<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 0-9341
Security National Financial Corporation
(Exact name of registrant as specified in its Charter)
UTAH 87-0345941
- --------------------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
Number)
5300 South 360 West, Suite 310 84123
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Salt Lake City, Utah (Zip Code)
(Address of principal executive offices)
Registrant's telephone number,
including area code: (801) 264-1060
--------------
Securities registered pursuant to Section 12(d) of the Act:
Name of each exchange
Title of each Class on which registered
- -------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common stock, $2.00 Par Value
(Title of Class)
Class C Common stock, $0.40 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No___
Indicated by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 28, 1995 was
$13,906,188.
As of March 28, 1995, registrant had outstanding 3,026,394
shares of Class A Common Stock and 2,250,765 shares of
Class C Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the
registrant's 1995 Annual Meeting of Shareholders are
incorporated by reference into Part III hereof.
<PAGE>
PART I
Item 1. Business
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Security National Financial Corporation (the "Company"),
through its subsidiaries, is engaged in the business of
selling and servicing selected lines of life insurance and
annuity products, in selling cemetery and funeral products
and services, and in originating, refinancing, and
servicing residential and commercial mortgage loans. The
Company markets its insurance and annuity products in 29
states through a commissioned sales force of 103
independent licensed insurance agents who may also sell
insurance products of other companies. The Company owns
six cemeteries (four with funeral chapels on the property)
and four mortuaries in the state of Utah and three
mortuaries in the State of Arizona. The Company markets
its cemetery and funeral products and services in the
States of Utah and Arizona, through a commissioned sales
force of 72 sales representatives, of which 21 sales
representatives also sell the Company's insurance and
annuity products. At December 31, 1994, the Company had 81
full time employees and 35 part-time employees. The
Company had approximately $437,000,000 of life insurance in
force and approximately $22,000,000 of contract value in
force as of December 31, 1994.
The Company was organized as a holding company in 1979 when
Security National Life Insurance Company ("Security
National Life") became a wholly-owned subsidiary of the
Company and the former stockholders of Security National
Life became stockholders of the Company. Security National
Life was formed in 1965 and completed a public offering of
Class A common stock in that year. It has grown through
the direct sales of life insurance and annuities and
through acquisitions of other companies. Memorial Estates,
Inc. and Memorial Mortuary became wholly-owned subsidiaries
of the Company in the 1979 reorganization when the Company
was formed. Those companies had been acquired by Security
National Life in 1973. Investors Equity Life Insurance
Company of Hawaii, Ltd. ("Investors Equity"), a direct
subsidiary of the Company was acquired in June 1986, and
subsequently sold in June 1991.
In 1989, the Company acquired Paradise Chapel Funeral Home,
Inc. as a wholly-owned subsidiary. Also in 1989 IEL
Holding Company, Inc. was formed as a wholly-owned
subsidiary of the Company to acquire all of the stock of
Investors Equity pursuant to a reorganization which was
completed on December 31, 1989. During December 1992, 100%
of the common stock of IEL Holding Company, Inc., was
contributed by the Company to Security National Life, a
wholly owned subsidiary of the Company. Effective April 1,
1994, IEL Holding Company Inc., was liquidated into
Security National Life.
At the annual meeting of stockholders held on December 27,
1990, the Articles of Incorporation were amended such that
the name was changed from S.N.L. Financial Corporation to
Security National Financial Corporation.
In 1991, the Company acquired Holladay Memorial Park, Inc.,
Cottonwood Mortuary, Inc., Holladay Cottonwood Memorial
Foundation, and Deseret Memorial, Inc. as wholly-owned
subsidiaries. Deseret Memorial, Inc. includes the
following entities: Deseret Mortuary, Colonial Mortuary,
<PAGE>
Deseret Memorial Plan, Lake Hills Benevolent Trust, Lake
Hills Memorial Crematory, Lake Hills Mortuary, Lake Hills
Memorial Park, and Alta Concrete Products and Vault Plant.
In July 1993, the Company formed Security National Mortgage
Company ("Security National Mortgage") to originate,
refinance and service residential and commercial mortgage
loans in the State of Utah. The Company contributed assets
of approximately $268,000 to capitalize the initial
operations of Security National Mortgage. In January 1994,
the Company acquired Sunset Funeral Home, Inc. which owns
and operates a mortuary located in Phoenix, Arizona.
Security National Mortgage and Sunset Funeral Home are both
wholly-owned subsidiaries of the Company.
In December 1994, the Company acquired Capital Investors
Life Insurance Company ("Capital Investors Life"), a
Florida based life insurance company. On December 28,
1994, Capital Investors Life was redomesticated to Utah.
Capital Investors Life is licensed in 23 states (17 of
which Security National Life is also licensed). At
December 23, 1994, Capital Investors Life had approximately
$79,000,000 insurance in force and $10,000,000 of contract
value. The Company intends to move Capital Investors
Life's administrative operations to Salt Lake City during
1995.
In January 1995, the Company, through its newly-formed
wholly-owned subsidiary, California Memorial Estates, Inc.,
purchased approximately 100 acres of real property located
in San Diego, California, of which approximately 35 acres
will be used for the development of a cemetery. The
Company is in the process of obtaining approval from the
federal government and the California Cemetery Board to
operate a cemetery on the property. In March 1995, the
Company acquired 97.8% of the issued and outstanding common
stock of Greer-Wilson Funeral Home, Inc., which owns and
operates a funeral home in Phoenix, Arizona.
The Company through its insurance subsidiaries issues and
distributes selected lines of life insurance and annuities.
The Company's life insurance business includes funeral
plans and interest-sensitive whole life insurance, as well
as other traditional life and accident insurance products.
The Company's annuity business includes flexible premium
deferred annuity contracts, single premium deferred annuity
contracts, and other types of annuities. The Company's
life insurance and annuity business decreased significantly
with the sale of Investors Equity.
The Company through its cemetery and mortuary subsidiaries
markets a variety of products and services utilized in its
cemetery and funeral service operations. The products
include grave plots, markers, caskets, and other related
products. The services include opening and closing of
graves, professional services, use of automobiles, and the
use of chapels and viewing rooms. The Company markets
these products and services through its six cemeteries
(four with funeral chapels on the property) and seven
mortuaries on both an at-need (at time of death) and a
pre-need basis. The Company's cemetery and mortuary
<PAGE>
business increased with the acquisition of Holladay
Memorial Park, Inc., Cottonwood Mortuary, Inc. and Deseret
Memorial, Inc. in September, 1991 and with the acquisition
of Sunset Funeral Home, Inc. in January 1994.
The following table sets forth information with respect to
revenues from the Company's life, annuity and accident and
health insurance, and cemetery and mortuary products and
services for each of the five years in the period ended
December 31, 1990 to 1994:
<TABLE>
<CAPTION>
Life, Annuity Cemetery
and Accident and and
Year Health Insurance Mortuary Total(3)
- ------- ------------------ ----------- -------------
<C> <C> <C> <C>
1994 $4,759,000 $5,888,000 $10,647,000
1993 4,777,000 6,085,000 10,862,000
1992 4,493,000 5,741,000 10,234,000
1991(1)(2) 5,182,000 4,054,000 9,236,000
1990 5,170,000 3,443,000 8,613,000
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
(1) Only includes Cottonwood Mortuary, Inc. and
Holladay Memorial Park, Inc. for three months
ended December 31, 1991. Revenues from these
companies are included in subsequent years but
not prior to September 1991, the date in which
they were purchased by the Company.
(2) Only includes Investors Equity Life Insurance
Company ("Investors Equity") for the first five
months of 1991 since Investors Equity was sold in
June 1991. Revenues from Investors Equity are
included in 1989 and 1990, but not in 1992, 1993,
and 1994.
(3) Does not include investment income or other
income.
</TABLE>
<PAGE>
For the years presented, accident and health insurance has
been combined with the life insurance segment, since the
amounts were insignificant.
Life Insurance
Products
The following table sets forth the annualized premiums from
new business written for the five years ended December 31,
1990 to 1994.
<TABLE>
<CAPTION>
Term and
Permanent
Funeral Plan Insurance
------------ ---------
Year Total
Ended New
December 31, Amount % Amount % Business
- ------------ ------- --- -------- -- ----------
<C> <C> <C> <C> <C> <C>
1994 $ 693,000 96 $ 26,000 4 $ 719,000
1993 1,232,000 98 26,000 2 1,258,000
1992 1,166,000 96 54,000 4 1,220,000
1991(1) 1,427,000 95 80,000 5 1,507,000
1990 1,200,000 84 223,000 16 1,423,000
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
1) Since Investors Equity was sold in June 1991,
premiums relating to Investors Equity are only
included in 1990 and for the first five months of
1991.
<PAGE>
The Company, in marketing its life insurance products,
seeks to locate, develop and service specific "niche"
markets. A "niche" market is an identifiable market which
the Company believes is not emphasized by other insurers.
In its insurance operations, the Company markets a variety
of life insurance products, including ordinary life
policies and interest-sensitive whole life policies, but
places specific marketing emphasis on funeral plans.
</TABLE>
A funeral plan is a small face value life insurance policy
that generally has a face coverage of up to $5,000. The
Company believes that funeral plans represent a marketing
niche that is less competitive since most insurance
companies do not offer similar coverages. The purpose of
the funeral plan policy is to pay the costs and expenses
incurred at the time of a person's death. On a per
thousand cost of insurance basis, these policies are more
expensive to the policyholder than many types of non-burial
insurance due to their low face amount, requiring the fixed
cost of the policy to be distributed over a smaller policy
size, and due to the higher age of the policyholder
resulting in higher mortality costs.
Markets and Distribution
The Company is licensed to sell insurance in 29 states.
The Company generally sells its life insurance products to
people of middle age who have a need for insurance to
protect the income of the wage earner of the family, to pay
off debts at the time of death and for other estate
planning purposes. Funeral plan policies are sold
primarily to persons who range in age from 45 to 75. Even
though people of all ages and income levels purchase
funeral plans, the Company believes that the highest
percentage of funeral plan purchasers are individuals who
are older than 45 and have low to moderate income. A
majority of the Company's funeral plan premiums come from
the states of Arizona, Colorado, Idaho, Oklahoma, Texas
and Utah, and a majority of the Company's non-funeral plan
life insurance premiums come from the states of New Mexico
and Utah.
The Company sells its life insurance products through
direct agents and brokers and has 103 independent licensed
agents who may also sell insurance products of other
companies. The commissions on life insurance products
range from approximately 45% to 90% of first year premiums.
In those cases where the Company utilizes its direct agents
in selling such policies, those agents customarily receive
advances against future commissions.
The Company employs a direct agency system in marketing
funeral plan insurance. In some instances, the policies
are marketed in conjunction with the Company's cemetery and
mortuary sales force. When they are marketed by that
group, the beneficiary is usually the Company. Thus, death
benefits that become payable under the policy are paid to
the Company's cemetery and mortuary subsidiaries to the
extent of services performed and products purchased.
<PAGE>
In marketing the funeral plan insurance, the Company also
seeks and obtains third-party endorsements from other
cemeteries and mortuaries within its marketing areas.
Typically, these cemeteries and mortuaries will provide
letters of endorsement and may share in mailing and other
lead-generating costs. The incentive for such businesses
to share the costs is that these businesses are usually
made the beneficiary of the policy as their interest may
appear.
Annuities
Products
The Company markets both deferred and immediate annuity
products. A deferred annuity is a contract where the
individual remits a sum of money to the Company which is
retained on deposit until such time as the individual may
wish to purchase an immediate annuity or surrender his
contract for cash. An immediate annuity is a contract with
the Company in which the individual remits to the Company
a sum of money in return for the Company's obligation to
pay a series of payments on a periodic basis over a
designated period of time, such as an individual's life, or
for such other period as may be designated.
Holders of annuities enjoy significant benefits under the
current federal income tax law in that interest accretions
that are credited to the annuities do not incur current
income tax expense on the part of the contract holder.
Instead, the interest income is tax deferred until such
time as it is paid out to the contract holder.
A flexible premium deferred annuity gives the contract
holder the right to make premium payments of varying
amounts or to make no further premium payments after his
initial payment. This flexible premium annuity can have an
initial surrender charge. The surrender charge acts as a
deterrent to individuals who may wish to surrender their
annuity contracts. This type of annuity has a guaranteed
interest rate of 4%. Above that, the interest rate is as
determined by the Board of Directors at their discretion.
In order for the Company to realize a profit on an annuity
product, the Company must maintain an interest rate spread
between its investment income and the credited interest
rate it is applying to annuities. From that spread must
be deducted commissions, issuance expenses and general
and administrative expenses. The Company's annuities
currently have credited interest rates ranging from 4% to
6.25%.
Markets and Distribution
The general market for all of the Company's annuities is
middle to older age individuals who wish to save or invest
their money in a tax deferred environment, having
relatively high yields. The Company currently markets its
annuities primarily in the states of Arizona, Colorado,
Idaho, New Mexico, Oklahoma, Texas and Utah.
<PAGE>
The major source of annuity premium comes from direct
agents. Annuities can be sold as a by-product of other
insurance sales. This is particularly true in the funeral
planning area. If an individual does not qualify for a
funeral plan due to health considerations, the agent will
often sell that individual an annuity to take care of those
final expenses. The commission rates on Single Premium
Deferred Annuities range from 2% to 8%. The commission
rates on annuities other than the Single Premium Deferred
Annuity range from 2.5% to 10.5%.
Accident and Health Products
Prior to the acquisition of Capital Investors Life, the
Company did not actively market accident and health
products. With the acquisition of Capital Investors Life,
the Company acquired a block of accident and health
policies which pay limited benefits to policyholders if
they are involved in motor vehicle accidents. At December
31, 1994, there were approximately 41,000 policyholders
with annual premiums of approximately $500,000.
Capital Investors Life is currently offering a low-cost
comprehensive diver's accident policy. The policy provides
world-wide coverage for medical expense reimbursement and
life insurance in the event of diving or water sports
accidents. At December 31, 1994, there were approximately
2,500 policyholders with annual premiums of approximately
$128,000.
Capital Investors Life currently markets its divers policy
through water sports magazine advertising and dive shops
throughout the world. Capital Investors Life pays a direct
commission to the dive shops for new business generated.
<PAGE>
Cemetery and Funeral Services
Products
The Company has five wholly-owned cemeteries and one cemetery owned through a
joint venture with an Ogden, Utah based mortuary. The cemeteries are non-
denominational. There are mortuary facilities located in Salt Lake City,
Utah; Sandy, Utah; and Phoenix, Arizona.
