STOCK PURCHASE AGREEMENT
dated as of January 26, 2004
by and among
SECURITY NATIONAL LIFE INSURANCE COMPANY,
PARAMOUNT SECURITY LIFE INSURANCE COMPANY
and
PHYSICIANS AND SURGEONS MEDICAL CENTER, INC.
and
THE OTHER SHAREHOLDERS THAT HAVE EXECUTED
AGREEMENT BY SHAREHOLDERS OF
PARAMOUNT SECURITY LIFE INSURANCE COMPANY
TO SELL SHARES IN STOCK PURCHASE TRANSACTION
IN THE FORM ATTACHED AS ANNEX I
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE AND SALES OF SHARES 1
1.1 Sale and Purchase of the Shares 1
1.2 Purchase Consideration 1
1.3 Delivery of Shares 3
1.4 Non-Admitted Assets 3
ARTICLE II - CLOSING 3
2.1 Closing 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARAMOUNT 3
3.1 Organization, Good Standing and Power 4
3.2 Capital Structure 4
3.3 Authority 5
3.4 Dividends, Stock Purchases, Etc. 6
3.5 Financial Statements 6
3.6 Annual Insurance Statements 6
3.7 Insurance Business 7
3.8 Compliance With Law 8
3.9 No Defaults 8
3.10 Litigation 8
3.11 No Material Adverse Change 9
3.12 Absence of Undisclosed Liabilities 10
3.13 Information Supplied 10
3.14 Certain Agreements 10
3.15 Plans; Benefits; Employment Claims 11
3.16 Major Contracts 12
3.17 Taxes 13
3.18 Interests of Officers and Directors 15
3.19 Intellectual Property 15
3.20 Restrictions on Business Activities 16
3.21 Title to Properties; Absence of Liens and
Encumbrances; Conditions of Equipment 16
3.22 Governmental Authorization and Licenses 16
3.23 Environmental Matters 17
3.24 Insurance 17
3.25 Labor Matters 18
3.26 Agents; Customers and Agent Complaints 18
3.27 Employees and Agents Assumed; No Liability 18
3.28 Questionable Payments 18
TABLE OF CONTENTS
(continued)
Page
ARTICLE IV - COVENANTS OF PSMCI AND SHAREHOLDERS 19
4.1 PSMCI and Shareholders to Sell Shares in Transaction 19
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SECURITY NATIONAL 19
5.1 Organization, Good Standing and Power 19
5.2 Authority 19
5.3 Board Authorization 20
ARTICLE VI - CONDUCT AND TRANSACTIONS PRIOR TO
CLOSING DATE; ADDITIONAL AGREEMENT 20
6.1 Conduct of Business of Paramount 20
ARTICLE VII - CONDITIONS PRECEDENT 24
7.1 Conditions to Each Party's Obligation to
Effect This Transaction 24
7.2 Conditions to Obligations of Security National 24
7.3 Conditions to Obligations of Paramount and Shareholders 26
ARTICLE VIII - TERMINATION 27
8.1 Termination 27
ARTICLE IX - INDEMNIFICATION 28
9.1 Obligation of PSMCI to Indemnify 28
9.2 Notice and Opportunity to Defend 29
ARTICLE X - GENERAL PROVISIONS 30
10.1 Survival of Representations, Warranties,
Covenants and Agreements 30
10.2 Amendment 30
10.3 Extension; Waiver 30
10.4 Notices 30
10.5 Interpretation 32
10.6 Counterparts 32
10.7 Entire Agreement 32
10.8 No Transfer 32
10.9 Severability 32
10.10 Other Remedies 32
10.11 Further Assurances 33
10.12 No Third Party Beneficiary Rights 33
10.13 Mutual Drafting 33
10.14 Governing Law 33
10.15 Jurisdiction and Venue 33
10.16 Expenses 33
10.17 Brokers or Finders 33
10.18 Public Announcements 34
10.19 Confidentiality 34
10.20 Attorney's Fees 35
EXHIBITS
Exhibit 1 Paramount Securities Schedule
Exhibit 2 Paramount Disclosure Schedule
Exhibit 3 Security National Disclosure Schedule
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated effective as of
January 26, 2004, and entered into by and among SECURITY NATIONAL LIFE INSURANCE
COMPANY, a Utah corporation ("Security National"), PARAMOUNT SECURITY LIFE
INSURANCE COMPANY, a Louisiana corporation ("Paramount"), and PHYSICIANS AND
SURGEONS MEDICAL CENTER, INC. ("PSMCI") and the other shareholders of Paramount
that have executed the AGREEMENT BY SHAREHOLDERS OF PARAMOUNT SECURITY LIFE
INSURANCE COMPANY 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, Paramount, PSMCI and the Shareholders
hereby agree as follows:
ARTICLE IPURCHASE AND SALE OF SHARES
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, PSMCI and the Shareholders shall sell, transfer, assign and deliver
to Security National, and Security National shall purchase from PSMCI and the
Shareholders, 486,445 shares of common stock of Paramount (the "Paramount Common
Stock"), representing all of the issued and outstanding stock and securities of
Paramount owned by PSMCI and the Shareholders, free and clear of all liens,
claims, options, proxies, voting agreements, charges and encumbrances. Security
National, Paramount, PSMCI and the Shareholders hereby acknowledge and agree
that regulatory approval from the Utah and Louisiana 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 Paramount's and PSMCI's representations, warranties,
agreements and covenants contained herein, and in consideration of the sale,
transfer, assignment and delivery of the Paramount Common Stock as herein
provided, Security National shall provide the following purchase consideration
(the "Purchase Consideration") to PSMCI and the Shareholders on a pro rata basis
to the number of shares of Paramount Common Stock held by PSMCI and the
Shareholders:
(a) Cash in U.S. dollars by certified funds or wire transfer in the
amount of the capital and surplus of Paramount as of December 31, 2003 plus
80 percent of the annualized in force premiums and annuity considerations
of Paramount as of December 31, 2003, less (i) the amount of the
adjustments in Sections 1.2(b), (c), (d) and (e) below, and (ii) the costs
of the transaction incurred by Security National up to a maximum of
$100,000;
(b) A holdback of $62,857 of the Purchase Consideration shall be
retained by Security National for a three month period from the Closing
Date of the transaction (as defined in Section 2.1 below), during which
time Security National shall have the right and be provided access to
verify the accuracy of the financial statement information concerning two
mortgage loans on real estate, including the loan to value ratios and the
fair market value of such real estate, described as (i) the Xxxxxx Rustler
Loan dated May 13, 1999 in the principal amount of $50,000, of which
$38,404 was outstanding as of November 30, 2003; and (ii) the Xxxxxx
Xxxxxxxxx Loan dated November 19, 1999 in the principal amount of $30,000,
of which $24,449 was outstanding as of November 30, 2003, and Security
National shall receive a put exercisable during the three month period to
return either of these two mortgage loans to PSMCI and the Shareholders in
exchange for cash from the $62,857 holdback in the amount of the book value
of such returned mortgage loans as reflected on the financial statements of
Paramount as of December 31, 2003, with the difference between the $62,857
holdback and the cash paid to Security National in exchange for the
returned mortgage loans to be paid to PSMCI and the Shareholders on a pro
rata basis to the number of shares of Paramount Common Stock at the end of
such three month period;
(c) Inasmuch as Security National is not purchasing the office
building located at 0000 Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx (the "Office
Building") that is listed as an asset on the financial statements of
Paramount, Security National shall transfer title to the Office Building to
PSMCI and the Shareholders on a pro rata basis at Closing and the Purchase
Consideration shall be reduced by the value of the Office Building as
reflected on the financial statements of Paramount as of December 31, 2003
or, in the alternative at the option of PSMCI and the Shareholders,
Security National shall transfer title to the Office Building to PSMCI and
the Shareholders on a pro rata basis at closing, at which time Security
National agrees to enter into a promissory note with PSMCI and the
Shareholders for a period of one year at no interest to be secured by the
Office Building in the amount not to exceed 75% of the lessor of (i) the
book value of the Office Building on the financial statements of Paramount
as of December 31, 2003, or (ii) the fair market value of the Office
Building as of December 31, 2003, and such promissory note shall be due and
payable one year from the Closing Date;
(d) Security National shall have the right prior to the Closing Date
to reject a certain derivative bond purchased on September 9, 2003 at an
investment cost of $94,300.47, in the event Security National deems the
derivative bond in its sole discretion to be an excessive risk, and in the
event of such rejection the derivative bond shall thereupon be transferred
to PSMCI and the Shareholders on a pro rata basis at Closing, with the
Purchase Consideration reduced by the amount of the rejected bond as
reflected on the financial statements of Paramount as of December 31, 2003;
(e) A holdback of $100,000 of the Purchase Consideration (the
"Holdback") shall be retained by Security National pending completion of
unaudited financial statements of Paramount for the year ended December 31,
2003, as required in Section 3.5 of this Agreement. If the amount of
capital and surplus of Paramount plus 80 percent of the annualized in force
premiums and annuity considerations of Paramount in the financial
statements for the year ended December 31, 2003 (as defined in Section
1.2(a) above) is less than the amount of the capital and surplus of
Paramount plus 80 percent of the annualized in force premiums and annuity
considerations of Paramount that is used for purposes of closing the
transaction, which shall be based upon the financial statements for the
nine months ended September 30, 2003, the difference between the capital
