ESCROW AGREEMENT
THIS
ESCROW AGREEMENT (the "Escrow
Agreement") is made and entered into this 17th day of December, 2007, by
and
among SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah corporation ("Security
National"), CAPITAL RESERVE LIFE INSURANCE COMPANY, a Missouri corporation
("Capital Reserve"), the shareholders of Capital Reserve that have executed
the
Agreement by Shareholders of Capital Reserve Life Insurance
Company to Sell Shares in Stock Purchase Transaction (the
"Shareholders"), and MACKEY PRICE XXXXXXXX & XXXXXX, a Utah professional
corporation (the "Escrow Agent") (each of the foregoing parties is referred
to
singly, as a "Party" and collectively, as the
"Parties").
WITNESSETH:
WHEREAS,
on October 9, 2007, Security
National, Capital Reserve, and the Shareholders entered into a stock purchase
agreement (the "Stock Purchase Agreement") in which the Shareholders agreed
to
sell to Security National, and Security National agreed to purchase from
the
Shareholders, all of the issued and outstanding shares of stock of Capital
Reserve in consideration for purchase consideration payable to the Shareholders
on a pro rata basis in an amount equal to the Capital and Surplus of Capital
Reserve as of September 30, 2007, plus the interest maintenance reserve and
the
asset valuation reserve as set forth on the September 30, 0000 Xxxxxxxxx
Xxxxxxxxx Xxxxxxxxx of Capital Reserve, plus $1,037,967, less certain
adjustments set forth in Section 1.2 of the Stock Purchase Agreement (the
"Purchase Consideration"); and
WHEREAS,
Security National, Capital
Reserve, and the Shareholders amended the Stock Purchase Agreement, effective
November 26, 2007; and
WHEREAS,
Security National, Capital
Reserve and the Shareholders desire to establish this escrow for the purpose
of
holding the funds to be deposited in an escrow account (the "Escrow Account")
in
accordance with the terms of the Stock Purchase Agreement and distributing
such
funds pursuant to the terms of such agreement; and
WHEREAS,
Escrow Agent is willing to
receive the funds contemplated by the Stock Purchase Agreement and to hold
and
distribute the same in accordance with the terms of such agreement;
WHEREAS,
in Section 1.2 of the Stock
Purchase Agreement, the Shareholders acknowledge that on June 8, 2007, Xxxxxxx
Xxxxxxx ("Xxxxxxx"), a former employee of Capital Reserve, filed an action
against Capital Reserve in the Circuit Court of Xxxx County, Missouri (Case
No.
07ALCC00513) (the "Xxxxxxx Litigation") for unpaid bonuses allegedly due
her in
the total amount of $1,486,045, plus interest at the statutory rate of 9%
per
annum until the judgment is paid in full; and
WHEREAS,
if the Xxxxxxx Litigation is
not completely resolved prior to the closing (the "Closing") of the transaction
relating to the Stock Purchase Agreement, the Shareholders have agreed to
deposit $2,100,000 of the Purchase Consideration into the Escrow Account
at
Closing with such funds to be held and distributed pursuant to the terms
of the
Stock Purchase Agreement; and
WHEREAS,
Security National, Capital
Reserve, and the Shareholders have agreed that if Capital Reserve or any
of its
officers, directors, employees or agents is determined to be liable in the
Xxxxxxx Litigation or if Capital Reserve settles the Xxxxxxx Litigation,
funds
from the Escrow Account are to be distributed to Xxxxxxx in the amount of
such
judgment or settlement, including the costs of defending Capital Reserve
in the
Xxxxxxx Litigation; and
WHEREAS,
Security National, Capital
Reserve, and the Shareholders have additionally agreed that funds
from the Escrow Account are to be distributed to Security National in the
amount
in which the Adjusted Capital and Surplus of Capital Reserve on September
30,
2007, exceeds the Adjusted Capital and Surplus on the closing date (the "Closing
Date") as defined in Section 2.1 of the Stock Purchase Agreement;
and
WHEREAS,
Security National, Capital
Reserve, and the Shareholders have further agreed that upon distribution
of
funds from the Escrow Account to Xxxxxxx equal to the amount of any judgment
or
settlement in the Xxxxxxx Litigation, including the cost of defending Capital
Reserve in the litigation, and to Security National in the amount in which
the
Adjusted Capital and Surplus Capital Reserve on September 30, 2007 exceeds
the
Adjusted Capital and Surplus of Capital Reserve on the Closing Date, any
funds
remaining in the Escrow Account are to be distributed to the Shareholders
on a
pro rata basis;
NOW,
THEREFORE, in consideration of the
mutual promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Delivery
of Documents into
Escrow. Security National and Capital Reserve herewith deliver
the following documents to Escrow Agent to be held and disposed of by Escrow
Agent strictly in accordance with the terms of this Escrow
Agreement:
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(a)
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A
copy of the Stock Purchase Agreement.
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(b)
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A
certified shareholders list of Capital Reserve dated the Closing
Date (the
"Certified Shareholders List") with the names and addresses of
each of the
Shareholders and the number of shares held by each of the shareholders
as
of the Closing Date.