The following table summarizes the location and acreage of the six Company
owned cemeteries:
<TABLE>
<CAPTION>
Net Saleable Acreage
Acres
Sold as Total
Name of Date Developed Total Cemetery Available
Cemetery Location Acquired Acreage(1) Acreage(1) Spaces(2) Acreage(1)
- -------- --------- -------- ---------- ---------- -------- ----------
<C> <C> <C> <C> <C> <C> <C>
Bountiful
Cemetery(3) 1700 E.
Lakeview Dr.
Bountiful, UT 1973 4 40 3 37
Evergreen
Memorial
Park(4) 100 Monroe Blvd.
Ogden, UT 1987 7 50 2 48
Holladay
Memorial
Park(5)(6) 4800 So. Memory
Lane
Holladay, UT 1991 6 13 4 9
Lakehills
Cemetery 10055 So. State
(5)(7) Sandy, UT 1991 12 42 6 36
Mountain
View
Cemetery(3) 3115 E. 7800 So.
Salt Lake City,
UT 1973 26 54 14 42
Redwood
Cemetery 6500 So.
(3)(8) Redwood Rd.
West Jordan, UT 1973 35 78 26 52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
(1) The acreage represents estimates of acres that are
based upon survey reports, title reports, appraisal
reports or the Company's inspection of the
cemeteries.
(2) Includes spaces sold for cash and installment
contract sales.
(3) The Bountiful and Mountain View Cemeteries each
include a chapel with adjoining viewing rooms. As
of December 31, 1994, there was a mortgage of
approximately $314,500 collateralized by the
property and facilities at Bountiful, Mountain View
and Redwood Cemeteries, of which approximately
$137,500 was held by Security National Life.
(4) The Company has acquired an interest in this
cemetery through a joint venture with an unrelated
mortuary, under which the Company receives 65% of
the net proceeds of all land sales and 50% of the
net proceeds of sales of other products and
services. As of December 31, 1994, there was a
mortgage of approximately $204,000, which is
collateralized by property and facilities of
Evergreen Memorial Park.
(5) As of December 31, 1994, there was a mortgage of
approximately $2,240,000 which is collateralized by
the property and facilities at Deseret Mortuary,
Cottonwood Mortuary, Holladay Memorial Park,
Lakehills Cemetery and Colonial Mortuary.
(6) This cemetery includes two granite mausoleums.
(7) This cemetery includes a chapel, viewing rooms and
a crematory in an approximately 14,600 square foot
facility.
(8) This cemetery includes a chapel with adjoining
viewing rooms and sales offices and two mausoleums.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes the location, square footage and the number
of viewing rooms and chapels of the six Company owned mortuaries:
Name of Date Viewing Square Total
Mortuary Location Acquired Room(s) Chapel(s) Footage Acreage(1)
- --------- --------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Camelback Sunset
Funeral Home(2) 301 West
Camelback Rd.
Phoenix, AZ 1994 2 1 11,000 1.4
Colonial
Mortuary(3) 2128 South
State St.
Salt Lake City,
UT 1991 1 1 14,500 .6
Cottonwood
Mortuary(3) 4670 South
Highland Dr.
Salt Lake City,
UT 1991 2 1 14,500 1.2
Deseret
Mortuary(3) 36 East
700 South
Salt Lake City,
UT 1991 2 2 36,300 1.1
Memorial
Mortuary 5850 South
900 East
Salt Lake City,
UT 1973 3 1 20,000 3.7
Paradise Chapel
Funeral Home 3934 East Indian
School Road
Phoenix, AZ 1989 2 1 9,800 1.3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
(1) The acreage represents estimates of acres that are
based upon survey reports, title reports, appraisal
reports or the Company's inspection of the
mortuaries.
(2) As of December 31, 1994, there was a mortgage of
approximately $575,000 collateralized by the
property and facilities of Camelback Sunset Funeral
Home.
(3) As of December 31, 1994, there was a mortgage of
approximately $2,240,000 which is collateralized by
the property and facilities at Deseret Mortuary,
Cottonwood Mortuary, Holladay Memorial Park,
Lakehills Cemetery and Colonial Mortuary.
</TABLE>
Through its cemetery and mortuary operations, the Company
markets products which include grave spaces, interment
vaults, mausoleum crypts and niches, markers, granite bases
for markers, caskets, flowers, wreaths and other monuments,
and provides services which include professional services
of funeral directors, the opening and closing of graves and
the use of chapel facilities, automobiles and clothing.
The Company has a funeral chapel at each of its cemeteries
other than the Ogden, Utah cemetery and Holladay Memorial
Park and has six separate stand alone mortuary facilities.
The Company sells its products on a pre-need and an at-need
basis. A pre-need basis is the sale of the product prior
to the actual use of the product at the time of death.
At-need is the sale of the product for immediate use, at
death.
Markets and Distribution
The Company's pre-need cemetery and mortuary sales are
marketed to persons of all ages but are generally limited
to persons 45 years of age and older. The Company also
markets its mortuary and cemetery products on an at-need
basis. The Company is limited in its geographic
distribution of these products to areas lying within an
approximate 20 mile radius of its cemeteries. This would
limit the sale of its products primarily to the area known
as the "Wasatch Front," covering approximately 100 miles
between Salt Lake City and Ogden, with the greatest
concentration of sales being in the Greater Salt Lake City
Area. The Company's at-need sales are similarly limited in
geographic area.
The Company actively seeks to sell its cemetery and funeral
products to customers on a pre-need basis. The Company
employs 72 cemetery sales representatives on a commission
basis to sell these products. Approximately 21 of the
cemetery sales representatives are also licensed insurance
salesmen and sell funeral plan insurance. In many
instances, the Company's cemetery and mortuary facilities
are the named beneficiary of the funeral plan policies.
The sales representatives of the Company's cemetery and
mortuary operations are commissioned and receive no salary.
The sales commissions range from 10% to 22% for cemetery
<PAGE>
products and services and 45% to 55% of first year premiums
for funeral plan insurance. Potential customers are
located via telephone sales prospecting, responses to
letters mailed by the sales representatives, newspaper
inserts and door to door canvassing. The Company trains
its sales representatives and generates leads for them. If
a customer comes to one of the Company's cemeteries on an
at-need basis, the sales representatives are compensated on
a commission basis.
Mortgage Loans
Products
The Company originates and underwrites residential and
commercial loans for new construction and existing homes
and real estate projects for the greater Salt Lake City
area. The Company is an approved governmental and
conventional lender and processes governmental and
conventional loans. Most of the loans are sold to Security
National Life, which in turn will either service the loan
or sell the loan to another investor. The Company also
sells directly to investors.
Markets and Distribution
The Company's mortgage services are marketed to individual
homeowners and businesses who are located in the area known
as the "Wasatch Front," covering approximately 100 miles
between Salt Lake City and Ogden, with the greatest
concentration of sales being in the Greater Salt Lake City
area. The typical loan size for residential loans ranges
from $40,000 to $150,000, and for commercial loans from
$200,000 to $750,000.
The Company's mortgage loan originations are through part-
time and full time mortgage brokers who are paid a sales
commission ranging between .40% to 1.0% of the loan amount.
Prospective customers are located through contacts with
builders, real estate agents, and door-to-door canvassing.
The part-time brokers are individuals who are supplementing
their full time employment by soliciting residential
homeowners to refinance their existing mortgage loans. The
Company provides training to these brokers.
Recent Acquisitions and Other Business Activities
Holladay Memorial Park, Inc. and Cottonwood Mortuary, Inc.
On September 10, 1991, the Company entered into a stock
purchase agreement (the "Stock Purchase Agreement") with
The John E. and Donna G. Mackay Family Trust, the sole
shareholder of Holladay Memorial Park, Inc., a Utah
corporation, and JD&M Investments, Inc., a Utah
corporation, for the purchase of all of the outstanding
shares of Holladay Memorial Park, Inc., and JD&M
Investments, Inc. JD&M Investments, Inc., now known as
<PAGE>
Cottonwood Mortuary, Inc., has all right, title and
interest in and to the following corporations and business
entities: Holladay Cottonwood Memorial Foundation, a Utah
corporation, and Deseret Memorial, Inc., a Utah
corporation, including, but not limited to, the following
entities: Deseret Mortuary, Colonial Mortuary, Deseret
Memorial Plan, Lakehills Benevolent Trust, Lakehills
Memorial Crematory, Lakehills Mortuary, Lakehills Memorial
Park, and Alta Concrete Products and Vault Plant.
JD&M Investments, Inc. (Cottonwood Mortuary, Inc.) includes
two cemeteries and four mortuaries, all of which are
located in Salt Lake County, Utah. The mortuaries and
cemeteries are non-denominational. The mortuaries consist
of Deseret Mortuary, which is reportedly the oldest
mortuary in Salt Lake City, Utah, Colonial Mortuary,
Cottonwood Mortuary and Lakehills Mortuary. The cemetery
is known as Lakehills Cemetery and consists of
approximately 42 acres, of which 12 acres are developed.
Holladay Memorial Park, Inc. has one cemetery located in
Salt Lake County, Utah, known as Holladay Memorial Park,
consisting of approximately 13 acres, of which six acres
are developed. Holladay Memorial Park is reportedly the
second oldest cemetery in the State of Utah. The Company
intends to operate the companies as wholly-owned
subsidiaries for an indefinite period of time. As a result
of acquiring stock of these companies, the Company was
required to assume certain pre-need obligations under
special terms and conditions which were determined by the
Department of Occupational and Professional Licensing of
the State of Utah.
Pinehill Business Park
On February 12, 1993, the Company entered into a purchase
and sale agreement to acquire Pinehill Business Park. The
business park is approximately 8.65 acres and located in
Murray, Utah. The business park contains three office
buildings with a total of 47,000 square feet of office
space and seven office and warehouse combination buildings
with a total of 89,000 square feet of space. The purchase
price of the property was $2,150,000. An aggregate of
$1,500,000 was borrowed by the Company from a bank. The
remainder of the purchase price came from the Company's
internal funds.
Sunset Funeral Homes, Inc.
On January 10, 1994, the Company acquired all of the issued
and outstanding shares of common stock of Sunset Funeral
Homes, Inc., an Arizona corporation ("Sunset"). In
connection with this transaction, the Company also acquired
certain real estate and other assets related to the
business of Sunset from the sole shareholder (the
"Shareholder") of Sunset. Sunset owns and operates a
funeral home in Phoenix, Arizona, known as Camelback Sunset
Funeral Home. In consideration for the transfer of all the
outstanding common stock of Sunset and related assets owned
<PAGE>
by the Shareholder of Sunset, the Company (i) assumed
approximately $588,000 in indebtedness of Sunset; (ii) paid
$100,000 in cash, subject to closing adjustments; (iii)
paid $40,000 in cash to the daughter of the Shareholder of
Sunset; (iv) issued 25,000 shares of the Company's Class A
Common Stock; and (v) agreed to pay the amount of $3,500
per month during the lifetime of the Shareholder of Sunset
up to a maximum of $560,000. In the event of the death of
the Shareholder of Sunset prior to the payment of $560,000,
the remaining unpaid balance of such amount would be paid
to the daughter of such Shareholder. The Company paid the
cash portion of the purchase price from internal funds.
The Company has continued to operate Sunset as a funeral
home and mortuary.
Capital Investors Life Insurance Company
On December 21, 1994, the Company completed the purchase of
all of the outstanding shares of common stock of Capital
Investors Life Insurance Company, a Florida based life
insurance company ("Capital Investors Life") from Suncoast
Financial Corporation, a Delaware corporation ("Suncoast
Financial") and, prior to closing of the transaction, the
sole shareholder of Capital Investors Life. Although the
closing documents were dated December 16, 1994, the
transaction was not completed until December 21, 1994 when
the Florida Department of Insurance approved the purchase
of the shares of Capital Investors Life by order dated
December 21, 1994. The closing documents were executed and
held in escrow until the order was received from the
Florida Department of Insurance, following which the escrow
was broken pursuant to written directions from the Company
and Suncoast Financial, and the funds and documents were
then disbursed in conformance with the terms of the escrow
agreement.
At the time of the transaction, Capital Investors Life was
a Florida domiciled insurance company with total assets of
approximately $30.0 million. However, Capital Investors
Life was redomesticated to Utah as of December 28, 1994.
Capital Investors Life's assets include fixed maturity
securities, equity securities, policy loans, receivables,
accrued investment income, deferred policy acquisition
costs, cost of insurance acquired, and property plant and
equipment. Capital Investors Life is currently licensed to
transact business in 23 states.
As consideration for the purchase of the shares of Capital
Investors Life, the Company provided Suncoast Financial at
closing with the following: (i) $5,231,000 in cash, (ii)
40,000 shares of the Company's Class A Common Stock, and
(iii) a profit sharing agreement providing for 33-1/3% of
the profits from new post-closing sales of existing Capital
Investors Life plans of insurance to be paid as earned. An
aggregate of $2,700,000 of the cash consideration was
borrowed by the Company from Key Bank, Crossroads Office,
Salt Lake City, Utah, and is payable by the Company in
accordance with the terms of a Promissory Note dated
<PAGE>
December 16, 1994, bearing interest at one-half
percent per annum above the bank's prime rate, and payable
in monthly payments in the amount of $36,420, with the
unpaid principal balance, together with accrued interest
and other charges, due and payable on December 16, 1999.
The remainder of the purchase price came from the Company's
internal funds. The Company is required to register the
40,000 shares of Class A Common Stock by preparing and
filing a Form S-3 Registration Statement with the U.S.
Securities and Exchange Commission.
The Company intends to continue the operations of Capital
Investors Life as an insurance company.
California Memorial Estates, Inc.
On February 3, 1995, California Memorial Estates, Inc., a
newly organized Utah corporation and wholly-owned
subsidiary of the Company, entered into a Purchase and Sale
Agreement and Escrow Instructions with the Carter Family
Trust and the Leonard M. Smith Family Trust to purchase
approximately 100 acres of real property located in San
Diego County, California (the "Property"). The purchase
price of the property was $1,162,000, $100,000 of which was
paid in cash at closing and the balance of $1,062,000 is to
be paid in accordance with terms of a promissory note
collateralized by a Deed of Trust to the Property. The
Company intends initially to develop the Property by
designating approximately 35 acres for the development of
a cemetery.
The Company has invested approximately $859,000 in various
regulatory studies, including environmental studies, water
studies, archaeological studies, and other studies. There
are still issues to be addressed with regards to the
California gnat catcher, a bird which is not currently a
protected species under either federal or California laws,
but which is protected by San Diego County regulations, and
the diegan sage, which is a habitat species also protected
by San Diego County regulations. Of the approximate 100
acres at the site, approximately 85% is impacted by the
diegan sage. In January 1993, the Company received zoning
approval from San Diego County to operate a cemetery on the
Property. The Company is in the process of obtaining
approval from the federal government and the California
Cemetery Board to operate a cemetery on the Property.