and surplus of Paramount plus 80 percent of the annualized in force
premiums and annuity considerations in the unaudited financial statements
for December 31, 2003 as compared to such amount in the unaudited financial
statements for September 30, 2003 shall be paid to Security National from
the Holdback, and the resulting amount of the Holdback after such deduction
shall then be paid to PSMCI and the Shareholders on a pro rata basis. If
such difference is greater than the Holdback, Security National shall
receive the Holdback, and PSMCI and the Shareholders agree to be jointly
and severally liable for paying to Security National any difference in
excess of the Holdback; and
(f) If the amount of capital and surplus of Paramount plus 80 percent
of the annualized in force premiums and annuity considerations of Paramount
in the financial statements for the year ended December 31, 2003 (as
defined in Section 1.2(a) above) is greater than the amount of capital and
surplus of Paramount plus 80 percent of the annualized in force premiums
and annuity considerations of Paramount that is used for purposes of
closing the transaction, which will be based upon the financial statements
for the nine months ended September 30, 2003, the difference between the
capital and surplus of Paramount plus 80 percent of the annualized in force
premiums and annuity considerations in the unaudited financial statements
for December 31, 2003 as compared to such amount in the unaudited financial
statements for September 30, 2003 shall be paid by Security National to
PSMCI and the Shareholders on a pro rata basis, and PSMCI and the
Shareholders shall also receive the Holdback on a pro rata basis.
1.3 Delivery of Shares. At the Closing Date, PSMCI and the Shareholders shall
deliver to Security National certificates with stock power executed in blank
representing the outstanding shares of Paramount Common Stock required by
Section 1.2 hereof.
1.4 Non-Admitted Asset. Security National, Paramount, PSMCI and the Shareholders
each acknowledge there is a non-admitted asset on the 2002 Annual Statement of
Paramount consisting of a $92,000 loan that Paramount made to its parent
company, Physicians and Surgeons Medical Center, Inc. Security National,
Paramount, PSMCI and the Shareholders each agree that this loan shall not be
included in the amount of the capital and surplus of Paramount as of December
31, 2003, but shall be transferred to PSMCI and the Shareholders at the Closing
without the requirement of payment of such loan.
ARTICLE II
THE CLOSING
2.1 Closing. The closing of the transaction (the "Closing") will take place at
the offices of Paramount Security Life Insurance Company, 0000 Xxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxxx, 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 February 9, 2004, unless this date is
extended as provided herein (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
Except as disclosed in a document to be prepared by Paramount and delivered
to Security National prior to the Closing Date (the "Paramount 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 Paramount to Security
National and approved by Security National by execution of this Agreement,
Paramount represents and warrants to Security National 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 Paramount 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 . Paramount is a corporation,
duly organized, validly existing and in good standing under the laws of its
state of incorporation 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 Paramount Disclosure Schedule contains a true and correct
listing of all states in which Paramount is registered, licensed and authorized
to engage in the insurance business. Paramount 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. Paramount is in good standing under all
such registrations and licenses. Paramount 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 Paramount Disclosure Schedule also sets forth a true and complete
list of the states where Paramount is qualified as a foreign corporation.
Paramount has no subsidiaries. Paramount has no other direct or indirect equity
interest in or loans to any partnership, corporation, joint venture, business
association or other entity. Paramount has delivered to Security National
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 Paramount's directors' and stockholders' meetings, and stock
certificate books correctly setting forth the record ownership of all
outstanding shares of Paramount Common Stock.
3.2 Capital Structure .
(a) The authorized capital structure of Paramount consists of 492,596
shares of Common Stock. There are 486,445 shares of Common Stock issued and
outstanding, all of which are owned by the Shareholders. Except as disclosed on
Schedule 3.2 of the Paramount Disclosure Schedule, there are no other debt,
equity or hybrid debt or equity interests or securities of Paramount issued and
outstanding.
(b) All outstanding shares of Paramount Common Stock and other Paramount
securities, if any, are validly issued, fully paid and non-assessable and,
except as disclosed on the Paramount Disclosure Schedule, are not subject to any
liens, claims, encumbrances or charges of any kind or nature or any preemptive
rights created by statute, Paramount's Articles of Incorporation or Bylaws or
any agreement to which Paramount is a party or by which Paramount may be bound.
There are no options, warrants, calls, conversion rights, commitments or
agreements of any character to which Paramount is a party or by which Paramount
may be bound that do or may obligate Paramount 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
Paramount Common Stock or other Paramount securities, if any.
3.3 Authority
(a) Paramount 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 Paramount 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 Paramount, including approval by its Boards of
Directors and the shareholders. This Agreement shall constitute legal, valid and
binding obligations of Paramount enforceable against Paramount 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 Paramount, 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 Paramount 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 Paramount pursuant to (i) any provision of
the Articles of Incorporation or Bylaws of Paramount or (ii) any material
agreement, contract, note, mortgage, indenture, lease instrument, permit,
concession, franchise, registration or license to which Paramount is a party or
by which Paramount or any of its properties or assets may be bound or affected.
(c) To the best knowledge of Paramount, 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 Paramount in
connection with the execution and delivery of this Agreement and by Paramount or
the consummation by Paramount of the transactions contemplated hereby or
thereby, except for (i) filing required documents with the relevant authorities
of states in which Paramount 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 Paramount 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 Paramount. All approvals of Paramount'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 September 30, 2003, Paramount
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) 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 Paramount.
3.5 Financial Statements . Paramount agrees to be responsible for the
preparation, at its own expense, of Paramount's unaudited financial statements
for the fiscal year ended December 31, 2003, including a balance sheet and the
related unaudited statements of income, cash flow and stockholders' equity and,
upon completion, will furnish or make available to Security National such
unaudited financial statements and a certified statement by the actuary of
Paramount verifying the aggregate reserves for life contracts and accident and
health contracts as of December 31, 2003; and Paramount has furnished or made
available to Security National or will furnish or make available to Security
National within ten days from the date of this Agreement Paramount's unaudited
financial statements for the fiscal years ended December 31, 1999, 2000, 2001
and 2002, including balance sheets and the related audited statements of income,
cash flow and stockholders' equity, and the related management letters, and
Paramount's unaudited financial statements as of and for the quarters ended
March 31, 2003, June 30, 2003, and September 30, 2003, including unaudited
balance sheets of Paramount as at March 31, 2003, June 30, 2003, and September
30, 2003, and the related unaudited statements of income, cash flow and
stockholders' equity (collectively, the "Unaudited Financial Statements"). The
Unaudited Financial Statements provided previously to Security National are
listed in Schedule 3.5 of the Paramount Disclosure Schedule. The Unaudited
Financial Statements together with the financial statements of Paramount for the
fiscal year ended December 31, 2003, are, collectively, referred to as the
"Paramount Financial Statements." The Paramount Financial Statements have been
or will be prepared in accordance with generally accepted accounting principles
(GAAP) consistently applied and fairly present the financial position of
Paramount 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 Paramount's
accounting policies, except as described in notes to the Paramount Financial
Statements.