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(c)
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A
copy of the September 30, 2007 Statutory Quarterly Statement of
Capital
Reserve.
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(d)
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A
copy of the complaint filed by Xxxxxxx in the Xxxxxxx Litigation.
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2. Delivery
of Cash into
Escrow. The Shareholders herewith deliver cash in the form of
immediately available U.S. Dollars by bank wire transfer into the Escrow
Agreement in the amount of Two Million One Hundred Thousand Dollars
($2,100,000).
3. Investment
of Escrow
Funds. Any funds held in the Escrow Account shall be invested
by the Escrow Agent, in the Escrow Agent's discretion, in an interest-bearing
account held by the Escrow Agent.
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4.
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Distribution
of Escrow
Funds.
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(a) Upon
the complete resolution of the Xxxxxxx Litigation by the court rendering
a final
judgment and the applicable appeal time having expired or the court dismissing
the complaint with prejudice pursuant to a settlement, the Escrow Agent shall
distribute to Xxxxxxx from funds in the Escrow Account any amounts owing
to
Xxxxxxx as a result of such judgment or settlement, including but not limited
to, any interest, penalties, attorney's fees and related expenses as required
by
such judgment or settlement.
(b) The
Escrow Agent shall also distribute from the funds in the Escrow Account the
costs of defending Capital Reserve in the Xxxxxxx Litigation, including any
attorney's fees and related expenses, to the extent such costs have not been
previously paid by the Shareholders. The Escrow Agent shall pay such costs
directly to the attorneys that defended Capital Reserve in the Xxxxxxx
Litigation.
(c) Upon
completion of the determination of the Adjusted Capital and Surplus of Capital
Reserve as of the Closing Date, together with a statement from the Chief
Financial Officer of Security National certifying the accuracy of such
calculation, the Escrow Agent shall distribute to Security National from
the
funds in the Escrow Account the amount in which the Adjusted Capital and
Surplus
of Capital Reserve as of September 30, 2007, as defined in Section 1.2 of
the
Stock Purchase Agreement, exceeds the Adjusted Capital and Reserve of Capital
Reserve on the Closing Date.
(d) Upon
the completion and satisfaction of the required distributions set forth in
Sections 4(a) - (c) above, the Escrow Agent shall distribute the remaining
funds
in the Escrow Account to the Shareholders on a pro rata basis to the number
of
shares of Capital Reserve common stock held by the Shareholders on the Closing
Date, as set forth on the Certified Shareholders List. Such payments to the
Shareholders shall be in the form of cashier's checks payable to the order
of
each of the Shareholders as named on the Certified Shareholders List. Such
Shareholder checks shall be delivered to J. Xxxxx Xxxxxxxxx, 0000 Xxxxxxxxxx,
Xxxxx X, Xxxxxxxxx Xxxx, Xxxxxxxx 00000, for disbursement to the
Shareholders.
5. Responsibility
of the Escrow
Agent. The escrow Agent accepts the escrow arrangements set
forth in this Escrow Agreement upon the terms and conditions hereof and
undertakes to act solely as depository for the escrow funds, with no obligations
to Security National, Capital Reserve, or the Shareholders except as
specifically set forth herein. The Parties hereto agree that the
following terms and conditions shall govern and control with respect to the
rights, duties, liabilities and immunities of the Escrow Agent
hereunder.
(a) Until
escrowed payments are distributed as provided herein, the Escrow Agent shall
maintain such funds in an interest bearing account, as provided
herein.
(b) The
duties and obligations of the Escrow Agent shall be determined solely by
the
express provisions of this Escrow Agreement, and no implied covenants, duties
or
obligations shall be read into this Escrow Agreement against the Escrow Agent,
nor shall it have, or be deemed to have, any duties or responsibilities under
the provisions of any other agreements between the other Parties
hereto.
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(c) The
Escrow Agent shall not be liable for any error of judgment, or any actions
taken, or omitted by it in good faith, or mistake of fact or law, or for
anything it may do or refrain from doing in connection therewith, except
its own
gross negligence or willful misconduct.
(d) The
Escrow Agent may rely and shall be protected from acting in good faith in
reliance upon resolution, direction, certificate, statement, approval, notice,
court order, or other document, not only unto its due execution and the validity
and effectiveness of its provisions, but also as to the truth of any information
therein contained, which it in good faith believes to be genuine and what
purports to be.
(e) The
Escrow Agent may consult with counsel or other experts of its own choice
and any
opinion of its own choice and any opinion of counsel or written opinion of
such
other experts shall be full and complete authorization and protection with
respect to any action taken or omitted by the Escrow Agent hereunder in good
faith and in accordance with such opinion of counsel or opinion of such other
experts within the area of their respective expertise.
(f) The
Escrow Agent may execute any of its powers or responsibilities hereunder
and
exercise any rights hereunder either directly or by or through its agent
or
attorneys.
(g) The
Escrow Agent shall not be responsible for and shall not be under a duty to
examine into or pass upon, the validity, binding effect, execution or
sufficiency of this Escrow Agreement or of any agreement, amendment or
supplement hereto nor shall the Escrow Agent be accountable for the source
of
the escrow funds.