Greer-Wilson Funeral Home, Inc.
On March 8, 1995, the Company was issued 97,800 shares of
common stock of Greer-Wilson Funeral Home, Inc. ("Greer-
Wilson"), representing 97.8% of the total issued and
outstanding shares of common stock of Greer-Wilson after
the issuance of such shares. In consideration for the
issuance of such shares, the Company agreed (i) to
contribute $430,000 to Greer-Wilson for the payment of its
accounts payable, including pre-need deposits, or to assume
payment of the accounts payable, and to pay, renegotiate,
bring current or refinance Greer-Wilson's existing mortgage
loan indebtedness; and (ii) to pay Page E. Greer, the
former President and sole shareholder of Greer-Wilson, and
<PAGE>
his wife, a licensed mortician, $6,000 per month over a ten
year period for providing consulting services. The Company
also loaned Mr. Greer and his wife the sum of $200,000 to
be paid on March 8, 2005, together with interest thereon at
the rate of seven percent (7%) per annum. This obligation
is to be collateralized by a pledge of 2,200 shares of the
Company's common stock which is held by Mr. Greer. The
Company plans to continue to operate Greer-Wilson as a
funeral home and mortuary.
Regulation
Insurance companies are subject to comprehensive regulation
in the jurisdictions in which they do business under
statutes and regulations administered by state insurance
commissioners. Such regulation relates to, among other
things, prior approval of the acquisition of a controlling
interest in an insurance company; standards of solvency
which must be met and maintained; licensing of insurers and
their agents; nature of and limitations on investments;
deposits of securities for the benefit of policyholders;
approval of policy forms and premium rates; periodic
examinations of the affairs of insurance companies; annual
and other reports required to be filed on the financial
condition of insurers or for other purposes; and
requirements regarding reserves for unearned premiums,
losses and other matters. The Company's insurance
subsidiaries are subject to this type of regulation in any
state in which they are licensed to do business. Such
regulation could involve additional costs, restrict
operations or delay implementation of the Company's
business plans.
The Company is currently subject to regulation in Utah
under insurance holding company legislation, and other
states where applicable. Intercorporate transfers of
assets and dividend payments from its insurance subsidiary
is subject to prior notice of approval if they are deemed
"extraordinary" under these statutes. The insurance
subsidiary is required, under state insurance laws, to file
detailed annual reports with the supervisory agencies in
each of the states in which it does business. Their
business and accounts are also subject to examination by
these agencies.
The cemetery and mortuary subsidiaries are subject to the
Federal Trade Commission's comprehensive funeral industry
rules and are licensed by the Utah State Cemetery Board to
operate as endowment care cemeteries. The morticians must
be licensed by the state they provide services and
mortuaries are subject to the state laws of Arizona and
Utah and related city laws within those states. Reports
are required on a yearly basis to the Utah Cemetery Board
and include financial information concerning the number of
spaces sold and funds provided to the Endowment Care Trust
Fund. Licenses are issued annually on the basis of such
reports. The cemeteries maintain city or county licenses
where they conduct business.
<PAGE>
Income Taxes
The Company's insurance subsidiaries, effective January 1,
1984, are taxed under the Life Insurance Company Tax Act of
1984. Pursuant thereto, life insurance companies are taxed
at standard corporate rates on life insurance company
taxable income. Life insurance company taxable income is
gross income less general business deductions, reserves for
future policyholder benefits (with modifications), and a
small life insurance company deduction (up to 60% of life
insurance company taxable income). The Company may be
subject to the corporate Alternative Minimum Tax (AMT).
The exposure to AMT is primarily a result of the small life
insurance company deduction. Also, under the Tax Reform
Act, distributions in excess of shareholder's surplus
account or significant decrease in life reserves will
result in taxable income.
The Company's insurance subsidiaries may continue to
receive the benefit of the small life insurance company
deduction. In order to qualify for the small company
deduction, the combined assets of the Company must be less
than $500,000,000 and the taxable income of the life
insurance companies must be less than $3,000,000. To the
extent that the net income limitation is exceeded, then the
small life insurance company deduction is phased out over
the next $12,000,000 of life insurance company taxable
income. Commencing in 1990, the Company's life insurance
subsidiaries will have to compute their life insurance
taxable income after establishing a provision representing
a portion of the costs of acquisition of such life
insurance business. The effect of the provision is that a
certain percentage of the Company's premium income will be
characterized as deferred expenses and recognized over a
five to ten year period.
The Company's non-life insurance company subsidiaries are
taxed in general under the regular corporate tax
provisions. For taxable years beginning January 1, 1987,
the Company may be subject to the Corporate Alternative
Minimum Tax and the proportionate disallowance rules for
installment sales under the Tax Reform Act of 1986.
Competition
The life insurance industry is highly competitive. There
are approximately 2,000 legal reserve life insurance
companies in business in the United States. These
insurance companies differentiate themselves through
marketing techniques, product features, price and customer
service. The Company's insurance subsidiary competes with
a large number of insurance companies, many of which have
greater financial resources, a longer business history,
and a more diversified line of insurance coverage than
<PAGE>
the Company. In addition, such companies generally have a
larger sales force. Further, many of the companies with
which the Company competes are mutual companies which may
have a competitive advantage because all profits accrue to
policyholders. Because the Company is small by industry
standards and lacks broad diversification of risk, it may
be more vulnerable to losses than large, well established
companies. The Company believes that its policies and
rates for the markets it serves are generally competitive.
The cemetery and funeral business is also highly
competitive. In the Salt Lake, Ogden and Phoenix areas in
which the Company competes, there are a number of
cemeteries and mortuaries which have longer business
histories, more established positions in the community and
stronger financial positions than the Company. In
addition, some of the cemeteries with which the Company
must compete for sales are owned by municipalities and, as
a result, can offer lower prices than can the Company. The
Company bears the cost of a pre-need sales program that is
not incurred by those competitors that do not have a
pre-need sales force. The Company believes that its
products and prices are generally competitive with those in
the industry.
The mortgage loan business is highly competitive with
several mortgage companies and banks in the same geographic
area in which the Company is operating which have longer
business histories and more established positions in the
community. The refinancing market is particularly
vulnerable to changes in interest rates.
Underwriting
Factors considered in evaluating an application for
insurance coverage include the applicant's age, occupation,
general health and medical history. Upon receipt of a
satisfactory application which contains pertinent medical
questions, the Company writes insurance that is based on
its medical limits and requirements on a basis satisfactory
to the reinsuring company (or companies, if submitted
facultatively), subject to the following general
non-medical limits:
<TABLE>
<CAPTION>
Age Nearest Non-Medical
Birthday Limits
----------- -------------
<C> <C>
0-40 $75,000
41-50 $75,000
51-up Exam Required
</TABLE>
When underwriting life insurance, the Company will
sometimes issue policies with higher premium rates for
substandard risks.
Reinsurance
The Company reinsures with other companies portions of the
individual life insurance and accident and health policies
it has underwritten. The primary purpose of reinsurance is
<PAGE>
to enable an insurance company to write a policy in an
amount larger than the risk it is willing to assume for
itself. No other liabilities or guarantees by the Company
exist on business ceded through reinsurance treaties.
There is no assurance that the reinsurer will be able to
meet the obligations assumed by it under the reinsurance
agreement.
The Company's policy is to retain no more than $50,000 of
ordinary insurance per insured life. Excess risk is
reinsured. The total amount of life insurance in force at
December 31, 1994, reinsured by other companies aggregated
$35,100,000, representing approximately 8% of the Company's
life insurance in force on that date.
The Company currently reinsures certain risks with American
United Life Insurance Company, Businessmen's Assurance
Company, Chesapeake Life Insurance Company, CIGNA RE,
Cologne Reassurance Company, Lincoln National Life
Insurance Company, Life Reassurance Corporation, Lone Star
Life, Mercantile & General Reinsurance Company, Munich
Reassurance Company, Transamerica Occidental Life Insurance
Company, Employers Reassurance Corporation, MidWest
National Life Insurance Company, North American Reinsurance
Company, Phoenix Mutual Life Insurance Company, Optimum
Reassurance Company, and Security Life of Denver, pursuant
to reinsurance treaties which are renewable annually. The
premiums paid by the Company are based on the age of the
insured and the risk ceded to the reinsurer. The Company
does not currently assume a material amount of premiums
under any reinsurance agreement.
The Company has entered into a coinsurance agreement with
an unaffiliated insurance company under which the Company
assumed 100% of the risk for certain life insurance
policies and certain other policy-related liabilities of
the insurance company. The Company has also entered into a
modified coinsurance arrangement, for statutory purposes,
with an unaffiliated insurance company.
Investments
The investments of the Company's life insurance and annuity
funds and assets is determined by the Investment Committee
of the Board of Directors of the various subsidiaries and
ratified by the full Board of Directors of the respective
subsidiaries. A significant portion of the investments
must meet statutory requirements governing the nature and
quality of permitted investments by insurance companies.
The Company's interest sensitive type products, primarily
annuities and interest-sensitive whole life, compete with
other financial products such as bank certificates of
deposit, brokerage sponsored money market funds as well as
competing life insurance company products. While it is not
the Company's policy to offer the highest yield in this
climate, in order to offer what the Company considers to be
a competitive yield, it maintains a diversified portfolio
consisting of common stocks, preferred stocks, municipal bonds,
<PAGE>
investment and non-investment grade bonds including
high-yield issues, short-term and other securities and
investments.
The following table shows investments of the Company at
December 31, 1994 and 1993. Fixed maturities, mortgage
loans on real estate and short-term investments are stated
at cost, adjusted where appropriate for amortization of
premium or discount. Equity securities are stated at market
and policy loans are stated at unpaid balances.
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
Amount Percent Amount Percent
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Fixed maturity
securities held
to maturity:
U.S. Treasury
Securities and
obligations of
U.S. Government
Agencies $10,146,365 13.9 $2,785,898 6.1
Obligations of
States and
political
Subdivisions 194,913 0.3 223,863 0.5
Corporate Securities
Including Public
Utilities 26,285,230 35.9 8,828,352 19.4
Redeemable
Preferred Stock 133,788 0.2 133,788 0.3
Mortgage-backed
Securities 2,637,332 3.6 7,210 0.0
------------ ----- ---------- -----
Total 39,397,628 53.5 11,979,111 26.3
Equity securities
Available for
sale 4,149,713 5.7 2,532,636 5.6
Mortgage loans
on real estate 14,681,293 20.1 10,322,492 22.6
Real Estate 7,586,650 10.4 7,740,721 17.0
Policy loans 2,670,989 3.7 1,803,515 4.0
Other loans 677,334 0.9 824,415 1.8
Short-term
Investments 4,013,296 5.5 10,403,037 22.8
----------- ---- ----------- -----
Total
Investments $73,176,903 100.0% $45,605,927 100.0%
=========== ===== =========== =====
</TABLE>
<PAGE>
The maturities of the Company's bond portfolio are
expressed below as a percentage of the book value of the
total bond portfolio at December 31, 1994.
<TABLE>
<CAPTION>
<S> <C>
Due in one year or less 1.48%
Due after one to five years 14.17%
Due after five to ten years 52.41%
Due after ten years 31.97%
</TABLE>
When the Company is not able to obtain a price from an
external source, the Company derives a price for the
security after an analysis of the issuer's financial
statements and by comparison of current market prices for
similar securities issued by companies of similar quality.
See "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and note 2 of Notes to
Consolidated Financial Statements for additional disclosure
and discussion regarding investments.
Employees
As of December 31, 1994, the Company, through its
subsidiaries, had 81 full time employees, 35 part-time
employees, and 154 independent commissioned sales
representatives who are not paid a salary. Of these
employees and sales representatives, Security National Life
Insurance Company had 26 full time employees, 10 part-time
employees, and 103 commissioned sales representatives, of
which 21 sales representatives also sold cemetery and
funeral products and services for the Company's cemetery
and mortuary companies. The cemetery and mortuary
companies had 49 full time employees, 23 part-time
employees, and 72 commissioned sales representatives, of
which 21 sales representatives also sold the Company's
insurance and annuity products. Security National Mortgage
Company had 6 full time employees and 2 part-time
employees. Capital Investors Life does not have any
employees. Its administrative operations are performed by
a third-party administrator.
Item 2. Properties
- -------------------
The following table sets forth the location of the
Company's office facilities and certain other information
relating to these properties.
<TABLE>
<CAPTION>
Approximate
Owned Square
Location Function Leased Footage
- ------------------- ------------- -------- -----------
<C> <C> <C> <C>
5300 So. 360 West Corporate
Salt Lake City, UT Headquarters Owned(1) 33,000
3636 No. 15th Ave. District Owned 3,000
Phoenix, AZ Sales Office
1603 Thirteenth St. District Owned(2) 5,000
Lubbock, TX Sales Office
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
(1) As of December 31, 1994, this facility was subject to
a mortgage of approximately $1,506,000. The Company
leases an additional 15,616 square feet of the
facility to unrelated third parties for approximately
$202,000 per year, under leases which expire at
various dates after 1994.
(2) The Company leases an additional 2,766 square feet of
the facility to unrelated third parties for
approximately $12,600 per year, under leases which
expire at various dates after 1994.
</TABLE>
The Company believes the office facilities it occupies are
in good operating condition, are adequate for current
operations and has no plan to build or acquire additional
office facilities. The Company believes its office
facilities are adequate for handling business in the
foreseeable future.
The cemeteries and mortuaries that the Company owns through
its subsidiaries, Memorial Estates, Inc., Memorial
Mortuary, Inc., Paradise Chapel Funeral Home, Inc.,
Cottonwood Mortuary, Inc., Deseret Memorial, Inc., Holladay
Memorial Park, Inc., Evergreen Memorial Park, and Camelback
Sunset Funeral Home, are described with the heading "Item
1. Business - Cemetery and Funeral Services." The Company
believes that its cemeteries and mortuaries are maintained
in good condition.
Item 3. Legal Proceedings
- --------------------------
The Company and its subsidiaries are not parties to any
legal proceedings outside the ordinary course of the
Company's business or to any other legal proceedings which,
if adversely determined, would have a material adverse
effect on the Company or its business.