3.6 Annual Insurance Statements.
(a) Paramount has provided Security National with (i) all annual
statements, certificates and applications to the Louisiana or any other
insurance commissioner or other Governmental Entity, which Paramount 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
Paramount Disclosure Schedule, and (ii) all reports of examination issued by
such insurance commissioners, regulatory authorities or other Governmental
Entity regarding Paramount 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; Paramount has provided Security National 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 Paramount Disclosure Schedule, and prior to the date of this Agreement, no
fines or penalties have been imposed on Paramount by any Governmental Entity;
and no deposits (other than in the ordinary course of business) have been made
by Paramount with any Governmental Entity.
(c) The statutory financial statements for Paramount as of and for the
years ended December 31, 2001 and 2002 and the statutory financial statements
for Paramount for the year ended December 31, 2003 (which Paramount agrees to be
responsible, at its own expense, for preparing) (i) fairly present or will
fairly present the statutory financial condition of Paramount at such dates and
(ii) have been or will be prepared in accordance with the required or permitted
statutory insurance accounting requirements or practices under the insurance
laws of Louisiana, 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 Louisiana, make a
sufficient provision for all unmatured obligations of Paramount 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 has been provided true and complete copies of all
contracts, arrangements, treaties, understandings and agreements of (or related
to) Paramount with any party with respect to reinsurance currently in force and
such documents and information are listed in Schedule 3.7 of the Paramount
Disclosure Schedule attached hereto. All policies assumed by Paramount 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
Paramount's option), and are fairly reflected on the Paramount 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 Paramount 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 Paramount considered as a whole for
the year ended December 31, 2002 has, after December 31, 2002, terminated or, to
the best knowledge of the Paramount, threatened to terminate its relationship
with Paramount. The contracts between Paramount and its agents, managers or
brokers are valid, binding and in full force and effect in accordance with their
terms. Paramount 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.
3.8 Compliance With Law . To the best knowledge of Paramount, Paramount 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 Paramount. There are no material judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against Paramount or against any of its properties or
businesses. Schedule 3.8 of the Paramount 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 Paramount, Paramount 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 Paramount or (ii) any agreement, note, mortgage, indenture,
contract, lease, instrument, permit, registration, concession, franchise or
license to which Paramount is a party or by which Paramount 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 Paramount.
3.10 Litigation . There is no action, suit, proceeding, claim, arbitration
or investigation pending or, to the best knowledge of Paramount, threatened,
against Paramount that, individually or in the aggregate, could be reasonably
expected to have a material adverse effect on the Business Condition of
Paramount, 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 Paramount Disclosure Schedule sets forth with respect to each pending
action, suit, proceeding, claim, arbitration or investigation to which Paramount
is a party, the forum, the parties thereto, a brief description of the subject
matter thereof and the amount of damages claimed. Paramount is not aware of any
reasonable basis for any other such action, suit, proceeding, claim, arbitration
or investigation. Paramount has delivered or made available to Security National
correct and complete copies of all correspondence prepared by its counsel for
Paramount's independent public accountants in connection with any audits or
reviews completed by Paramount's independent public accountants. 3.11 No
Material Adverse Change . Since September 30, 2003, Paramount has conducted its
business in the ordinary course and there has not occurred:
(a) Any material adverse change in the Business Condition of Paramount;
(b) Any amendments or changes in the Articles of Incorporation or Bylaws of
Paramount;
(c) Any damage, destruction or loss, whether covered by insurance or not,
materially and adversely affecting any of the properties or businesses of
Paramount;
(d) Any issuance, redemption, repurchase or other acquisition of the shares
of capital stock of Paramount 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 Paramount;
(e) Any increase in or modification of the compensation or benefits payable
or to become payable by Paramount 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 Paramount 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 Paramount;
(i) Any (a) incurrence, assumption or guarantee by Paramount of any debt
for borrowed money; (b) issuance or sale of any securities convertible into or
exchangeable for debt securities of Paramount; (c) issuance or sale of options
or other rights to acquire from Paramount, 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 Paramount 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 Paramount 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 Paramount 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 Paramount 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 Paramount;
(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 Paramount knows, might reasonably be expected
to materially and adversely affect) the Business Condition of Paramount;
(p) Any agreement or arrangement made by Paramount 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 Paramount 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 Paramount Disclosure Schedule or as reflected in the Paramount
Financial Statements and except for liabilities and obligations arising after
September 30, 2003, 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 Paramount, Paramount 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 audited balance sheet of Paramount (including the
footnotes thereto) or should be described on an Annual Insurance Statement filed
with any state insurance commissioner having jurisdiction over Paramount or its
business.
3.13 Information Supplied . None of the information supplied or to be
supplied by Paramount 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 Paramount 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 Paramount are listed in
Schedule 3.15 of the Paramount 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. Paramount has furnished or made available to
Paramount 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 Paramount nor any officer or director of Paramount 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 Paramount, 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 3.15 attached hereto, no present or
former employee of Paramount has any claim against Paramount (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 Paramount has threatened to file,
any claim against Paramount 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 Paramount 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 Paramount, or to or by which Paramount 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 Paramount 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
Paramount Disclosure Schedule, Paramount 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
Paramount 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 2003 exceeded $5,000 in aggregate
amount or pursuant to which Paramount 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 Paramount 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
Paramount 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 Paramount 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 Paramount;
(l) Any agreement, contract or commitment relating to personal services to
be rendered by any person to Paramount requiring the payment of more than $1,000
per month or the disposition or acquisition of any assets by Paramount; or
(m) Any other agreement, contract or commitment that is material to
Paramount's business.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license, regulations and commitment
listed on the Paramount Disclosure Schedule pursuant to this Section 3.16 is
valid and binding on Paramount, and is in full force and effect, and neither
Paramount nor to the best knowledge of Paramount, 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 Paramount, 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 Paramount, 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(f) below) with respect to any Taxable period ending on or before the
Closing Date, by or on behalf of Paramount (collectively, the "Paramount
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
Paramount Financial Statements (i) fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through September 30, 2003 and
Paramount has not and will not incur any Tax liability in excess of the amount
reflected on the Paramount Financial Statements with respect to such periods and
(ii) properly accrues in accordance with GAAP all liabilities for Taxes payable
after September 30, 2003 with respect to all transactions and events occurring
on or prior to such date. All information set forth in the footnotes to the
Paramount Financial Statements relating to Tax matters is true, complete and
accurate in all material respects.
(b) No material Tax liability since September 30, 2003 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. Paramount has withheld and paid to the applicable financial
institution or Taxing Authority all amounts required to be withheld. Neither
Paramount nor any member of any affiliated or combined group of which Paramount
has been a member has granted any extension or waiver of the limitation period
applicable to any of the Paramount Returns.
(c) PSMCI and the Shareholders shall be entitled to receive on a pro rata
basis any tax refund that Paramount shall receive from any Taxing Authority (as
defined in Section 3.17(f) below) with respect to any Taxable period ending on
or before December 31, 2003.
(d) PSMCI and the Shareholders agree to be jointly and severally liable for
paying any premium tax due and owing with respect to Paramount's operations
ending on or before December 31, 2003. Security National agrees to be liable for
paying any premium tax due and owing with respect to Paramount's operations
beginning as of January 1, 2004.
(e) There is no material claim, audit, action, suit, proceeding or
investigation now pending or (to the best knowledge of Paramount) threatened
against or with respect to Paramount in respect of any Tax or assessment. No
notice of deficiency or similar document of any Tax Authority has been received
by Paramount, 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 Paramount, materially and
adversely affect the liability of Paramount for Taxes. There are no liens for
Taxes against the assets of Paramount except liens for current Taxes not yet
due. Paramount 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.
(f) 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 Paramount
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, Paramount 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 Paramount being a member of a group
filing consolidated tax returns, under operation of certain state law as a
result of Paramount being a member of a group filing consolidated tax returns,
under operation of certain state laws as a result of Paramount being a member of
a unitary group or under comparable laws of other states or foreign
jurisdictions) that includes a party other than Paramount. Paramount has listed
in Schedule 3.17 of the Paramount Disclosure Schedule all of Paramount's
material federal and state tax returns for years ending December 31, 2003 and
2002, information statements, reports work papers, Tax opinions, Tax memoranda
and other Tax data and documents of Paramount that Paramount has furnished or
made available to Security National or will furnish or make available to
Security National within ten (10) days from the date of this Agreement.