(h) Except
as otherwise specifically provided herein, the Escrow Agent may deal with
Security National, its parent company or its affiliates, in the same manner
and
to the same extent and with like effect as if it were not the Escrow Agent
hereunder.
(i) If
any controversy or dispute arises between the Parties hereto or with any
third
party with respect to the subject matter of the escrow described herein,
the
Escrow Agent shall not be required to determine the same or take any action,
but
may await the settlement of any such controversy or dispute by final appropriate
legal proceedings or otherwise as the Escrow Agent may require, and in such
event the Escrow Agent shall not be liable for interest or damage, except
that
the Escrow Agent shall not deliver the escrow funds in any manner other than
in
accordance with Section 4 hereof. In addition, the Escrow Agent shall have
the
right to commence such interpleader or other legal proceedings or actions,
or
take or withhold any other actions, as are reasonably necessary or appropriate
pending resolution of such controversy or dispute. The Escrow Agent shall
be
entitled to retain counsel to represent it in any controversy or dispute
relating to this Escrow Agreement.
6. Termination. This
Escrow Agreement shall terminate upon distribution of all of the funds in
the
Escrow Account pursuant to Section 4 hereof.
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7. Manner of Notice. All
notices required by this Escrow Agreement or which one party desires to serve
on
another party, shall be in writing and shall be deemed given or made when
delivered to such party personally, or three days after mailing to such party
by
bonded courier, by registered or certified mail, postage prepaid, return
receipt
requested, or by first-class mail, postage prepaid, to the addresses specified
below:
If to Security
National, to :
Security
National Life Insurance Company
0000
Xxxxx 000 Xxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxx
X. Xxxxx, President
Facsimile
No. (000) 000-0000
Telephone
No. (000) 000-0000
or
to
such other address or addresses as Security National shall hereinafter designate
by notice to the other parties as herein provided; and
If
to
Capital Reserve, to :
Capital
Reserve Life Insurance Company
000
Xxxxxxx Xxxxxx
X.X.
Xxx
000
Xxxxxxxxx
Xxxx, Xxxxxxxx 00000
Attn: Xxxx
Xxxxxxxxxx, Vice President
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
or
to
such other address or addresses as Capital Reserve shall hereinafter designate
by notice to the other parties as herein provided;
If
to
Shareholders, to:
J.
Xxxxx
Xxxxxxxxx, CPA
0000
Xxxxxxxxxx, Xxxxx X
Xxxxxxxxx
Xxxx, Xxxxxxxx 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
or
to
such other address or addresses as the Shareholders shall hereinafter designate
by notice to the other parties as herein provided; and
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If to Escrow Agent, to :
Mackey
Price Xxxxxxxx & Xxxxxx
00
Xxxx
000 Xxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxxxx
X. Xxxxxx, Esq.
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
or
to
such other address or addresses as the Escrow Agent shall hereinafter designate
by notice to the other parties as herein provided.
8. Governing Law. This
Escrow Agreement shall be enforced and construed in accordance with the laws
of
the State of Utah.
9. Counterparts. This
Escrow Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the
same
instrument.
10. Time. Time
is of the essence of this Escrow Agreement.
11. Headings. The
subject headings of the paragraphs contained in this Escrow Agreement are
included for purposes of convenience only and shall not control or affect
the
meaning, construction or interpretation of any of the provisions of this
Escrow
Agreement.
IN
WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of
the day and year first above written.
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SECURITY
NATIONAL LIFE INSURANCE COMPANY
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By: /s/
Xxxxx X.
Xxxxx
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Xxxxx
X. Xxxxx, President
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CAPITAL
RESERVE LIFE INSURANCE COMPANY
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By: /s/
Xxxx X.
Xxxxxx
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Its: President
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THE
SHAREHOLDERS:
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/s/
Xxxxxx Xxxxxx
Xxxxxxxx
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Xxxxxx
Xxxxxx Xxxxxxxx
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/s/
Xxxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx
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/s/
Xxxxxx X.
Xxxx
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Xxxxxx
X. Xxxx
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/s/
Xxxxx Xxxxxx
Xxxxx
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Xxxxx
Xxxxxx Xxxxx
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx for
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Xxxxx
X. Xxxxxx (Minor Child)
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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XXXXX
X. XXXXXX TRUST
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By:
/s/ Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx, Trustee
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/s/
Xxxxxxxx X.
Xxxxxx
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Xxxxxxxx
X. Xxxxxx
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Xxxxxxxx
X. and Xxxxxxxxx Xxx Xxxxxx,
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Joint
Tenants
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By:
/s/ Xxxxxxxx X.
Xxxxxx
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Xxxxxxxx
X. Xxxxxx
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By:
/s/ Xxxxxxxxx Xxx
Xxxxxx
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Xxxxxxxxx
Xxx Xxxxxx
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XXXX
X. XXXXXX TRUST
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By:
/s/ Xxxx X.
Xxxxxx
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Xxxx
X. Xxxxxx, Trustee
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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/s/
Xxxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx
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MACKEY
PRICE XXXXXXXX & XXXXXX
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By /s/
Xxxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx, President
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