Item 4. Submission of Matters to a Vote of Security
- ----------------------------------------------------
Holders
- -------
None
PART II
Item 5. Market for the Registrant's Common Stock and
- -----------------------------------------------------
Related Security Holder Matters
- -------------------------------
The Company's Class A Common Stock trades on the NASDAQ
Stock Market under the symbol "Suncoast Financial." Prior
to August 13, 1987, there was no active public market for
the Class A and Class C Common Stock. During the recent
years there have been occasional trading of Class A and
Class C Common Stock by brokerage firms in the
over-the-counter market. The following are the high and
low sales prices for Class A Common Stock as reported by
NASDAQ.
<PAGE>
<TABLE>
<CAPTION>
Period (Calendar Year) Price Range
- --------------------- ------------
High Low
---- ---
<C> <C> <C>
1993
First Quarter . . . . . . . . . . 3 1/16 2 3/4
Second Quarter. . . . . . . . . . .3 1/2 3
Third Quarter . . . . . . . . . . .3 1/2 2 3/4
Fourth Quarter. . . . . . . . . . . . .3 2 3/4
1994
First Quarter . . . . . . . . . . .3 3/8 2 5/8
Second Quarter. . . . . . . . . . .4 1/2 2 7/8
Third Quarter . . . . . . . . . . .4 1/2 4
Fourth Quarter. . . . . . . . . . .4 3/4 4
1995
First Quarter . . . . . . . . . . .4 1/2 3 7/8
</TABLE>
The Class C Common Stock is not actively traded, although
there are occasional transactions in such stock by
brokerage firms. (See Note 11 to the Consolidated Financial
Statements.)
The Company has never paid a cash dividend on its Class A
or Class C Common Stock. The Company currently anticipates
that all of its earnings will be retained for use in the
operation and expansion of its business and does not intend
to pay any cash dividends on its Class A or Class C Common
Stock in the foreseeable future. Any future determination
as to cash dividends will depend upon the earnings and
financial position of the Company and such other factors as
the Board of Directors may deem appropriate. A 5% stock
dividend on Class A and Class C Common Stock was paid in
1990, 1991, 1992, 1993 and 1994.
As of March 7, 1995, there were 5,254 record holders of
Class A Common Stock and 173 record holders of Class C
Common Stock.
<PAGE>
Item 6. Selected Financial Data - The Company and Subsidiaries (Consolidated)
--------------------------------------------------------------------
The following selected financial data for each of the years in the five year
period ended December 31, 1994, are derived from the audited consolidated
financial statements. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
Consolidated Statement of Earnings Data:
1994 1993(2) 1992 1991(1) 1990
------ --------- ------- -------- ------
Revenue
- -------
<S> <C> <C> <C> <C> <C>
Premiums $4,945,000 $4,933,000 $4,630,000 $5,684,000 $ 6,146,000
Net investment
income 4,121,000 3,473,000 3,567,000 9,209,000 16,472,000
Mortuary and
cemetery income 5,888,000 6,085,000 5,741,000 4,054,000 3,493,000
Realized gains
(losses) on
investments 384,000 780,000 583,000 4,000 (2,846,000
Provision for losses
on investments -- (28,000) (142,000) (85,000) (2,058,000)
Gain on sale of
subsidiary -- -- -- 2,586,000 --
Mortgage fee income
and other 1,323,000 1,253,000 354,000 597,000 285,000
------------ ----------- ----------- ----------- -----------
Total revenue $ 16,661,000 $16,496,000 $14,733,000 $22,049,000 $21,492,000
------------ ----------- ----------- ----------- -----------
Expenses
- --------
Policyholder
benefits 4,036,000 4,420,000 3,901,000 8,873,000 16,118,000
Amortization
of deferred
policy
acquisition
costs 767,000 943,000 729,000 1,323,000 1,770,000
General and
administrative
expenses 8,064,000 7,098,000 6,629,000 6,915,000 6,825,000
Interest expense 692,000 675,000 601,000 602,000 495,000
Cost of goods &
services mortuary
& cemetery 1,767,000 1,890,000 1,907,000 1,659,000 808,000
---------- ----------- ----------- ----------- -----------
Total benefits &
expenses 15,326,000 15,026,000 13,767,000 19,372,000 26,016,000
----------- ----------- ----------- ----------- -----------
Income (loss
before income
tax expense 1,335,000 1,470,000 966,000 2,677,000 (4,524,000)
Income tax
(expense)
benefit (302,000) (388,000) 8,000 (141,000) 300,000
Minority
interest in loss
of subsidiary 7,000 2,000 1,000 29,000 --
------------ ----------- ----------- ----------- -----------
Total income
(loss) $ 1,040,000 $ 1,084,000 $ 975,000 $ 2,565,000 ($4,224,000)
=========== =========== =========== =========== ============
Earnings per common
equivalent of Class
A Common Stock (fully
diluted):
Net income $0.31 $0.35 $0.33 $0.85 ($1.47)
=========== =========== =========== ========== ============
Average common
equivalent shares
outstanding 3,476,544 3,245,899 3,092,000 2,979,000 2,867,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1994(3) 1993(2) 1992 1991(1) 1990
--------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Assets:
- ------
Investments $ 75,659,000 $47,692,000 $42,701,000 $42,711,000 $179,996,000
Cash 2,061,000 6,831,000 6,120,000 1,778,000 486,000
Receivables 3,814,000 4,084,000 3,793,000 4,478,000 4,437,000
Other assets 22,224,000 17,314,000 17,941,000 18,229,000 23,563,000
------------ ----------- ----------- ----------- ------------
Total Assets $103,758,000 $75,921,000 $70,555,000 $67,196,000 $208,482,000
============ =========== =========== =========== ============
Liabilities:
- -----------
Policyholder
benefits $ 61,896,000 $38,605,000 $35,665,000 $32,841,000 $184,456,000
Notes & contracts
payable 10,210,000 8,095,000 7,665,000 8,578,000 5,879,000
Cemetery &
mortuary
liabilities 6,603,043 6,511,000 6,430,000 5,962,000 2,399,000
Other
liabilities 5,070,000 3,876,000 3,170,000 2,983,000 2,262,000
------------ ----------- ----------- ----------- ------------
Total
liabilities 83,779,000 57,087,000 52,930,000 50,364,000 194,996,000
------------ ----------- ----------- ----------- ------------
Stockholders'
equity 19,979,000 18,834,000 17,625,000 16,832,000 13,486,000
------------ ----------- ----------- ----------- ------------
Total
Liabilities
and Stock-
holders'
Equity $103,758,000 $75,921,000 $70,555,000 $67,196,000 $208,482,000
============ =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
(1) Only includes Cottonwood Mortuary, Inc., and Holladay Memorial Park,
Inc. for three months ended December 31, 1991, and Investors Equity
Life Ins. Co. for the first five months of 1991.
(2) Only includes Security National Mortgage Company for the five months
ended December 31, 1993.
(3) Reflects the acquisition of Capital Investors Life and Camelback
Sunset Funeral Home.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
- -----------------------------------
Overview
The Company's operations over the last three years
generally reflect three trends or events which the Company
expects to continue: (i) increased attention to "niche"
insurance products, such as the Company's funeral plan
policies, annuities, and limited pay accident policies;
(ii) decreased general and administrative costs as a
percentage of revenue through efforts to reduce operating
costs and through eliminating unnecessary duplication of
costs at acquired companies; and (iii) emphasis on high
margin cemetery and mortuary business.
The Company maintains a diversified investment portfolio
consisting of common stock, preferred stock, municipal
bonds, investment grade and non-investment grade bonds,
mortgage loans, real estate, short term and other
securities and investments. The Company's investment goals
are to maintain safety and liquidity, enhance principal
values and achieve increased rates of return consistent
with regulatory restraints. The Company's interest
sensitive type products, primarily annuities and interest
sensitive whole life, compete with other financial products
such as bank certificates of deposit, brokerage sponsored
money market funds as well as competing life insurance
company products.
Results of Operations
1994 Compared to 1993
The Company's total revenues increased by $164,000 (1.0%),
from $16,496,000 in fiscal 1993, to $16,660,000 in fiscal
1994. Contributing to this increase in total revenues was
a $648,000 increase in investment income and a $70,000
increase in mortgage fee income and other.
Net investment income increased by $648,000, from
$3,473,000 in 1993, to $4,121,000 in 1994. This increase
was attributable to the Company's emphasis on investing its
cash and short-term investments in high-yielding long term
investments.
Realized gains on investments decreased by $396,000, from
$780,000 in 1993 to $384,000 in 1994. The 1994 amount
included the results of the sale of 13.45 acres of land
deemed not suitable for cemetery development at Lake View
Cemetery. On August 22, 1994, an agreement was reached for
the sale of the land to Temple Ridge Development Company
for $515,000. The net gain on the sale of the land, after
deducting the original cost of the land and related fees,
was approximately $278,000.
The 1993 amount of realized gains on investments included
the results of a favorable settlement of a lawsuit brought
in 1988 by the Metropolitan Water District against the
Company to condemn 6.6 acres of land at Mountain View
Cemetery. The net gain on the sale of the land to the
Metropolitan Water District was $184,000. The 1993 amount
also included $485,000 in realized gains by Security
National Life due to a significant amount of early bond
redemptions.
<PAGE>
Mortuary and cemetery income decreased by $197,000, from
$6,085,000 in 1993 to $5,888,000 in 1994. This decrease
was primarily related to a $299,000 reduction in pre-need
sales at Holladay Cottonwood Memorial Foundation. This
decrease was partially offset by the additional sales of
the Company's other mortuaries, particularly Camelback
Sunset Funeral Home, which was acquired on January 10,
1994.
Mortgage fee income and other increased by $71,000, from
$1,253,000 in 1993 to $1,324,000 in 1994. This increase
was due to $382,000 in additional revenues that were
generated by Security National Mortgage Company ("Security
National Mortgage"), which was formed as a wholly-owned
subsidiary of the Company on July 1, 1993, for the purpose
of originating and refinancing mortgage loans. Partially
offsetting the additional revenues that were realized in
1994 from Security National Mortgage was a $174,000
reduction in revenues from Bonneville Limousine. The
higher level of revenues from Bonneville Limousine in 1993
reflected the increased limousine services from the NBA
Allstar Game, which was held in Salt Lake City in 1993.
There was also a $75,000 reduction in 1994 due to the
termination of a computer services agreement. The Company
had provided computer services to a third-party in 1993
under a computer services agreement but these services were
not provided in 1994.
Total benefits and expenses were $15,326,000 for 1994,
which constituted 92% of total revenue of the Company, as
compared to $15,027,000, or 91% of total revenues for 1993.
Policy benefits decreased by $384,000, from $4,420,000 in
1993 to $4,027,000 in 1994. This decrease was primarily
due to diminishing policies inforce from 1993 to 1994 and
because a large block of business obtained paid-up status.
Amortization of deferred policy acquisition costs decreased
by $176,000, from $943,000 in 1993 to $767,000 in 1994.
This decrease was primarily due to certain deferred policy
acquisition costs which were determined unrecoverable and
amortized against income in 1993.
General and administrative expenses increased by $965,000,
from $7,098,000 in 1993, to $8,063,000 in 1994. This
increase was primarily due to the additional costs
associated with the operations of Camelback Sunset Funeral
Home, which was acquired on January 10, 1994, and Security
National Mortgage Company, which was formed and operated as
of July 1, 1993.
Interest expense increased by $18,000, from $675,000 in
1993 to $693,000 in 1994, due primarily to the debt assumed
with the acquisition of Camelback Sunset Funeral Home.
Cost of mortuary and cemetery lots and services decreased
by $123,000, from $1,890,000 in 1993 to $1,767,000 in 1994.
This decrease was primarily due to a reduction in pre-need
sales at Holladay Cottonwood Memorial Foundation.
1993 Compared to 1992
The Company's total revenues increased by $1,763,000
(12.0%), from $14,733,000 in fiscal 1992 to $16,496,000 in
fiscal 1993. Contributing to this increase in total
<PAGE>
revenues was a $284,000 increase in premiums, from
$4,493,000 in 1992 to $4,777,000 in 1993. This increase
was attributable to a greater premium per application
issued in 1993 than the previous year. The number of
policies issued in 1993 was about the same as in 1992.
Net investment income decreased by $94,000, from $3,567,000
in 1992 to $3,473,000 in 1993. This decrease was due to a
higher percentage of invested assets in short term
investments in 1993 yielding a lower rate of interest. In
1992, 19% of the invested assets were in short term
investments whereas in 1993, 26% of the invested assets
were in short term investments.
Mortuary and cemetery income increased by $344,000, from
$5,741,000 in 1992 to $6,085,000 in 1993. This increase
was primarily related to increases in mortuary services as
Memorial Mortuary had a 25% increase in sales in 1993 and
Paradise Chapel Funeral Home had an 8% increase in sales in
1993, and to an increase in at need cemetery sales. In
addition, the amount written off in the cemetery operations
deceased by approximately $200,000 in 1993 as compared to
the previous year.
Realized gains on investments increased by $197,000, from
$583,000 in 1992 to $780,000 in 1993. This increase
resulted from a favorable settlement of the lawsuit brought
in 1988 by the Metropolitan Water District to condemn 6.6
acres of land at Mountain View Cemetery. On February 19,
1993, an agreement was reached wherein the land was sold to
Metropolitan Water District for $300,000. The net gain on
the sale of the land, after deducting the original cost of
the land and the costs of litigation, was $184,000.
In addition to the foregoing, other revenues increased by
$899,000, from $354,000 in 1992 to $1,253,000 in 1993.
This increase was primarily due to $788,000 in additional
revenues that were generated by Security National Mortgage
Company, which was formed on July 1, 1993, as a wholly-
owned subsidiary of the Company for the purpose of
originating and refinancing mortgage loans.
Total benefits and expenses were $15,026,000 for fiscal
1993, which constituted 91.1% of total revenue of the
Company, as compared to $13,767,000, or 93.4% of total
revenue in fiscal 1992. Policyholder benefits increased by
$519,000, from $3,901,000 in 1992 to $4,420,000 in 1993.
This increase was primarily due to an increase in interest
that was credited to annuity and other interest sensitive
reserves.
Amortization of deferred policy acquisition costs increased
by $214,000, from $729,000 in 1992 to $943,000 in 1993.
This increase was primarily due to certain deferred policy
acquisition costs which were determined unrecoverable and
amortized against income in 1993. General administrative
expenses increased by $469,000, from $6,629,000 in 1992 to
$7,098,000 in 1993. This increase resulted from the
Company's new subsidiary, Security National Mortgage
Company, which incurred $687,000 in expenses in 1993.
Interest expense increased by $74,000, from $601,000 in
1992 to $675,000 in 1993. This additional increase in
expense was the result of the $1,500,000 in additional debt
<PAGE>
financing by the Company in 1993 to acquire Pinehill
Business Park. Cost of mortuary and cemetery lots and
products and services decreased by $17,000, from $1,907,000
in 1992 to $1,890,000 in 1993. This decrease was due to a
decrease in pre-need cemetery sales.