(g) The federal income tax returns of Paramount have not been audited by
the Internal Revenue Service, (or a predecessor agency). Paramount has not
received any notice of assessment or proposed assessment of any United Sates,
State or other tax measured by its income, property or transactions, and no
issues have been raised by any taxing authority providing a basis for any
additional assessment of any such tax. Paramount has not waived any law or
regulation fixing, or consenting to the extension of, any period of time for the
assessment of any tax or other governmental imposition, or become committed so
to do, except as described in Schedule 3.17 which is true, complete and correct
in all material respects. The reserves for current taxes accrued on the books of
Paramount are reasonable and adequate in amount. PSMCI agrees to indemnify
Security National for any and all tax assessments not accrued on the books of
Paramount and related to any income, events, transactions, or time periods prior
to the Closing, except for any tax which may become due on income previously
excluded from taxable income and accumulated in the undistributed policyholders'
surplus account ("Phase III Tax").
(h) For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i)
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, privilege, intangible, profits,
license, withholding, payroll, employment, excise, insurance, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to or
additional amount imposed by any Governmental Entity (a "Taxing Authority")
responsible for the imposition of any such tax (whether domestic or foreign),
(ii) any liability for the payment of any amounts of the type described in
clause (i) above as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period and (iii) any liability for the
payment of any amounts of the type described in clause (i) or clause (ii) above
as a result of any express or implied obligation to indemnify any other person
or entity.
3.18 Interests of Officers and Directors . Except as described in Schedule
3.18 of the Paramount Disclosure Schedule, none of Paramount's officers or
directors (or relatives of such persons living in the same household) have any
material interest in any property, whether real or personal, tangible or
intangible, used in or pertaining to Paramount's business.
3.19 Intellectual Property .
(a) Paramount owns or is licensed or otherwise entitled to exercise all
rights under or with respect to all intellectual property including without
limitation, patents, copyrights, trademarks or service marks owned or used in
connection with its business. Schedule 3.19 of the Paramount Disclosure Schedule
lists all patents, trademarks, works of authorship, registered and unregistered
copyrights, registered and unregistered trademarks, trade names and service
marks, and all applications therefor owned or licensed by Paramount (the
"Intellectual Property Rights"), and further specifies the jurisdictions in
which each such matter and registration has been filed, including the respective
registration or application numbers. Schedule 3.19 of the Paramount Disclosure
Schedule also lists all material licenses, sublicenses and other agreements
(oral or written) as to which Paramount is a party and pursuant to which
Paramount or any other person or entity owns or is licensed or otherwise
authorized or obligated with respect to any Intellectual Property Right and
includes the identity of all parties thereto. Paramount is not, nor as a result
of the execution and delivery of this Agreement or the performance of
Paramount's obligations hereunder will be, in violation of any license,
sublicense or other agreement applicable to it, whether or not described in the
Paramount Disclosure Schedule. Except to the extent clearly and conspicuously
disclosed in Schedule 3.19 of the Paramount Disclosure Schedule, Paramount is
the sole and exclusive owner or licensee of, with full right, title and interest
in and to (free and clear of any liens, claims or encumbrances), the
Intellectual Property Rights, and has the sole and exclusive right in respect
thereof (and, except as set forth in Schedule 3.19 of the Paramount Disclosure
Schedule is not contractually obligated to pay any compensation to any third
party with respect thereto).
3.20 Restrictions on Business Activities . There is no material agreement,
judgment, injunction, order or decree binding upon Paramount that has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Paramount, any acquisition of property by Paramount or
the conduct of business by Paramount as currently conducted or as currently
proposed to be conducted.
3.21 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) Schedule 3.21 of the Paramount Disclosure Schedule sets forth a true,
complete and accurate list of all real property owned or leased by Paramount and
summarizes all material lease terms, including the aggregate annual rental or
other fees payable, the length of all leases and the number of extensions
available.
(b) Paramount has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, whether real, personal or mixed, used in its business,
free and clear of any liens (other than liens for taxes that are not yet
delinquent), claims, charges, pledges, security interests or other encumbrances,
except as reflected in the Paramount Financial Statements and except for such
imperfections of title and encumbrances, if any, that are not substantial or
material in character, amount or extent, and that do not materially detract from
the value, or interfere with the present use, of the property subject thereto or
affected thereby.
(c) The machinery, equipment and other personal property (collectively, the
"Equipment") owned or leased by Paramount is, taken as a whole (i) adequate for
the conduct of the business of Paramount consistent with its past practice, (ii)
suitable for the uses to which it is currently employed, (iii) in good operating
condition, (iv) regularly and properly maintained and (v) free from all defects,
except, with respect to clauses (ii) through (iv) of this Section 3.21(c), as
would not have a material adverse effect on the Business Condition of Paramount.
3.22 Governmental Authorizations and Licenses . Paramount is the holder of
all licenses, authorizations, permits, concessions, registrations, certificates
and other franchises of any Governmental Entity required to operate its business
(collectively, the "Licenses") and is in compliance with the terms, conditions,
limitations, restrictions, standards, prohibitions, requirements and obligations
of all of such Licenses, except where the failure to hold any such License or to
so comply would not have a material adverse effect on the Business Condition of
Paramount. The Licenses are in full force and effect on the date hereof and will
be in full force and effect on the Closing Date, except as noted in Section 3.8
hereof. There is not now pending, nor to the best knowledge of Paramount is
there threatened, any action, suit, investigation or proceeding against
Paramount before any Governmental Entity with respect to the Licenses, nor is
there any issued or outstanding notice, order or complaint with respect to the
violation by Paramount of the terms of any such License or any rule or
regulation applicable thereto.
3.23 Environmental Matters .
(a) To the best knowledge of Paramount, no substance that is regulated by
any Governmental Entity or that has been designated by any Governmental Entity
to be radioactive, toxic, hazardous or otherwise a danger to health or the
environment (a "Hazardous Material") is present in, on or under any property
that Paramount has at any time owned, operated, occupied or leased.
(b) To the best knowledge of Paramount, Paramount has not transported,
stored, used, manufactured, released or exposed its employees or any other
person to any Hazardous Material in violation of any applicable statute, rule,
regulation, order or law, except where such violation would not have a material
adverse effect on the Business Condition of Paramount.
(c) To the best knowledge of Paramount, Paramount has obtained all permits,
consents, waivers, exemptions, licenses, approvals and other authorizations
(collectively, "Environmental Permits") required to be obtained under the
applicable statutes, rules, regulations, orders or laws of any Governmental
Entity relating to land use, public and employee health and safety, pollution or
protection of the environment (collectively, "Environmental Laws"), except where
the failure to obtain such an Environmental Permit would not have a material
adverse effect on the Business Condition of Paramount. Schedule 3.23 of the
Paramount Disclosure Schedule sets forth a true, complete and accurate list of
all such Environmental Permits, each of which is in full force and effect on the
date hereof and will be in full force and effect on the Closing Date. Paramount
(i) is in full compliance in all of the material respects with all of the terms
and conditions of the Environmental Permits and (ii) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered into,
promulgated by or approved thereunder. Paramount has not received any notice nor
is Paramount aware of any past or present condition or practice of the business
conducted by Paramount that forms or that could be reasonably expected to form
the basis of any material claim, action, suit, proceeding, hearing or
investigation against Paramount, arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport or handling,
or the emission, discharge, release or threatened release into the environment,
of any Hazardous Material by Paramount.
3.24 Insurance . Schedule 3.24 of the Paramount Disclosure Schedule lists
and summarizes all insurance policies and fidelity or surety bonds covering the
assets, Inventories, business, equipment, properties, operations, employees,
officers and directors of Paramount, the amounts of coverage under each such
policy and bond of Paramount. Within the last four years, Paramount has not been
refused any requested insurance or bond coverage. Except as disclosed on the
Paramount Disclosure Schedule, all premiums payable under all of such policies
and bonds have been paid and Paramount is otherwise in full compliance with the
terms of all of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Such policies of insurance and bonds
are of the type and in amounts customarily carried by persons and entities
conducting businesses similar to that of Paramount. Paramount does not know of
any threatened termination of or material premium increase with respect to, any
of such insurance policies or bonds.