Income tax expense as a percentage of pre-tax income was
26% in 1993. In 1992 the tax provision was a benefit due
to the re-estimation of deferred tax liabilities based upon
the accumulation of identified temporary differences and
applying the current effective tax rates with the resulting
reduction in such deferred tax amounts being recorded in
1992 operations.
Liquidity and Capital Resources
The Company's life insurance subsidiary and cemetery and
mortuary subsidiaries realize cash flow from premiums,
contract payments and sales on personal services rendered
for cemetery and mortuary business from interest and
dividends on invested assets, and from the proceeds from
the maturity or held to maturity investment, or sale of
other investments. The Company considers these sources of
cash flow to be adequate to fund future policyholder and
cemetery and mortuary liabilities which generally are
long-term and adequate to pay current policyholder claims,
annuity payments, expenses on the issuance of new policies
and the maintenance of existing policies.
The Company attempts to match the duration of invested
assets with its policyholder and cemetery and mortuary
liabilities. The Company may sell investments other than
those held to maturity in the portfolio to help in this
timing, however to date that has not been necessary. The
Company purchases short-term investments on a temporary
basis to meet the expectations of short-term requirements
of the Company's products. The Company's investment
philosophy is intended to provide a rate of return which
will persist during the expected duration of policyholder
and cemetery and mortuary liabilities regardless of future
interest rate movements.
The Company's investment policy is to invest predominately
in fixed maturity securities in accordance with the
requirements and laws governing the life insurance
subsidiary. Bonds owned by the insurance subsidiary
amounted to $39,461,000, at amortized cost as of December
31, 1994. Generally all bonds owned by life insurance
companies are rated by the National Association of
Insurance Commissioners (NAIC). Under this rating system,
there are six categories used for rating bonds. At
December 31, 1994, 4.8% ($1,893,000) and at December 31,
1993, 7.4% ($898,000) of the Company's total invested
assets were invested in bonds in rating categories three
through six which are considered non-investment grade.
The Company's interest sensitive type products, primarily
annuities and interest sensitive whole life, compete with
other financial products such as bank certificates of
deposit, brokerage sponsored money market funds as well as
competing life insurance company products. Based on
<PAGE>
preliminary information, the Company plans to hold its
fixed income securities, including high-yield securities,
in its portfolio to maturity. Business conditions,
however, may develop in the future which may indicate a
need for a higher level of liquidity in the investment
portfolio. In that event the Company believes it could
sell cash equivalents in investment grade securities before
liquidating high-yield securities.
Lapse rates measure the amount of insurance terminated
during a particular period. The Company's lapse rate for
life insurance in 1994 was 8%, as compared to a rate of 9%
in 1993. The Company's primary needs for liquidity are for
debt service, maintenance of statutory capital and surplus
for its life insurance subsidiary and administrative
expenses and cost of cemetery and mortuary services to be
rendered.
On February 12, 1993, Security National Life Insurance
Company entered into a purchase and sale agreement for the
Pinehill Business Park located in Murray, Utah. The
purchase price was $2,150,000 with debt financing of
$1,500,000 through a local bank. As of December 31, 1994,
about 95% of the available space was occupied.
On July 31, 1993, the Company contributed assets of
approximately $268,000 to its new wholly-owned subsidiary,
Security National Mortgage Company. Security National
Mortgage Company operates in two principal markets:
refinancing of mortgage loans and origination of mortgage
loans. These loans are sold on the secondary market to
investors with servicing obligations released. Security
National Life Insurance Company intends to act as a
warehouse lender for the mortgage loans. By becoming a
warehouse lender, Security National Life Insurance Company
can obtain a long term interest rate on its assets without
committing the funds for a long period of time.
On January 10, 1994, the Company acquired Sunset Funeral
Home, Inc. ("Sunset"), which owns and operates a mortuary
in Phoenix, Arizona, known as Camelback Sunset Funeral
Home. As consideration for the purchase, the Company paid
$140,000 in cash, issued 25,000 shares of Class A Common
Stock, assumed an existing debt of $588,000, and entered
into an agreement to pay the seller the sum of $3,500 in
monthly installments during his lifetime up to a maximum of
$560,000. In the event of the death of the seller prior to
the payment of $560,000, the remaining unpaid balance of
such amount would be paid to his daughter. Repairs and
maintenance of approximately $80,000 will be required to
bring the mortuary facility to a fully operating funeral
home.
On December 21, 1994, the Company purchase all of the
outstanding shares of common stock of Capital Investors
Life Insurance Company ("Capital Investors Life") from
Suncoast Financial Corporation ("Suncoast Financial"). As
consideration for the purchase of the shares, the Company
paid $5,231,000 in cash, issued 40,000 shares of its Class
A Common Stock, and entered into a profit sharing agreement
providing for 33-1/3% of the profits from new post-closing
sales of existing Capital Investors Life plans of insurance
to be paid as earned. An aggregate of $2,700,000 of the
cash consideration was borrowed by the Company from Key
<PAGE>
Bank, Crossroads Office, Salt Lake City, Utah, and is
payable by the Company in accordance with the terms of a
Promissory Note dated December 16, 1994, bearing interest
at one-half percent per annum above the bank's prime rate,
and payable in monthly payments in the amount of $36,420,
with the unpaid principal balance, together with accrued
interest and other charges, due and payable on December 16,
1999. The remainder of the purchase price came from the
Company's internal funds.
On February 3, 1995, the Company purchased approximately
100 acres of real property (the "Property") located in San
Diego, California, approximately 35 acres of which will be
used for the development of a cemetery. The purchase price
of the property was $1,172,000, $100,000 of which was paid
in cash and the balance of $1,062,000, together with
interest thereon at the rate of nine percent (9%) per
annum, will be paid in 12 monthly payments of $5,000,
thereafter in equal monthly payments of $10,000; however,
interest shall not accrue on any part of the principal
balance until February 3, 1996, and a principal payment of
$100,000 is to be made 15 days after the date the
California Cemetery Board approves the Company's
application for Certificate of Authority, or February 3,
1996, whichever occurs first.
The Company has invested and deferred approximately
$859,000 in option fees and costs of various regulatory
studies, including environmental, water, and archaeological
studies. The Company is seeking approval from the federal
government and the California Cemetery Board to operate a
cemetery. The development of the cemetery will be financed
internally as well as through a private offering. Initial
development of 35 acres to operate as a cemetery would cost
approximately $500,000.
On March 8, 1995, the Company was issued 97,800 shares of
common stock of Greer-Wilson Funeral Home, Inc. ("Greer-
Wilson"), representing 97.8% of the total issued and
outstanding shares of common stock of Greer-Wilson after
the issuance of such shares. In consideration for the
purchase of such shares, the Company agreed to contribute
$430,000 to Greer-Wilson for the payment of its accounts
payable, or to assume payment of the accounts payable, and
to pay or refinance Greer-Wilson's existing mortgage loan
indebtedness; and to pay the former President and his wife
$6,000 per month over a ten year period for providing
consulting services. The Company also loaned the former
President and his wife the sum of $200,000 to be paid on
March 8, 2005, together with interest thereon at the rate
of seven percent (7%) per annum. This obligation is
collateralized by a pledge of 2,200 shares of the Company's
common stock that is currently owned by Mr. Greer.
At December 31, 1994, $8,570,000 of the Company's
consolidated stockholders' equity represents the statutory
stockholders' equity of the Company's insurance subsidiary
Security National Life. Security National Life cannot pay
a dividend to its parent company without the approval of
insurance regulatory authorities.
<PAGE>
<TABLE>
<CAPTION>
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL
SCHEDULES
Page No.
--------
Financial Statements:
<S> <C>
Report of Independent Auditors. . . . . . . . . . . . . . F-1
Consolidated Balance Sheets, December 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Earnings,
Years Ended December 31, 1994, 1993,
and 1992. . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders'
Equity, Years Ended December 31, 1994, 1993
and 1992. . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows,
Years Ended December 31, 1994, 1993 and
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . F-8
Financial Statement Schedules:
I. Summary of Investments -- Other than
Investments in Related Parties . . . . . . . . . . . . .F-31
II. Condensed Financial Information of
Registrant . . . . . . . . . . . . . . . . . . . . . . .F-32
IV. Reinsurance. . . . . . . . . . . . . . . . . . . . . . .F-37
V. Valuation and Qualifying Accounts and
Reserves . . . . . . . . . . . . . . . . . . . . . . . .F-38
</TABLE>
All other schedules to the consolidated financial
statements required by Article 7 of Regulation S-X are not
required under the related instructions or are inapplicable
and therefore have been omitted.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Security National Financial Corporation:
We have audited the accompanying consolidated balance
sheets of Security National Financial Corporation and
subsidiaries as of December 31, 1994, and 1993, and the
related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the
period ended December 31, 1994. Our audits also include
the financial statement schedules listed in the Index at
Item 8. These financial statements and schedules are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Security National
Financial Corporation and subsidiaries at December 31, 1994
and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects,
the information set forth therein.
As described in Note 1, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting of
Certain Investments in Debt and Equity Securities", in
1994.
ERNST & YOUNG LLP
Salt Lake City, Utah
March 10, 1995
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31,
-----------
Assets: 1994 1993
- ------- ----- -----
<S> <C> <C>
Investments (Notes 2, 5 & 6):
Fixed maturity securities
held to maturity, at amortized
cost (market $38,695,480 and
$12,863,054 for 1994 and 1993) $39,397,628 $11,979,111
Equity securities available for sale
at market (cost $3,927,923 and
$2,180,225 for 1994 and 1993) 4,149,713 2,532,636
Mortgage loans on real estate 14,681,293 10,322,492
Real estate, net of accumulated
depreciation of $1,262,853
and $1,000,113 for 1994 and 1993 7,586,650 7,740,721
Policy loans 2,670,989 1,803,515
Other loans 677,334 824,415
Short-term investments 4,013,296 10,403,037
------------ ------------
Total insurance related investments 73,176,903 45,605,927
Restricted assets of cemeteries
and mortuaries (Note 7) 2,482,068 2,086,100
Cash 2,060,876 6,831,051
Receivables (Note 7):
Trade contracts, net of unearned interest
of $100,590 and $166,908 for 1994
and 1993 4,938,098 5,244,315
Receivable from agents 463,040 488,277
Other 336,801 300,530
------------ ------------
Total receivables 5,737,939 6,033,122
Allowance for doubtful accounts (1,923,808) (1,949,553)
------------ ------------
Net receivables 3,814,131 4,083,569
Land and improvements held for sale 6,920,208 7,085,617
Accrued investment income 996,845 466,377
Deferred policy acquisition
costs (Notes 1 & 3) 4,860,865 5,041,947
Property, plant and equipment, net (Note 4) 4,899,873 3,359,981
Cost of insurance acquired (Note 1) 3,488,383 --
Excess of cost over net assets
of acquired subsidiaries 718,391 766,757
Other 339,714 593,884
------------ -----------
Total Assets $103,758,257 $75,921,210
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
December 31,
-----------
1994 1993
------ -------
Liabilities:
- ------------
<S> <C> <C>
Future life, annuity, and other
benefits $61,895,251 $38,605,759
Bank loans payable (Note 5) 7,440,576 5,374,537
Notes and contracts payable (Note 6) 2,768,546 2,720,298
Estimated future costs of pre-need sales 6,284,421 6,225,857
Payable to endowment care trust fund
(Note 7) 319,336 284,945
Accounts payable and accrued expenses 1,760,399 1,574,859
Other liabilities 1,438,889 730,386
Income taxes (Note 8) 1,872,294 1,570,497
----------- -----------
Total Liabilities 83,779,712 57,087,138
Commitment and contingencies (Note 9)
Stockholders' Equity (Note 11):
- --------------------
Common stock:
Class A: $2 par value, authorized
10,000,000 shares, issued 3,558,406
shares in 1994 and 3,322,818 shares
in 1993 7,116,814 6,645,636
Class C: $0.40 par value, authorized
7,500,000 shares, issued 2,275,045
shares in 1994 and 2,171,915 shares
in 1993 910,018 868,766
Additional paid-in capital 7,214,061 6,726,614
Unrealized appreciation of
investments (Note 2) 221,790 352,412
Retained earnings 6,154,694 5,879,476
----------- -----------
21,617,377 20,472,904
Treasury stock at cost (532,015 Class
A shares and 24,281 Class C shares
in 1994; 506,677 Class A shares and
23,125 Class C shares in 1993, held
by affiliated companies) (1,638,832) (1,638,832)
------------ -----------
Net Stockholders' Equity 19,978,545 18,834,072
------------ -----------
Total Liabilities and Stockholders'
Equity $103,758,257 $75,921,210
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
Revenue:
- --------
<S> <C> <C> <C>
Insurance premiums and
other considerations $4,944,789 $ 4,932,853 $ 4,630,188
Net investment income (Note 2) 4,120,917 3,473,374 3,567,062
Mortuary and cemetery sales 5,887,726 6,085,066 5,740,574
Realized gains on investments
and other assets (Note 2) 383,637 751,511 440,986
Mortgage fee income 1,170,465 788,032 --
Other 153,042 465,320 353,947
----------- ----------- -----------
Total revenue 16,660,576 16,496,156 14,732,757
=========== =========== ===========
Benefits and expenses:
Death benefits 1,663,475 1,553,892 1,364,154
Surrenders and other policy
benefits 903,603 860,925 1,064,419
Increase in future policy
benefits 1,469,029 2,005,048 1,472,138
Amortization of deferred
policy
acquisition costs
(Note 3) 766,658 943,387 728,873
General and administrative
expenses:
Commissions 1,257,043 1,183,997 1,075,759
Salaries 2,937,993 2,434,934 2,309,769
Other 3,868,508 3,479,279 3,242,999
Interest expense 692,675 675,103 601,026
Cost of mortuary and cemetery
lots and services 1,766,532 1,889,944 1,907,416
----------- ----------- -----------
Total benefits and expenses 15,325,516 15,026,509 13,766,553
------------ ----------- -----------
Earnings before income taxes 1,335,060 1,469,647 966,204
Income tax (expense) benefit (Note 8) (302,218) (388,100) 7,709
Minority interest in loss of subsidiary 6,917 1,994 1,127
---------- ----------- -----------
Net earnings $1,039,759 $ 1,083,541 $ 975,040
========== =========== ===========
Earnings per share $0.31 $0.35 $0.33
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Year Ended December 31,
-------------------------
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Common Stock Class A:
Beginning of year $ 6,645,636 $ 6,313,216 $ 6,032,150
Stock dividend (5%) 338,922 315,686 303,292
Conversion Class C to
Class A 2,090 17,622 23,364
Tender Offer -- 1,320 (45,590)
Surrendered certificates -- (2,208) --
Stock Issued 130,166 -- --
----------- ----------- -----------
End of Year $ 7,116,814 $ 6,645,636 $ 6,312,216
----------- ----------- -----------
Common Stock Class C:
Beginning of year $ 868,766 $ 845,259 $ 829,091
Stock dividend (5%) 43,343 41,015 40,613
Conversion Class C to
Class A (2,091) (17,624) (23,416)
Tender Offer -- 116 (1,029)
----------- ----------- -----------
End of year $ 910,018 $ 868,766 $ 845,259
----------- ----------- ------------
Additional paid-in capital:
Beginning of year $ 6,726,614 $ 6,611,989 $ 6,577,817
Stock dividend (5%) 382,280 112,141 42,988
Conversion Class C to Class A 1 2 52
Tender Offer -- 274 (8,868)
Surrendered certificates -- 2,208 --
Stock Issued 105,166 -- --
----------- ----------- -----------
End of year $ 7,214,061 $ 6,726,614 $ 6,611,989
----------- ------------ -----------
Unrealized appreciation
of investments:
Beginning of year $ 352,412 $ 228,803 $ 280,201
Change in unrealized
appreciation (130,622) 123,609 (51,398)
----------- ----------- -----------
End of year $ 221,790 $ 352,412 $ 228,803
----------- ----------- -----------
Retained earnings:
Beginning of year $ 5,879,476 $ 5,264,777 $ 4,676,630
Net earnings 1,039,759 1,083,541 975,040
Stock dividend (5%) (764,541) (468,842) (386,893)
----------- ----------- -----------
End of year $ 6,154,694 $ 5,879,476 $ 5,264,777
----------- ----------- -----------
Treasury stock (at cost):
Beginning of year $(1,638,832) $(1,638,832) $(1,563,406)
Cost of treasury shares
acquired -- -- (75,426)
----------- ----------- -----------
End of year $(1,638,832) $(1,638,832) $(1,638,832)
----------- ----------- -----------
Stockholders' equity $19,978,545 $18,834,072 $17,625,212
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended December 31,
----------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $1,039,759 $1,083,541 $975,040
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Net realized gain on sale
of investments (383,637) (751,511) (440,986)
Depreciation 565,777 557,558 438,582
Provision for losses on
accounts and loans
receivable 79,752 101,803 142,000
Amortization of goodwill,
premiums, and discounts (28,632) (47,101) (80,057)
Deferred taxes payable 302,218 388,100 (7,709)
Policy acquisition costs
deferred (585,576) (893,777) (796,971)
Policy acquisition costs
amortized 766,658 943,387 728,873
Change in assets and liabilities
net of effects from purchase
of subsidiaries:
Land and improvements held
for sale 454,707 40,027 (572,322)
Future life and other
benefits 1,437,243 1,798,544 1,396,783
Other operating assets and
liabilities 567,730 244,191 1,795,151
----------- ----------- -----------
Net cash provided by
operating activities 4,215,999 3,464,762 3,578,384
Cash flows from investing activities:
Securities held to maturity:
Purchases - fixed maturity
securities (9,242,105) (4,028,098) (2,720,309)
Calls and maturities -
fixed maturity securities 1,989,244 10,116,298 6,685,900
Securities available for sale:
Purchases - equity securities (209,275) (376,005) (97,939)
Sales - equity securities 235,484 266,921 440,611
Net purchases and sales of
short-term investments and
restricted assets of
cemeteries and mortuaries 5,993,773 (4,188,525) (2,877,376)
Mortgage and other loans made (26,364,641) (14,508,184) (1,999,503)
Payments received for mortgage
and other loans 22,198,104 10,885,707 1,338,640
Change in policy loans 20,032 (5,030) 107,805
Purchases of property, plant,
and equipment (1,545,167) (178,229) (200,883)
Purchases of real estate (147,837) (2,629,918) (493,940)
Purchases of subsidiaries
net of cash acquired (5,008,708) -- --
------------ ------------ ----------
Net cash (used in)
provided by investing
activities (12,081,096) (4,645,063) 183,006
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31,
--------------------------
1994 1993 1992
------ ------- ------
<S> <S> <S> <S>
Cash flows from financing
activities:
Net increase in annuity
contracts 980,635 1,460,956 1,623,054
Repayment of notes and
contracts
payable (1,768,985) (1,211,827) (1,484,718)
Proceeds from borrowings
on notes and contracts
payable 3,883,272 1,640,953 572,390
Purchase of treasury
stock and stock tender
offer -- 1,710 (130,913)
------------ ----------- -----------
Net cash provided by
financing activitie 3,094,922 1,891,792 579,813
------------ ----------- -----------
Net increase (decrease) in cash (4,770,175) 711,491 4,341,203
Cash at beginning of year 6,831,051 6,119,560 1,778,357
------------ ----------- -----------
Cash at end of year $ 2,060,876 $ 6,831,051 $ 6,119,560
============ =========== ===========
</TABLE>
<PAGE>
SECURITY NATIIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 1994, 1993, and 1992
1) Significant Accounting Principles
- ------------------------------------
Basis of Presentation
Significant accounting policies followed by the Company
are summarized below. The accompanying consolidated
financial statements have been prepared in accordance
with generally accepted accounting principles which, for
the life insurance subsidiaries, differ from statutory
accounting principles prescribed or permitted by
regulatory authorities.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts and operations of Security National
Financial Corporation and its wholly-owned subsidiaries
and their wholly-owned subsidiaries, except as noted,
(the "Company") at December 31, 1994, as follows:
Security National Life Insurance Company
Capital Investors Life Insurance Company ("Capital
Investors Life")
Memorial Estates, Inc.
Memorial Mortuary
Evergreen Memorial Park (66 2/3% owned)
Paradise Chapel Funeral Home
California Memorial Estates, Inc.
Cottonwood Mortuary, Inc.
Deseret Memorial
Holladay Cottonwood Memorial Foundation
Holladay Memorial Park
Sunset Funeral Home, Inc.
Security National Mortgage Company
All significant intercompany transactions and accounts
have been eliminated in consolidation.
Effective December 21, 1994, the Company purchased all of
the outstanding shares of common stock of Capital
Investors Life for a total cost of $6,395,000 which
included 40,000 shares of the Company's Class A Common
Stock valued at $160,000. The acquisition was accounted
for using the purchase method. As a result of the
acquisition Capital Investors Life was redomesticated to
Utah on December 28, 1994. The assets and liabilities of
Capital Investors Life have been included in the
Company's balance sheet at December 31, 1994. The
results of operations of Capital Investors Life were not
included in the financial statements of the Company for
the year ended December 31, 1994, since the effective
date for accounting purposes was Decemeber 31, 1994.
The unaudited consolidated pro forma results of
operations assuming consummation of the purchase as of
January 1, 1993 are summarized as follows:
<TABLE>
<CAPTION>
Pro Forma
1994 1993
-----------------------
(In thousands except
earnings per share)
<S> <C> <C>
Total Revenue $19,601 $21,182
Net earnings 477 2,286
Earnings per share $ 0.14 $ 0.70
</TABLE>
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
The unaudited consolidated pro forma results of
operations are not necessarily indicative of the results
that would have occurred had the two companies been
combined for the years presented nor of future results of
operations.
Effective January 10, 1994, the Company purchased all of
the outstanding shares of common stock of Camelback
Sunset Funeral Home for a total cost of $78,427 which
included 25,000 shares of the Company's Class A Common
Stock valued at $75,000. The acquisition was accounted
for using the purchase method. The assets, liabilities,
and equity of Camelback Sunset Funeral Home have been
included in the Company's balance sheet at December 31,
1994. The results of operations of Camelback Sunset
Funeral Home for the twelve months ended December 31,
1994, were included in the consolidated financial
statements of the Company.
Investments
Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and
Equity Securities", was adopted by the Company as of
January 1, 1994. In accordance with SFAS No. 115, the
Company's prior-year financial statements have not been
restated to reflect the change in accounting principle.
Under SFAS No. 115, securities are classified as
available-for-sale, held-to-maturity, or trading. The
Company has the ability and intent to hold to maturity
its fixed maturity investments and, accordingly, has
classified all of its fixed maturities security portfolio
as "held-to-maturity". Equity securities have been
classified as "available for sale". Securities classified
as available for sale are carried at fair value and
unrealized gains and losses on such securities are
reported as a separate component of stockholders' equity.
Securities classified as held-to-maturity are carried at
cost. Because the Company classified their entire fixed
maturity portfolio as held to maturity there was no
effect on stockholders' equity as a result of the
adoption. With respect to 1992 and 1993, SFAS No. 115
was not adopted and, therefore, the investments were not
actually "held-to-maturity", and "available for sale" but
were rather held for investment and actively managed,
respectively.
Investments are shown on the following basis:
Fixed maturity securities held to maturity - at cost,
- ------------------------------------------
adjusted for amortization of premium or accretion of
discount. Although the Company has the ability and
intent to hold these investments to maturity, there could
occur infrequent and unusual conditions in which it would
sell certain of these securities. Those conditions would
include unforeseen changes in asset quality, significant
changes in tax laws affecting the changes in regulatory
capital requirements or permissible investments, at which
time the carrying value is expected to be realized.
Equity securities available for sale - at fair value,
- ------------------------------------
which is based upon quoted trading prices. Changes in
face values net of deferred income taxes are reported as
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
unrealized appreciation or depreciation directly to
stockholders' equity and, accordingly have no effect on
net income.
Mortgage loans on real estate - at unpaid principal
- -----------------------------
balances, adjusted for amortization of premium or
accretion of discount, less allowance for possible
losses.
Real estate - at cost, less accumulated depreciation
- -----------
provided on a straight-line basis over the estimated
useful lives of the properties, and net of allowance for
decline in value.
Policy and other loans - at the aggregate unpaid
- ----------------------
balances.
Short-term investments - consists of certificates of
- ----------------------
deposit and commercial paper, carried at cost which
approximates fair value.
Restricted Assets of the Cemeteries and Mortuaries
- --------------------------------------------------
Consists of cash, mortgage loans, mutual funds which are
carried at cost, fixed maturity securities at cost,
adjusted for amortization of premium or accretion of
discount and equity securities at fair value, which is
based upon quoted trading prices.
Realized gains and losses on sales of investments
- -------------------------------------------------
Realized gains and losses on sales of investments, and
declines in value considered to be other than temporary,
are recognized in operations on the specific
identification basis.
Recognition of Insurance Premiums
Premiums for traditional life insurance products, which
include those products with fixed and guaranteed premiums
and benefits and consist principally of whole life
insurance policies, limited-payment life insurance
policies, and certain annuities with life contingencies,
are recognized as revenues when due from policyholders.
Revenues for interest sensitive insurance policies (which
include interest sensitive life policies, deferred
annuities and annuities without life contingencies)
consist of policy charges for the cost of insurance,
policy administration charges, and surrender charges
assessed against policyholder account balances during the
period.
Deferred Policy Acquisition Costs and Cost of Insurance
Acquired
Commissions and other costs, net of commission and
expense allowances for reinsurance ceded, that vary with
and are primarily related to the production of new and
renewal insurance business have been deferred. Deferred
policy acquisition costs for traditional life insurance
are being amortized over the premium-paying period of the
related policies using assumptions consistent with those
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
used in computing policy benefit reserves. For interest
sensitive insurance products, deferred policy acquisition
costs are being amortized generally in proportion to the
present value of expected gross profits from surrender
charges and investment, mortality and expense margins.
This amortization is adjusted when estimates of current
or future gross profits to be realized from a group of
products are reevaluated.
Cost of insurance acquired is the present value of
estimated future profits of the acquired business and is
amortized similar to deferred policy acquisition costs.
These assets are stated at a cost of $3,488,383. The
interest rate used to record the acquisition and to be
used to amortize assets in future periods is
approximately 9%. Amortization net of accrued interest
is expected to approximate $502,000, $378,000, $377,000,
$365,000, and $305,000 for the years 1995, 1996, 1997,
1998, and 1999, respectively.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost.
Depreciation is calculated principally on the
straight-line method over the estimated useful lives of
the assets.
Policyholder Reserves and Policyholder Funds
The liabilities for future policy benefits for
traditional life insurance are computed using a net level
method, including assumptions as to investment yields,
mortality, morbidity, withdrawals, and other assumptions
based on the insurance subsidiaries' experience, modified
as necessary to give effect to anticipated trends and to
include provisions for possible unfavorable deviations.
Reserve interest assumptions are graded and range from
4.5% to 10%. Such liabilities are, for some plans,
graded to equal statutory values or cash values at or
prior to maturity. The range of assumed interest rate
for all traditional life and health insurance policy
reserves was 4.5% to 9.1% in 1994, 4.5% to 9.2% in 1993,
and 4.5% to 9.3% in 1992. Benefit reserves for
traditional limited-payment life insurance policies
include the deferred portion of the premiums received
during the premium-paying period; those deferred premiums
are recognized in income over the life of the policies.
Policy benefit claims are charged to expense in the
period that the claims are incurred. All insurance-
related benefits and expenses are reported net of
reinsurance ceded.
Policy liabilities for interest sensitive insurance
products are computed under a retrospective deposit
method and represent policy account balances before
applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims
incurred in the period in excess of related policy
account balances. Interest crediting rates for interest
sensitive insurance products ranged from 4% to 6.25% in
1994, 4% to 7% in 1993, and 4% to 7.5% in 1992.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Participating Insurance
Participating business constitutes 12%, 11%, and 10% of
the life insurance in force, for 1994, 1993 and 1992
respectively. The provision for policyholders' dividends
included in policyholder obligations is based on dividend
scales anticipated by management. Amounts to be paid are
determined annually by the Board of Directors.
Reinsurance
The Company follows the procedure of reinsuring risks in
excess of $50,000. The Company is liable for those
amounts in the event the reinsurers are unable to pay
their portion of the claims.
The Company has entered into a coinsurance agreement with
an unaffiliated insurance company under which the Company
assumed 100% of the risk for certain life insurance
policies and certain other policy-related liabilities of
the insurance company.
Reinsurance premiums, commissions, expense reimbursements
and reserves related to reinsured business are accounted
for on a basis consistent with those used in accounting
for the original policies issued and the terms of the
reinsurance contracts. Premiums ceded to other companies
are reported as a reduction of premium income. Expense
allowances received in connection with reinsurance ceded
are accounted for as a reduction of the related policy
acquisition costs and are deferred and amortized
accordingly.