3.25 Labor Matters. To the best knowledge of Paramount, Paramount is in
compliance in all material respects with all currently applicable laws, rules
and regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages and hours and occupational safety and health and
employment practices, and has not and currently is not engaged in any unfair
labor practice. Paramount has not received any notice from any Governmental
Entity, and there has not been asserted before any Governmental Entity, any
claim, action or proceeding to which Paramount is a party or involving
Paramount, and there is neither pending nor, to Paramount's best knowledge,
threatened, any investigation or hearing concerning Paramount arising out of or
based upon any such law, regulation or practice.
3.26 Agents; Customers and Complaints . Schedule 3.26 of the Paramount
Disclosure Schedule sets forth the names and addresses of the sales agents or
brokers of Paramount as of December 31, 2003. As of the date hereof, Paramount
has no unresolved customer or agent complaints filed with a Governmental Entity
concerning its products and/or services.
3.27 Employees and Agents Assumed; No Liability. Paramount represents and
warrants that at Closing, Paramount will retain the sales agents but no
employees, except for Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxx X.
Xxxxxx, and that Security National shall not assume or be responsible for any
liability of any kind or nature to any employees of Paramount existing prior to
the Closing. Following the Closing, Paramount shall continue its operations
through March 20, 2004 at an estimated aggregate cost of $28,000, of which
Security National agrees to pay $11,000 of such costs and Paramount agrees to be
responsible for and pay all of the costs in excess of $11,000.
3.28 Questionable Payments . Neither Paramount nor, to Paramount's best
knowledge, any director, officer or other employee of Paramount has: (i) made
any payments or provided services or other favors in the United States or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity with respect to any aspect of the business of Paramount
or any of its Subsidiaries or (ii) made any political contributions that would
not be lawful under the laws of the United States and the foreign country in
which such payments were made. Neither Paramount nor, to Paramount's best
knowledge, any director, officer or other employee of Paramount nor, to
Paramount's best knowledge, any customer or supplier of any of them, has been
the subject of any inquiry or investigation by any Governmental Entity in
connection with payments or benefits or other favors to or for the benefit of
any governmental or armed services official, agent, representative or employee
with respect to any aspect of the business of Paramount or with respect to any
political contribution.
ARTICLE IV
COVENANTS OF PSMCI AND SHAREHOLDERS
4.1 PSMCI and Shareholders to Sell Shares in Transaction. PSMCI and each of
the Shareholders join in this Agreement for the sole and limited purpose of
irrevocably agreeing to sell PSMCI's and Shareholders' shares of common stock in
the transaction. PSMCI and each of the Shareholders represent and warrant that
such agreement set forth in this Section 4.1 constitutes a valid and legally
binding obligation of PSMCI and the Shareholders, enforceable against PSMCI and
the Shareholders in accordance with its terms and that such agreement has been
duly authorized and approved and adopted by or on behalf of PSMCI and each
Shareholder that is not a natural person by all requisite corporate equivalent
action.
ARTICLE VREPRESENTATIONS AND WARRANTIES OF SECURITY NATIONAL
Except as noted on the Security National Disclosure Schedule, Security
National represents and warrants as follows:
5.1 Organization, Good Standing and Power . Security National is a
corporation validly existing and in good standing under the laws of the state of
Utah and each has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Security National has delivered to the Shareholders complete and
correct copies of its Articles of Incorporation and Bylaws, as amended to the
date hereof.
5.2 Authority .
(a) Security National has all requisite corporate power and authority to
enter into and execute and deliver this Agreement and to consummate the
transactions contemplated hereby and thereby, subject to approval of the
transactions by applicable state insurance commissioners and other relevant
Governmental Entities having jurisdiction over its business. This Agreement,
when executed and delivered by Security National, will constitute the valid and
binding obligation of Security National, enforceable in accordance with its
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 Security National, the execution and delivery
of this Agreement 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 Security National or any of its Subsidiaries or their respective 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 obligation or to
the loss of any material benefit under (i) any provision of the Articles of
Incorporation or Bylaws of Security National or of any of its Subsidiaries or
(ii) any material agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which Security National
or any of its Subsidiaries is a party or by which Security National or any of
its Subsidiaries or their respective properties or assets may be bound or
affected.
5.3 Board Authorization. Prior to the Closing, the Board of Directors of
Security National will have authorized the execution and delivery of this
Agreement and the performance by Security National of its obligations under the
Agreement.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
DATE; ADDITIONAL AGREEMENT
6.1 Conduct of Business of Paramount.
(a) During the period form the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing Date, Paramount
shall carry on its business in the usual, regular and ordinary course in
substantially the same manner as conducted prior to the date of this Agreement
and, to the extent consistent with such businesses, use all commercially
reasonable efforts consistent with past practice and policies to preserve intact
its present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, agents, brokers, licensors, licensees, Governmental
Entities, and others having business dealings with them, to the end that its
good will and ongoing businesses shall be unimpaired at the Closing Date.
Paramount shall promptly notify Security National of any event or occurrence not
in the ordinary course of business of Paramount, and any event which could have
a material and adverse effect on the Business Condition of Paramount. Except as
expressly contemplated by this Agreement or disclosed in the Paramount
Disclosure Schedule, Paramount shall not, without the prior written consent of
Security National:
(i) Grant any options, warrants, or stock purchase rights;
(ii) Enter into any commitment or transaction not in the ordinary
course of business to be performed over a period longer than six months in
duration, or to purchase fixed assets with an aggregate purchase price
exceeding $5,000, or (ii) sell or commit to sell any products with an
aggregate purchase price greater than $5,000 in any single month if the
expected profit margins are lower than those customarily obtained for sales
of similar products by Paramount in the past.
(iii) Grant any severance or termination pay to any director, officer,
employee or consultant, except mandatory payments made pursuant to standard
written agreements outstanding on the date hereof (any such agreement or
arrangement to be disclosed in Schedule 6.1 of the Paramount Disclosure
Schedule);
(iv) Transfer to any person title to any rights to Paramount
Intellectual Property Rights except in the ordinary course of business;
(v) Enter into or amend any agreements pursuant to which any other
party is granted marketing, agency or other similar rights of any type or
scope with respect to any products of Paramount;
(vi) Except in the ordinary course of business with prior notice of
Security National, violate, amend or otherwise modify the terms of any of
their material contracts binding on Paramount set forth on the Paramount
Disclosure Schedule;
(vii) Commence a lawsuit other than for the routine collection of
bills or for a breach of this Agreement;
(viii) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, lieu of or in
substitution for shares of its capital stock, or repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to Paramount;
(ix) Issue, deliver or sell, authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of
its capital stock or securities convertible into, or subscriptions rights,
warrants, or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(x) Solicit approval for and effect any amendments to Paramount's of
Incorporation or Bylaws (other than as contemplated by this Agreement);
(xi) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the Business Condition of Paramount;
(xii) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business and
consistent with past practice;
(xiii) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others or loan money to others;
(xiv) Adopt or amend any Plan, or enter into any employment contract,
pay any special bonus or special remuneration to any director, employee or
consultant, or increase the salaries or wage rates of its employees other
than pursuant to scheduled employee reviews under Paramount's normal
employee review cycle, as the case may be, or in connection with the hiring
of employees other than officers in the ordinary course of business, in all
cases consistent with past practice;
(xv) Revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past
practice;
(xvi) Pay, discharge or satisfy in an amount in excess of $25,000 in
any one case any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against Paramount's Financial Statements or those
incurred after the date of the September 30, 2003 Unaudited Balance Sheet
in the ordinary course of business;
(xvii) Make any material tax election other than in the ordinary
course of business and consistent with past practice, change any material
tax election, adopt any material tax accounting method practice, change any
material tax accounting method, file any material tax return (other than
any estimate tax returns, payroll tax returns or sale tax returns) or any
amendment to a material tax return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or
assessment, without the prior written or unwritten consent of Security
National, which consent will not be reasonably withheld; and
(xviii) Engage in any activities or transactions that are outside the
ordinary course of its business consistent with past practice.
(b) Unless and until this Agreement shall have been terminated by either
party pursuant to Article VIII, Paramount shall not, directly or indirectly,
through any officer, director, agent or otherwise, (i) solicit, initiate or
encourage submission or proposals or offers from any person relating to any
acquisition or purchase of all or substantially all of the assets of, or any
equity interest in, Paramount or any merger, consolidation, business combination
or similar transaction with Paramount, or (ii) participate in any discussions or
negotiations regarding, furnish to any other person any confidential information
with respect to, or otherwise cooperate with any way with, or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing.