Cemetery and Mortuary Operations
Land and improvements used in cemetery operations are
stated at cost and charged to operations when sold based
on the number of spaces available for sale. Mausoleum
costs are charged to operations when sold based on the
number of niches available for sale. Perpetual care is
maintained on sold spaces as discussed in Note 7.
Certain cemetery products are sold on a pre-need basis.
Revenues from pre-need cemetery sales are recognized at
the time of sale. Related costs required to establish
the liability for estimated future costs of pre-need
sales are also recorded at the time of sale. This
liability relates to promised merchandise and funeral
services and is increased or decreased each period as
current costs change. A corresponding charge is made to
operations. Certain mortuary products and services are
also sold on a pre-need basis. Pre-need mortuary sales
are fully reserved at the time of the sale. Revenue on
pre-need mortuary services is recognized at the time the
service is performed. Sales contracts average 6 years in
duration. Through 1990, these contracts were
non-interest bearing and the related receivables were
discounted using current market rates. Resulting
discount amounts are amortized into operations as other
income over the terms of the contracts. Beginning in
1991, all pre-need sales contracts bear interest at 8%.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company is required to place specified amounts into
restricted asset accounts for products sold on a pre-need
basis. Income from assets placed in these restricted
asset accounts are used to offset required increases to
the estimated future liability. Management believes that
amounts placed into these accounts are sufficient to
fulfill all future pre-need contract obligations.
Revenues and costs for at-need sales are recorded when
the services are performed.
The Company, through its mortuary and cemetery
operations, provides a guaranteed funeral arrangement
wherein a prospective customer can receive future goods
and services at guaranteed prices. To accomplish this,
the Company, through its life insurance operations, sells
to the customer an increasing benefit life insurance
policy that is assigned to the mortuaries. If at the
time of need, the policyholder/potential mortuary
customer utilizes one of the Company's facilities, the
guaranteed funeral arrangement contract that has been
assigned will provide the funeral goods and services at
the contracted price. The increasing life insurance
policy will cover the difference between the original
contract prices and current prices. Risks may arise if
the difference cannot be fully met by the life insurance
policy. However, management believes that given current
inflation rates and related price increases of goods and
services, the risk of exposure is minimal.
Mortgage Operations
Mortgage company fee income is generated through the
origination and refinancing of mortgage loans and is
deferred until such loans are sold.
Excess of Cost Over Net Assets of Acquired Subsidiaries
Previous acquisitions have been accounted for as
purchases under which assets acquired and liabilities
assumed were recorded at their fair values. The excess
of cost over net assets of acquired subsidiaries is being
amortized over a range of fifteen to thirty years using
the straight-line method. Accumulated amortization was
$532,140 and $483,774 at December 31, 1994 and 1993.
Land and Improvements
Included in land and improvements for sale are certain
costs amounting to $859,116 and $721,988 at December 31,
1994 and 1993, incurred to pursue the acquisition and
development of certain cemetery property in the San Diego
area. Deferral of these costs have been made pending
successful acquisition and development of the property.
Acquisition of the property was completed subsequent to
December 31, 1994.
Income Taxes
Federal income taxes include taxes currently payable plus
deferred taxes related to the tax effect of temporary
differences in the financial reporting basis and tax
basis of assets and liabilities. Such temporary
<PAGE>
differences are related principally to the deferral of
policy acquisition costs and the provision for future
policy benefits in the insurance operations.
Earnings Per Common Share
Earnings per common share are based on the weighted
average number of shares outstanding during the year
after giving effect to the assumed conversion of Class C
Common Stock to Class A Common Stock, the acquisition of
treasury stock, and the retroactive effect of stock
dividends declared for each year presented. Outstanding
stock options are not included in the computation when
the effect is antidilutive. The weighted average number
of shares are 3,476,544 in 1994, 3,245,899 in 1993 and
3,092,284 in 1992.
Reclassifications
Certain amounts in prior years have been reclassified to
conform with the current year presentation.
New Accounting Standards
During 1993, the FASB issued Statement 114, "Accounting
by Creditors for Impairment of a Loan" as amended in
October 1994 by Statement 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition" which are
effective for fiscal years beginning after December 15,
1994. The Company has not yet adopted these new
standards; however, the effect on operations and
stockholders' equity is not considered to be significant.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
2) Investments
- ---------------
The Company's investments in fixed maturity securities held to maturity and
equity securities available for sale are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1994: Cost Gains Losses Value
- ----------------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Fixed maturity securities
held to maturity
U.S. Treasury securities
and obligations of
U.S. Government agencies $10,146,365 $ 27,897 $ (228,438) $ 9,945,824
Obligations of states
and political subdivisions 194,913 7,744 (34,821) 167,836
Corporate securities
including public utilities 26,285,230 441,253 (728,611) 25,997,872
Redeemable preferred stock 133,788 14,557 (33,837) 114,508
Mortgage-backed securities 2,637,332 -- (167,892) 2,469,440
----------- ---------- ----------- -----------
Total $39,397,628 $ 491,451 $(1,193,599) $38,695,480
=========== ========== =========== ===========
Equity securities
available for sale $ 3,927,923 $ 539,137 $ (317,347) $ 4,149,713
=========== ========== =========== ===========
December 31, 1993:
- -----------------
Fixed maturity securities
held to maturity
U.S. Treasury securities
and obligations of
U.S. Government agencies $ 2,785,898 $ 141,872 $ (2,115) $ 2,925,655
Obligations of states
and political subdivisions 223,863 1,267 (2,260) 222,870
Corporate securities
including public utilities 8,828,352 968,494 (221,427) 9,575,419
Redeemable preferred stock 133,788 23,320 (25,208) 131,900
Mortgage-backed securities 7,210 -- -- 7,210
----------- ---------- --------- -----------
Total $11,979,111 $1,134,953 $(251,010) $12,863,054
=========== ========== ========= ===========
Equity securities
available for sale $ 2,180,224 $ 609,553 $(257,141) $ 2,532,636
=========== ========== ========= ===========
</TABLE>
The fair values for fixed maturity securities are based on quoted market
prices, when available. For fixed maturity securities not actively traded,
fair values are estimated using values obtained from independent pricing
services, or in the case of private placements, are estimated by discounting
expected future cash flows using a current market valule applicable to the
coupon rate, credit and maturity of the investments. The fair values for the
equity securities are based on quoted market prices.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The amortized cost and estimated fair value of fixed
maturity securities held to maturity at December 31,
1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because
certain borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
----------- ----------
<S> <C> <C>
Due in 1995 $ 574,304 $ 563,129
Due in 1996 through 2000 5,663,111 5,513,929
Due in 2001 through 2005 20,261,055 19,675,997
Due after 2005 10,128,038 10,358,477
Mortgage backed securities 2,637,332 2,469,440
Redeemable preferred stock 133,788 114,508
----------- -----------
$39,397,628 $38,695,480
=========== ===========
</TABLE>
The Company's realized gains and losses in investments
and provisions for losses are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Fixed maturity
securities held
to maturity
Gross realized gains $101,862 $662,434 $ 385,293
Gross realized losses (7,523) (18,552) (7,407)
Equity securities
available for sale
Gross realized gains -- 54,482 222,601
Gross realized losses -- (106,038) (18,801)
Other assets 289,298 187,738 1,300
--------- --------- ---------
Net realized gains 383,637 780,064 582,986
Net provision for
losses -- (28,553) (142,000)
--------- --------- ---------
Total $383,637 $751,511 $ 440,986
========= ========= =========
</TABLE>
The change in unrealized appreciation of investments, as
shown in the accompanying consolidated statements of
stockholders' equity, relates entirely to equity
securities for 1994, 1993, and 1992.
Concentrations of credit risk arise when a number of
mortgage loan debtors have similar economic
characteristics that would cause their ability to meet
contractual obligations to be similarly affected by
changes in economic conditions. Although the Company has
a diversified mortgage loan portfolio consisting of
residential and commercial loans and requires collateral
on all real estate exposures, a substantial portion of
its debtors' ability to honor obligations is reliant on
the economic stability of the geographic region in which
the debtors do business. The Company has 95% of its
mortgage loans in the state of Utah with one mortgage
loan to Wasatch Land and Development which constitutes
26% of the total mortgage loan balance.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Major categories of net investment income are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ------ ------
<S> <C> <C> <C>
Fixed maturity
securities $1,290,174 $1,333,251 $1,762,678
Equity securities 137,283 135,110 149,759
Mortgage loans
on real estate 1,210,670 846,186 252,562
Real estate 1,286,328 1,104,362 886,953
Policy loans 102,995 101,826 101,555
Other 849,900 783,823 733,177
---------- ---------- ----------
Gross investment
income 4,877,350 4,304,558 3,886,684
Investment expenses (756,433) (831,184) (319,622)
---------- ---------- ----------
Net investment
income $4,120,917 $3,473,374 $3,567,062
========== ========== ==========
</TABLE>
Net investment income includes net investment income
earned by the restricted assets of the cemeteries and
mortuaries of approximately $515,000, $426,000 and
$520,000 for 1994, 1993, and 1992, respectively.
Investment expenses consist primarily of depreciation,
property taxes and an estimated portion of administrative
expenses relating to investment activities.
Securities on deposit for regulatory authorities as
required by law amounted to $3,907,432 at December 31,
1994 and $3,805,985 at December 31, 1993.
3) Deferred Policy Acquisition Costs
- -------------------------------------
Information with regard to deferred policy acquisition
costs are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Balance at
beginning of year $5,041,947 $5,091,557 $5,023,459
Acquisition
costs deferred 585,576 893,777 796,971
Amortization charged
to income (766,658) (943,387) (728,873)
---------- ---------- ----------
Balance at end
of year $4,860,865 $5,041,947 $5,091,557
========== ========== ==========
</TABLE>
4) Property, Plant and Equipment
- -----------------------------------
The cost of property, plant and equipment and their
corresponding estimated useful lives are summarized
below:
<TABLE>
<CAPTION>
Estimated December 31,
Useful -----------
Lives 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Buildings 25-30 Years $4,779,417 $3,587,330
Furniture and
equipment 3-10 Years 2,594,801 2,189,875
Electronic data
processing
equipment 5 Years 451,561 205,711
---------- ----------
7,825,779 5,982,916
Less accumulated
depreciation (2,925,906) (2,622,935)
----------- -----------
$ 4,899,873 $ 3,359,981
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31,
-------------
1994 1993
----- ------
<S> <C> <C>
5) Bank Loans Payable
- ---------------------
Bank loans payable are summarized as follows:
Prime rate plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $36,420
including principal and
interest, collateralized by
1,000,000 shares of Security
National Life stock due
December 1999. $2,859,177 --
Prime rate plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $20,000,
including principal and
interest collateralized by
stock of Security National
Life, due July 1995,
loan retired in 1994. -- $ 528,022
One year treasury constant
maturity plus 2.75% (6.04%
at December 31, 1994) note
payable in monthly
installments of $6,000,
including principal and
interest, collateralized by
real property, which book
value is approximately
$748,000 due October
1999. 414,368 457,569
Prime plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $4,580,
including principal and
interest, collateralized
by real property due June
1996, loan retired in
1994. -- 356,594
Prime plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $15,018,
including principal and
interest, collateralized
by real property, which
book value is approximately
$1,440,000 due August 1997 1,907,453 1,939,104
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31,
------------
1994 1993
----- -----
<S> <C> <C>
5) Bank Loans Payable (Continued)
- --------------------------------
Time deposit plus 2% (3.25%
at December 31, 1994) note
payable in monthly
installments of $3,500,
including principal and
interest, collateralized
by 75% of the unpaid face
amount of the accounts
receivable which are less
than 60 days from payment
date due March 2006 297,004 326,241
Prime rate plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $7,235
including principal and
interest collateralized
by real property, which
book value is approximately
$1,136,000, due August
1999. 575,200 --
Prime plus 1% (8.5% at
December 31, 1994) note
payable in monthly
installments of $14,345,
including principal and
interest, collateralized
by real property, which
book value is approximately
$2,258,000, due February
2003 1,014,683 1,337,619
Other collateralized
notes payable 372,691 429,388
--------- ----------
Total bank loans 7,440,576 5,374,537
Less current installments 532,707 1,022,398
--------- ----------
Bank loans, excluding
current installments $6,907,869 $4,352,139
========== ==========
</TABLE>
See Note 6 for summary of maturities for subsequent
years.
<TABLE>
<CAPTION>
December 31,
-------------
1994 1993
----- -----
<S> <C> <C>
6) Notes and Contracts Payable
- -------------------------------
Notes and contracts payable are summarized as follows:
10% note payable in monthly
installments of $17,551,
including principal and
interest, collateralized
by a building, which book
value is approximately
$2,987,000, due December,
1997 $1,506,318 $1,790,667
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31,
------------
1994 1993
----- ------
<S> <C> <C>
6) Notes and Contracts Payable (Continued)
- -------------------------------
Due to former stockholders
of Deseret Memorial, Inc.
resulting from the
acquisition of such entity.
Amount represents the
present value discounted
at 8% of annuity payments
ranging from $4,600 to
$5,000 plus an index
adjustment in the 7th
through the 12th years,
over a minimum period of
20 years 696,670 700,759
Other notes payable 565,558 228,872
---------- ----------
Total notes and contracts 2,768,546 2,720,298
Less current installments 141,643 111,912
---------- ----------
Notes and contracts,
excluding current
installments $2,626,903 $2,608,386
========== ==========
</TABLE>
<TABLE>
<CAPTION>
The following tabulation shows the combined maturities of
bank loans payable and notes and contracts payable:
<C> <C>
1995 $ 674,350
1996 688,329
1997 3,857,640
1998 554,011
1999 1,157,143
Thereafter 3,277,649
-----------
$10,209,122
===========
</TABLE>
Interest paid approximated interest expense in 1994, 1993
and 1992.