(c) Paramount shall not take, or fail to take, any action which from the
date hereof through the Closing would cause or constitute a breach of any of its
representations, warranties and covenants set forth in this Agreement or which
would from the date hereof through the Closing cause any of such representations
or warranties to be inaccurate. In the event of, and promptly after becoming
aware of, the occurrence of or the pending or threatened occurrence of any event
which would cause or constitute such a breach of inaccuracy, Paramount shall
give detailed notice thereof to the other parties and shall use its best efforts
to prevent or promptly remedy such breach or inaccuracy.
(d) Paramount shall promptly apply for or otherwise seek, and use its
commercially reasonable efforts to obtain all consents and approvals required to
be obtained by it for the consummation of this transaction, and Paramount shall
use its best efforts to obtain all necessary consents, waivers and approvals
under any of Paramount's material agreements, contracts licenses or leases in
connection with this transaction, except such consents and approvals which
Security National and Paramount agree Paramount shall not seek to obtain, as
contemplated by the Paramount Disclosure Schedule.
(e) Paramount shall each use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement.
(f) Paramount shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on Paramount with
respect to this transaction and will promptly cooperate with and furnish
information to Security National in connection with any such requirements
imposed upon Paramount, Security National or any other party in connection with
this transaction. Paramount shall take all reasonable actions to obtain (and to
cooperate with Security National and its subsidiaries in obtaining) a consent,
authorization, order or approval of, or any exception by, any Governmental
Entity, required to be obtained or made by Paramount (or by Security National or
its subsidiaries) in connection with this transaction or the taking of any
action contemplated, by this Agreement, and to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated by this Agreement and to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability or the parties
to consummate the transactions contemplated hereby, and to effect all necessary
registrations and filings and submissions or information required by any
Governmental Entity, and to fulfill all conditions to this Agreement.
(g) Paramount shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
this transaction and will promptly cooperate with and furnish information to
Paramount in connection with this transaction. Paramount shall take all
reasonable actions to obtain (and to cooperate with Paramount in obtaining) and
consent, authorization, order or approval of, or exemption by, and Governmental
Entity required to be obtained or made by Paramount action contemplated by this
Agreement, and to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transaction contemplated
hereby, and to effect all necessary registrations and filings and submissions of
information required by any Governmental Entity, and to fulfill all conditions
to this Agreement. (h) Paramount shall give Security National and its agents,
full and complete access to all books, records, personnel, properties, assets
and facilities of Paramount for Security National's inspection and due
diligence, in its discretion and Security National may make copies of documents
and information subject to Section 10.19 below.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect This Transaction. The
respective obligation of each party to effect this transaction shall be subject
to the satisfaction prior to the Closing of the following conditions:
(a) Legal Action. No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of this
transaction shall have been issued by any Governmental Entity and remain in
effect, and no litigation seeking the issuance of such and order or injunction,
or seeking relief against Paramount, or Security National if this transaction is
consummated, shall be pending which, in the good faith judgment of Paramount's
or Security National's Board of Directors (acting upon the written opinion of
their respective outside counsel) has a reasonable probability of resulting in
such order, injunction or relief and such relief would have a material adverse
effect on the Business Condition of such party. In the event any such order or
injunction shall have been issued, each party agrees to use commercially
reasonable efforts to have an such injunction lifted.
(b) Statutes. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to this transaction by any Governmental Entity which would (i) make
the consummation of this transaction illegal, (ii) prohibit Security National's
or Paramount's ownership or operation of all or a material portion of the
business or assets of Paramount, or Security National and its subsidiaries taken
as a whole, or compel Security National or Paramount to dispose of or hold
separate all or a material portion of the business or assets of Paramount, or
Security National and its subsidiaries taken as a whole, as a result of this
transaction or (iii) render Security National or Paramount unable to consummate
this transaction, except for any waiting period provisions.
7.2 Conditions to Obligations of Security National. The obligations of
Security National to effect this transaction are subject to the satisfaction of
the following conditions, unless waived by Security National:
(a) Representations and Warranties. The representations and warranties of
Paramount set forth in this Agreement (determined without regard to any
materiality qualifiers, including without limitation "material adverse effect")
shall be true and correct in all respects as of the date of this Agreement and
as of the Closing Date, unless any failures to be true and correct, individually
or in the aggregate, do not have and could not reasonably be expected to have a
material adverse effect on the Business Condition of Paramount; and there shall
have been no wilful breach by Paramount of any of its representations or
warranties made in this Agreement. Security National shall have received a
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of Paramount to such effect on the Closing Date.
(b) No Material Adverse Change. There shall have been no material adverse
change in the Business Condition of Paramount from the date of this Agreement
through the Closing Date and Security National shall have received a certificate
signed by the Chief Executive Officer and the Chief Financial Officer of
Paramount to such effect on the Closing Date.
(c) Performance of Obligations of Paramount and Shareholders. Paramount and
the Shareholders shall have performed all obligations and covenants required to
be performed by it under this Agreement prior to the Closing Date, and Security
National shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of Paramount to such effect on the Closing Date.
(d) Regulatory Approvals. All authorizations, consents, orders or approvals
of, or declarations of, or declarations or filing with, or expiration of waiting
periods imposed by, any Governmental Entity (including, without limitation, the
states of Utah and Louisiana) necessary for the consummation of the transactions
contemplated by this Agreement shall have been obtained.
(e) Consents. Security National shall have received duly executed copies of
all material third-party non-regulatory consents and approvals contemplated by
this Agreement or the Paramount Disclosure Schedule in form and substance
reasonably satisfactory to Security National, including a written consent from
PSMCI confirming its agreement to pay for the continued operations of Paramount
through March 20, 2004 at an estimated aggregate cost of $28,000, of which
Security National will be responsible for the payment of $11,000 of such costs
and Paramount agrees to be responsible for and pay all of the costs in excess of
$11,000. Security National shall be entitled to receive any earnings from the
operations of Paramount beginning as of January 1, 2004.
(f) Resignation of Directors. The directors of Paramount in office
immediately prior to the Closing Date shall have resigned as directors of the
Surviving Corporation effective as of the Closing Date.
(g) Legal Opinion. Security National shall have received an opinion of
Paramount's legal counsel, in form and substance acceptable to Security
National, to the effect that:
(i) this Agreement has been duly authorized, executed and delivered by
Paramount and constitutes the valid and binding obligations of Paramount
and the Shareholders and all corporate action required by Paramount in
order to effect the transactions contemplated hereby has been taken;
(ii) Paramount is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Louisiana and is duly
authorized to conduct its business as presently conducted;
(iii) Paramount is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Louisiana and is
duly licensed to conduct the insurance business that it presently conducts
under the Louisiana insurance law;
(iv) the authorized capital structure of Paramount consists of 492,595
shares of Common Stock and there are 486,445 shares of Common Shares issued
and outstanding, all of which are owned by the Shareholders. All issued and
outstanding shares of Common Stock have been duly authorized, validly
issued and are fully-paid and nonassessable and were not issued in
violation of the pre-emptive rights of any Shareholder;
(v) upon delivery to Security National of the stock certificates
evidencing all of the issued and outstanding shares of Common Stock said
Common Stock will be free and clear of all liens, claims, encumbrances or
other adverse interests; and
(vi) neither the execution and delivery by Paramount of this
Agreement, nor the compliance by Paramount with the terms and provisions
hereof, will conflict with or result in a breach of (A) any of the terms,
conditions or provisions of the Articles of Incorporation, the Bylaws or
any other governing instrument with respect to Paramount, or (B) with any
judgment, order, injunction, decree, law, statute, regulation or ruling
with or of any court or Governmental Entity known to such counsel to which
Paramount is subject, or will constitute a default thereunder. In rendering
such opinion, such counsel may rely, to the extent such counsel deems such
reliance necessary or appropriate, upon certificates of public officials or
of any officer or officers of Paramount, provided the extent of such
reliance is specified in such opinion and executed copies of such opinions
and certificates are furnished to Security National.
7.3 Conditions to Obligations of Paramount and Shareholders. The obligation
of Paramount and the Shareholders to effect this transaction is subject to the
satisfaction of the following conditions unless waived by Paramount and the
Shareholders.
(a) Representations and Warranties. The representations and warranties of
Security National set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all aspects) (i) as of the date
of this Agreement, and (ii) as of the Closing Date as though made on and as of
each such date, except as otherwise contemplated by this Agreement, and
Paramount shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officer of Security National to such effect.
(b) Performance of Obligations of Security National. Security National
shall have performed all obligations and covenants required to be performed by
them under this Agreement prior to the Closing Date, and Paramount shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of Security National to such effect.
(c) Legal Opinion. Paramount and the Shareholders shall have received an
opinion of Security National's legal counsel, in form and substance satisfactory
to the Paramount, to the effect that:
(i) Security National is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah with all
requisite corporate power and corporate authority to execute, deliver and
preform this Agreement;
(ii) the execution, delivery and performance of this Agreement by
Security National will not conflict with any of the terms, provisions or
conditions of the Articles of Incorporation or the Bylaws of Security
National;
(iii) the execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate action on the part of
Security National and is enforceable against Security National in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditor's rights generally.
In rendering such opinion such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate, upon certificates of public
officials or of any officer or officers of Security National, provided the
extent of such reliance is specified in such opinion and executed copies of such
certificates are furnished to Paramount.
(f) Payment of Purchase Consideration. Security National shall pay the
Purchase Consideration as required in Section 1.2 of this Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination.
(a) This Agreement may be terminated at any time prior to the Closing Date:
(i) by mutual written agreement of Security National, Paramount, PSMCI
and the Shareholders;
(ii) by Security National, if there has been a breach by Paramount,
PSMCI or the Shareholders of any representation, warranty, covenant or
agreement set forth in this Agreement on the part of Paramount, PSMCI or
the Shareholders which is material and which Paramount, PSMCI or the
Shareholders fails to cure within five (5) business days after notice
thereof is given by Security National (except that no cure period shall be
provided for a breach by Paramount, PSMCI or the Shareholders which by its
nature cannot be cured);
(iii) by Paramount, PSMCI or the Shareholders, if there has been a
breach by Security National of any representation, warranty, covenant or
agreement set forth in this Agreement on the part of Security National
which is material and which Security National fails to cure within five (5)
business days after notice thereof is given by Paramount (except that no
cure period shall be provided for a breach by Security National which by
its nature cannot be cured);
(iv) by Security National, PSMCI or the Shareholders, if this
transaction shall not have been consummated on or before February 15, 2004;
provided, however, that if the sole reason this transaction has not been
completed by such date results from delays in the regulatory approval
process, this Agreement may not be terminated but rather shall remain in
full force and effect for an additional sixty (60) days beyond February 15,
2004.
(v) by Security National, PSMCI or the Shareholders if any permanent
injunction or other order of a court or other competent authority
preventing this transaction shall have become final and nonappealable.
(b) Where action is taken to terminate this Agreement pursuant to this
Section 8.1 it shall be sufficient for such action to be authorized by the Board
of Directors of the party taking such action.
(c) In the event of termination of this Agreement as provided in this
Section, the provisions of this Agreement shall forthwith become void, except
that the agreements contained or referred to in Sections 10.16 (expenses), 10.17
(brokers, finders), 10.18 (public announcements) and 10.19 (confidentiality)
shall survive. Notwithstanding the foregoing, in the event of a breach of this
Agreement by any party hereto, nothing herein shall limit the remedies at law or
in equity of the other party with respect thereto.
ARTICLE IX
INDEMNIFICATION
9.1 Obligation of PSMCI to Indemnify. Subject to the time limitations set
forth in Section 10.1 below, PSMCI agrees to indemnify, defend and hold harmless
Security National and its respective directors, officers, employees, agents,
subsidiaries, affiliates, successors and assigns, from and against all losses,
liabilities, claims, damages, deficiencies, costs and expenses, including
without limitation interest, penalties and attorneys' fees and disbursements
(collectively, the "Losses" and singularly, a "Loss"), based upon, arising out
of or otherwise related to any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Paramount or PSMCI contained
in this Agreement or in any document or other papers delivered pursuant to this
Agreement, including the Paramount Financial Statements, and in respect of any
third party claim made based upon facts alleged which, if true, would have
constituted any such inaccuracy or breach. For purposes of this Agreement,
Security National shall be deemed to have suffered a Loss if and to the extent
that such Loss has been suffered by Paramount. Notwithstanding the foregoing,
the time limitations set forth in Section 10.1 below do not apply to the PSMCI's
tax obligations set forth in Section 3.17 hereof.
9.2 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by any person
entitled to indemnity under this Agreement (the "Indemnitee") of notice of any
demand, claim or circumstances which, with the lapse of time, would or might
give rise to a claim or the commencement or threatened commencement of any
action, proceeding or investigation (an "Asserted Liability") that may result in
a Loss, the Indemnitee may, at its option, give notice thereof (the "Claims
Notice") to PSMCI (the "Indemnifying Party"). The Claims Notice shall describe
the Asserted Liability in reasonable detail, and shall indicate the amount
(estimate, if necessary and to the extent feasible) of the Loss that has been or
may be suffered by the Indemnitee.
(b) Opportunity To Defend. The Indemnifying Party may elect to compromise
or defend, at its own expense and by its own counsel, any Asserted Liability. If
the Indemnifying Party elects to compromise or defend such Asserted Liability,
it shall within thirty (30) days after the Claims Notice is given or sooner, if
the nature of the Asserted Liability so requires, notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the objection of the other, provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.
(c) Disputes with Third Parties. Anything in this Section 9.2(c) to the
contrary notwithstanding, in the case of any Asserted Liability by any supplier,
distributor, agent, broker, shareholder, franchisee, customer or other third
party doing business with Paramount prior to the Closing in connection with
which Security National may make a claim against PSMCI for indemnification
pursuant to this Section 9.2(c), Security National may, at its option, give a
Claims Notice with respect thereto but, unless Security National and the
Indemnifying Party otherwise agree, Security National shall have the exclusive
right at its option to defend any such matter, subject to the duty of Security
National to consult with the Indemnifying Party and its attorneys in connection
with such defense and provided that no such matter shall be compromised or
settled by Security National without the prior consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
shall have the right to recommend in good faith Security National proposals to
compromise or settle claims brought by a supplier, agent, or customer, and
Security National agrees to present such proposed compromises or settlements to
such supplier, distributor, shareholder, franchisee or customer. All amounts
required to be paid in connection with any such Asserted Liability pursuant to
the determination of any court, governmental or regulatory body or arbitrator,
and all amounts required to be paid in connection with any such compromise or
settlement consented to by the Indemnifying Party, shall be borne and paid by
the Indemnifying Party. The parties agree to cooperate fully with one another in
the defense, compromise or settlement of any Asserted Liability. In the event
any compromise, settlement or judgment amount includes amounts resulting from
frivolous or groundless claims or defenses made by Indemnitee, the Indemnifying
Party shall not bear the portion of the amount to be paid relating to such
frivolous or groundless claims.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties, Covenants and Agreements .
Except as provided below with regard to Section 3.17, all representations,
warranties, covenants and agreements in this Agreement or in any document or
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to this transaction and shall survive the consummation of this transaction for a
period of twenty-four (24) months after the Closing Date. Notwithstanding the
foregoing, except as provided below with regard to Section 3.17, all
representations, warranties, covenants and agreements shall survive the Closing
Date for forty-eight (48) months following the Closing Date if such
representations, warranties, covenants and agreements are breached due to fraud
or gross negligence. Notwithstanding the foregoing, the tax obligations set
forth in Section 3.17 above shall survive the consummation of this transaction
and the Closing Date for an indefinite period of time.
10.2 Amendment . This Agreement may be amended by the parties hereto at any
time before or after approval of this transaction by the Shareholders; provided,
however, that following approval of this transaction by the Shareholders, no
amendment hereto shall be made that by law requires the further approval of the
Shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of both of the
parties hereto.
10.3 Extension; Waiver . At any time prior to the Closing Date, Paramount
and Security National, by action taken by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other, (ii) waive any inaccuracies
in the representations and warranties made to it contained herein or in any
document or instrument delivered pursuant hereto and (iii) waive compliance with
any of the agreements or conditions for the benefit of it contained herein. Any
agreement on the part of either party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by such
party.
10.4 Notices . All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or if sent by facsimile,
confirmation received, to the respective party at the following addresses and/or
facsimile numbers, with the original thereof being mailed by registered or
certified mail, return receipt requested (or at such other address or facsimile
number for the parties hereto as shall be specified by like notice):
(a) If to Security National, to:
Security National Financial Corporation
0000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxx, President, General Counsel
and Chief Operating Officer
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Mackey Price &Thompson
000 Xxxxxxxx Xxxxx II
00 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) If to Paramount, to:
Paramount Security Life Insurance Company
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, President
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxx, III, Esq.
000 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) If to Shareholders, to:
Physicians and Surgeons Medical Center, Inc.
0000 Xxxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xx. Xxxxx X. Xxxxxxx, M.D.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxx, III, Esq.
000 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10.5 Interpretation . When a reference is made in this Agreement to
Sections or Exhibits, such references shall be deemed to be to a Section or
Exhibit to this Agreement, unless otherwise indicated. The words "include",
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation". The Table of Contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
10.6 Counterparts . This Agreement may be executed in one or more
counterparts, all of which, when taken together, shall be considered one and the
same agreement, and this Agreement shall become effective when one or more
counterparts have been signed by each of the parties hereto and delivered to the
other parties hereto.
10.7 Entire Agreement . This Agreement and the documents and instruments
attached hereto as Exhibits and all other agreements between the parties hereto
delivered pursuant to this Agreement constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof (including specifically the Stock
Purchase Agreement dated as of January 26, 2004 among Security National,
Paramount and the Shareholders) and are not intended to confer upon any other
person or entity any rights or remedies hereunder except as otherwise expressly
provided herein.
10.8 No Transfer . This Agreement and the rights and obligations set forth
herein may not be transferred or assigned by operation of law or otherwise
without the consent of both parties hereto. This Agreement is binding upon and
will inure to the benefit of each party hereto and their respective successors
and permitted assigns.
10.9 Severability . If any provision of this Agreement, or the application
thereof, is for any reason whatsoever and to any extent deemed to be invalid or
unenforceable, the remainder of this Agreement and the application thereof to
other persons, entities or circumstances will be interpreted so as reasonably to
effect the intent of the parties hereto. The parties hereto further agree to
replace any such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision
hereof.
10.10 Other Remedies . Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereto will be deemed
cumulative with, and not exclusive of, any other remedy conferred hereby or by
law or equity on such party; and the exercise of any one remedy will not
preclude the exercise of any other remedy otherwise available at law or in
equity.
10.11 Further Assurances . The parties hereto agree to cooperate fully with
other parties hereto and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party hereto in order to evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
10.12 No Third Party Beneficiary Rights . No provision of this Agreement is
intended, nor will any provision hereof be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind whatsoever in any
client, customer, supplier affiliate, stockholder, employee, distributor,
partner of either party hereto or any other person or entity, and all of the
provisions hereof shall be deemed to be personal in nature and between the
parties to this Agreement.
10.13 Mutual Drafting . This Agreement is the joint product of Security
National and Paramount, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Security National and Paramount, and
shall not be construed for or against either party hereto.
10.14 Governing Law . This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Louisiana, without giving effect to its choice of law principles.
10.15 Jurisdiction and Venue. The federal and state courts within the State
of Utah shall have exclusive jurisdiction to adjudicate any dispute arising
under or out of this Agreement. The parties hereto expressly consent to (i) the
personal jurisdiction of the federal and state courts within the State of Utah
and (ii) service of process being effected upon them by registered or certified
mail. Venue shall be deemed to be with the state and federal courts sitting in
Salt Lake County, State of Utah.
10.16 Expenses . All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such costs and expenses. Those costs and expenses of
Paramount will be paid immediately following this transaction by the
Shareholders.
10.17 Brokers or Finders . Security National, Paramount, PSMCI and the
Shareholders each represent, as to itself and, to the extent applicable, its
subsidiaries, that except for Xxxx X. Xxxxx, Xxxxxxxx & Xxxxxxxx LLP and Xxxxx
Xxxxxx (who are Security National's agent/broker and Security National's
responsibility to compensate), no agent, broker, investment banker or other firm
or person is, or will be, entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
10.18 Public Announcements . Each party hereto will consult in advance with
the other concerning the timing and content of any announcements, press releases
and public statements concerning this transaction and will not make any such
announcement, press release or public statement without the other's prior
consent; provided, however, that Security National may make any public statement
or announcement concerning this transaction without Paramount's or the
Shareholders' prior consent if, in the opinion of counsel for Security National,
such public statement or announcement is required or advisable to comply with
applicable law.
10.19 Confidentiality . No party hereto shall release, publish, reveal or
disclose, directly or indirectly, any business or technical information of the
other party hereto or any of its Subsidiaries considered by the other party as
"confidential", "secret" or "proprietary" (or words of similar meaning)
including, but not limited to, systems, processes, formulas, recipes, data,
functional specifications, computer programs, blue prints, know-how,
improvements, discoveries, developments, designs, inventions, techniques, new
products, marketing and advertising methods, distribution methods and programs,
supplier agreements, customer or distributor lists, pricing policies, financial
information, projections, forecasts, strategies, budgets or other information
related to its business or its distributors, suppliers or customers
(collectively, "Confidential Material"), except to the party's directors,
officers, employees, financial advisors, legal counsel, independent public
accountants or other agents, advisors or representatives who shall require
access thereto on a "need-to-know" basis for the purpose of the transactions
contemplated by this Agreement and who shall agree in writing to be bound by the
terms of this Section 10.19. The parties hereto agree to take all reasonable
precautions to safeguard the confidentiality of the other party's Confidential
Material and to exercise the same degree of care with respect to such other
party's Confidential Material that the party in possession of such Confidential
Material exercises with respect to its own confidential information. Neither
party hereto shall make or permit to be made, except in furtherance of the
transactions contemplated by this Agreement, any copies, abstracts or summaries
of the other party's Confidential Material. In addition, all Confidential
Material belonging to the other party hereto shall be used solely for the
purpose of the investigation and evaluation contemplated by this Section 10.19,
and shall not be used for any other purpose, including any use that would be to
the detriment of the other party hereto or its Subsidiaries, nor shall such
Confidential Material be used in competition with the other party hereto or its
Subsidiaries. The restrictions on disclosure of information contained in this
Section 10.19 do not extend to any information that (a) is already known to the
receiving party; (b) was or is independently developed by the receiving party;
(c) is now or hereafter becomes available to the public other than as a
consequence of a breach of obligations under this Section 10.19 or (d) is
disclosed to third parties hereto outside of the receiving party in accordance
with terms approved by the disclosing party. Upon written request, the parties
hereto shall return all writings, documents and materials containing
Confidential Material with a letter confirming that all copies, abstracts and
summaries of the Confidential Material have been returned or destroyed. In the
event that either party hereto becomes legally required to disclose the other
party's Confidential Material, it shall provide such other party with prompt
written notice of such requirement prior to such disclosure. In the event that a
protective order or other remedy is not obtained, or such other party waives
compliance with the provisions of this Section 10.19 with respect to the
Confidential Material subject to such requirement, such party agrees to furnish
only that portion of the Confidential Material that it is legally required to
furnish and, where appropriate, agrees to use its best efforts to obtain
assurances that such Confidential Material will be accorded confidential
treatment.
10.20 Attorney's Fees. In the event any legal action or arbitration or
other proceeding is brought for the enforcement of this Agreement or in
connection with any other provisions of this Agreement, the successful and
prevailing party or parties shall be entitled to reasonable attorney's fees and
other costs incurred in such action or proceeding.
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IN WITNESS WHEREOF, Security National, Paramount and the Shareholders have
each caused this Agreement to be signed effective as of the date first written
above.
SECURITY NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxx
------------------
Its: President
PARAMOUNT SECURITY LIFE
INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Its: Vice President
PHYSICIANS AND SURGEONS
MEDICAL CENTER, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Its: Vice President
EXHIBIT INDEX
Exhibit 1 Paramount Securities Schedule
Exhibit 2 Paramount Disclosure Schedule
Exhibit 3 Security National Disclosure Schedule