7) Cemetery and Mortuary Endowment Care and Pre-need
- -----------------------------------------------------
Merchandise Funds
-----------------
Memorial owns and operates several endowment care
cemeteries, for which it has established and maintains an
endowment care fund. Per statutory requirement, Memorial
records a liability to the fund of $14 for each space
sold after 1979, $42 for spaces sold after July 1, 1983
and $50 for spaces sold after May 1, 1993. For each
space sold in the mausoleum, $30 is recognized as a
liability. Memorial is not required to transfer assets
to the fund until the spaces are paid for. Memorial is
not liable for any maintenance costs exceeding the
stipulated statutory rate.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBISDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
The liability to the endowment care fund is summarized as
follows:
December 31,
-------------
1994 1993
----- ----
<S> <C> <C>
Liability for spaces sold $1,306,320 $1,240,912
Less assets in the fund (986,984) (955,967)
---------- ----------
Total due to fund (fully
and not fully paid) $ 319,336 $ 284,945
========== ==========
</TABLE>
Assets in the endowment care trust fund are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
-------------
1994 1993
------ ----
<S> <C> <C>
Cash $870,127 $ 834,420
Mutual funds 19,927 19,458
Bonds, at cost 1,000 6,159
Other common stock 90,480 90,480
Preferred stock 5,450 5,450
-------- -----------
$986,984 $ 955,967
======== ===========
</TABLE>
Marketable equity securities of the fund are carried at
the lower of aggregate cost or market.
The Company has established and maintained certain
restricted asset accounts to provide for future
merchandise obligations incurred in connection with its
pre-need sales. Investments in these restricted assets
were $2,482,068 and $2,086,100 at December 31, 1994 and
1993, respectively.
In addition to the above mentioned assets, $286,990 of
accounts receivable have been pledged to the restricted
asset accounts. Memorial transfers assets to the
restricted asset accounts as merchandise payments are
received.
8) Income Taxes
- ----------------
Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standard No. 109, "Accounting for
Income Taxes" after previously following SFAS No. 96.
Under SFAS No. 109 and SFAS No. 96, the liability method
is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are measured
using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
There were no changes to the accompanying financial
statements by adopting SFAS No. 109.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax
liabilities and assets are approximately as follows:
1994 1993
----- ----
(In Thousands)
<S> <C> <C>
Assets
Future policy
benefits $(47) $(249)
Uncollected agents'
balances (30) (32)
Difference between
book and tax basis
of bonds (142) --
Surplus notes (272) --
Funds held under
reinsurance treaty (56) --
Net operating
loss carryforwards (369) --
Unearned premium
discount (9) --
----- ------
Total deferred
tax assets (925) (281)
----- ------
Liabilities
Deferred policy
acquisition costs 304 466
Cost of insurance
acquired 453 --
Installment sales 551 584
Depreciation 889 370
Trusts 286 164
Other 314 267
------ -----
Total deferred
tax liabilities 2,797 1,851
------ ------
Net deferred tax
liability $1,872 $1,570
====== ======
</TABLE>
<TABLE>
<CAPTION>
The Company's entire tax expense of $302,000, $388,000,
and $8,000 in 1994, 1993, and 1992, respectively,
consists solely of deferred expense for all three years.
The reconciliation of income tax attributable to
continuing operations computed at the U.S. federal
statutory rates is as follows:
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Computed expense at
statutory rate $454 $ 500 $ 335
Special deductions
allowed small life
insurance companies (108) (25) (59)
Dividends received
deduction (50) (116) --
Tax exempt interest (4) -- --
Capital loss -- -- (38)
Other, net 10 29 (246)
---- ------ ------
Tax expense
(benefit) $302 $ 388 $ (8)
==== ====== ======
</TABLE>
The other benefit recorded in 1992 of $246,000 primarily
results from the re-estimation of deferred tax
liabilities based upon the accumulation of identified
temporary differences and applying the current effective
tax rates with the resulting reduction in such deferred
tax amounts being recorded in 1992 operations.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATI0N
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A portion of the life insurance subsidiaries income
earned prior to 1984 was not subject to current taxation
but was accumulated for tax purposes, in a
"policyholders' surplus account." Under provisions of
the Internal Revenue Code, the policyholders' surplus
account was frozen at its December 31, 1983 balance and
will be taxed generally only when distributed. As of
December 31, 1994, the policyholders' surplus accounts
approximated $650,000 for Security National Life
Insurance Company and $3,365,000.
The non-insurance affiliates have tax operating loss
carryforwards available to offset future taxable income
amounting to approximately $905,000. Such losses will
begin to expire if unused by 2002.
The insurance companies have remaining loss carry
forwards for tax purposes of approximately $280,000 for
Security National Life and $449,000 for Capital Investors
Life for a total of $729,000. Such losses will begin to
expire if unused by 2008. Capital Investors Life's loss
carryforward originated in a separate return limitation
year.
The Company paid no income taxes in 1994, 1993, and 1992.
9) Reinsurance, Commitments and Contingencies
- --------------------------------------------
Security National Life follows the procedure of
reinsuring risks in excess of a specified limit which was
$50,000 at December 31, 1994. Security National Life is
contingently liable for these amounts in the event such
reinsurers are unable to pay their portion of the claims.
At December 31, 1994 and 1993, the contingent liabilities
for such future policy benefits aggregated $5,798,680 and
$82,030, respectively, all of which relate to life and
accident and health insurance. These amounts pertain to
insurance in force aggregating $35,073,111 and
$16,396,117.
The Company has also assumed insurance from other
companies (credit life and credit accident and health)
having insurance in force amounting to $69,998,195 at
December 31, 1994 and $135,558 at December 31, 1993.
The Company is a defendant in various legal actions
arising from the normal conduct of business. Management
believes that none of the actions will result in any
liability materially in excess of the provisions that
have been made.
The Company has committed to purchase cemetery property
in the San Diego area. Acquisition of the property was
completed subsequent to December 31, 1994.
10) Employee Stock Ownership Plan (ESOP)
- ---------------------------------------
The Company and its subsidiaries have a noncontributory
ESOP for all eligible employees. Eligible employees are
primarily those with more than one year of service and
who work in excess of 1,040 hours per year.
Contributions, which may be in cash or stock of the
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Company, are determined annually by the Board of
Directors. The Company's contributions are allocated to
eligible employees based on the ratio of each eligible
employee's compensation to total compensation for all
eligible employees during each year. ESOP contribution
expense totaled $54,288, $146,039, and $139,619 for 1994,
1993, and 1992, respectively. At December 31, 1994 the
ESOP held 553,365 shares of Class A and 472,716 shares of
Class C common stock of the Company. All shares held by
the ESOP have been allocated to the participating
employees and all shares held by the ESOP are considered
outstanding for purposes of computing earnings per share.
11) Capital Stock
- ------------------
The Company has two classes of common stock with shares
outstanding, Class A and Class C. Class C shares vote
share for share with the Class A shares on all matters
except election of one-third of the directors who are
elected solely by the Class A shares, but generally are
entitled to a lower dividend participation rate. Class C
is convertible into Class A at any time on a five to one
ratio, however, the ability to convert Class A into Class
C is extremely limited.
Shareholders of both classes of common stock have
received 5% stock dividends in 1994, 1993, 1992, 1991,
and 1990, as authorized by the Company's Board of
Directors. The Company has Class B Common Stock of $1.00
par value, 5,000,000 shares authorized, of which none are
issued. Class B shares are non-voting stock except to
any proposed amendment to the Articles of Incorporation
which would affect Class B Common Stock.
In 1987, the Company adopted the 1987 Incentive Stock
Option Plan (the 1987 Plan). The 1987 Plan provides that
an aggregate of 285,000 shares of the Class A Common
Stock of the Company may be optioned to certain officers
and key employees of the Company. The Plan establishes a
Stock Option Plan Committee which selects the employees
to whom the options will be granted and determines the
price of the stock. The Plan establishes the minimum
purchase price of the stock at an amount which is not
less than 100% of the fair market value of the stock
(110% for employees owning more than 10% of the total
combined voting power of all classes of stock). The Plan
terminates ten years from its effective date and options
granted are non-transferable. The Plan also includes a
Stock Appreciation Right which permits the holder of the
option to elect to receive cash, amounting to the
difference between the option price and the fair market
value of the stock at the time of the exercise, or a
lesser amount of stock without payment, upon exercise of
the option.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of December 31, 1994, options to purchase an aggregate
of 132,000 shares of Class A Common Stock have been
granted under the 1987 Plan at the exercise prices
indicated in the following table.
<TABLE>
<CAPTION>
Name of Individual
or Identity of 1988 1987
Group Option Shares Option Shares
------------------ ------------- -------------
<S> <C> <C>
Scott M. Quist 18,000(2) 29,000(1)
All executive officers
and key employee option
recipients as a group
(5 persons) 71,600 60,400
- -----------------------------------------------------------------
(1) Exercisable at $3.65 per share
(2) Exercisable at $3.25 per share
</TABLE>
As of December 31, 1994, none of the options granted have
been exercised or cancelled. All options are currently
exercisable.
On December 10, 1992, the Company's Board of Directors
elected to make a Tender Offer to all shareholders of the
Company's Class A and Class C Common Stock with less than
twenty-five shares and ninety-five shares respectively.
The offering price was $2.38 cash for Class A Common
Stock and $.48 cash for Class C Common Stock for
shareholders' of record on January 15, 1993. The
purpose of the Tender Offer was to reduce the high cost
of servicing small shareholders and enable such
shareholders to dispose of their shares without incurring
odd lot transaction costs. The transaction has been
reflected in the balance sheet as of December 31, 1992.
On June 21, 1993, the Board of Directors adopted the
Security National Financial Corporation 1993 Stock
Incentive Plan (the "1993 Plan"), which reserves 300,000
shares of Class A Common Stock for issuance thereunder.
The 1993 Plan was approved at the annual meeting of the
stockholders held on June 21, 1993. The 1993 Plan allows
the Company to grant options and issue shares as a means
of providing equity incentives to key personnel, giving
them a proprietary interest in the Company and its
success and progress.
The 1993 Plan provides for the grant of options and the
award or sale of stock to officers, directors, and
employees of the Company. Both "incentive stock
options," as defined under Section 422A of the Internal
Revenue Code of 1986 (the "Code"), and "non-qualified
options" may be granted pursuant to the 1993 Plan. On
April 29, 1993, the Company granted options for 90,000
shares under the 1993 Plan to George R. Quist and William
C. Sargent. Mr. Quist was granted options to purchase
50,000 shares of the Company's Class A Common Stock at an
exercise price of $3.44 per share. Mr. Sargent was
granted options to purchase 40,000 shares of Class A
Common Stock at an exercise price of $3.13 per share.
The exercise prices for the options granted are equal to
or greater than the fair market value of the stock
subject to such options as of the date of grant, as
determined by the Company's Board of Directors. Of these
recently granted options, 50% were exercisable on April
29, 1993 and the remaining 50% were exercisable on April
29, 1994.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Corporation
The options granted on April 29, 1993, were to reward
certain officers and key employees who have been employed
by the Company for a number of years and to help the
Company retain these officers by providing them with an
additional incentive to contribute to the success of the
Company.
The 1993 Plan is to be administered by the Board of
Directors or by a committee designated by the Board. The
terms of options granted or stock awards or sales
effected under the 1993 Plan are to be determined by the
Board of Directors or its committee. No options may be
exercised for a term of more than ten years from the date
of grant. Options intended as incentive stock options
may be issued only to employees, and must meet certain
conditions imposed by the code, including a requirement
that the option exercise price be no less than the fair
market value of the option shares on the date of grant.
The 1993 Plan provides that the exercise price for
non-qualified options will be not less than at least 50%
of the fair market value of the stock subject to such
option as of the date of grant of such options, as
determined by the Company's Board of Directors.
The 1993 Plan has a term of ten years. The Board of
Directors may amend or terminate the 1993 Plan at any
time.
12) Statutory Financial Information
- ------------------------------------
The Company's insurance subsidiaries are domiciled in
Utah and prepare their statutory basis financial
statements in accordance with accounting practices
prescribed or permitted by the Utah Insurance Department.
"Prescribed" statutory accounting practices include state
laws, regulations, and general administrative rules, as
well as a variety of publications of the National
Association of Insurance Commissioners ("NAIC").
"Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such
practices may differ from state to state, may differ from
company to company within a state, and may change in the
future. The NAIC currently is in the process of
codifying statutory accounting practices, the result of
which is expected to constitute the only source of
"prescribed" statutory accounting practices.
Accordingly, that project, which is expected to be
completed in 1996, will likely change, to some extent,
prescribed statutory accounting practices, and may result
in changes to the accounting practices that insurance
enterprises use to prepare their statutory financial
statements. Statutory net income and statutory
stockholders' equity for Security National Life, which
includes its subsidiary Capital Investors Life, as
reported to state regulatory authorities, is presented
below:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- -----
<S> <C> <C> <C>
Statutory net income
(loss) for the years
ended December 31 $701,985 $(380,271) $ 283,770
Statutory Stockholders
Equity at December 31 $8,569,956 $7,499,128 $7,762,614
</TABLE>
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Generally, the net assets of Security National Life are
available for transfer to the Company are limited to the
amounts that Security National Life's net assets, as
determined in accordance with statutory accounting
practices, exceed minimum statutory capital requirements;
however, payments of such amounts as dividends may be
subject to approval by regulatory authorities.
The Utah Insurance Department imposes minimum risk-based
capital requirements on insurance enterprises that were
developed by the NAIC. The formulas for determining the
amount of risk-based capital ("RBC") specify various
weighting factors that are applied to financial balances
or various levels of activity based on the perceived
degree of risk. Regulatory compliance is determined by a
ratio (the "Ratio") of the enterprise's regulatory total
adjusted capital, as defined by the NAIC, to its
authorized control level, RBC, as defined by the NAIC.
Enterprises below specific trigger points or ratios are
classified within certain levels, each of which requires
specified corrective action.
Each of the Company's insurance subsidiaries has a Ratio
that is greater than 300% of the minimum RBC
requirements; accordingly, the Company's subsidiaries
meet the RBC requirements.
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
13) Business Segment Information
- ---------------------------------
The Company is principally involved in three segments: Life insurance and
annuities, cemetery/mortuary operations and mortgages. The mortgage
operations began in 1993.
The following schedules summarize segment information for the three segments
and corporate activities for 1994, 1993, and 1992:
<TABLE>
<CAPTION>
1994
-----
Life Cemetery/
Insurance Corporate Mortuary Mortgage Consolidated
--------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net investment
income $ 3,582,518 $ 23,379 $ 515,020 $ -- $ 4,120,917
Other revenues 5,077,914 171 6,291,109 1,170,465 12,539,659
----------- -------- ----------- ---------- -----------
8,660,432 23,550 6,806,129 1,170,465 16,660,576
Expenses:
Death and other
policy benefits 2,567,078 -- -- -- 2,567,078
Increase in future
policy benefits 1,469,029 -- -- -- 1,469,029
Amortization of
deferred policy
acquisition costs 766,658 -- -- -- 766,658
General,
administrative and
other costs 3,126,598 228,604 6,073,846 1,093,703 10,522,751
----------- --------- --------- ---------- ------------
7,929,363 228,604 6,073,846 1,093,703 15,325,516
----------- --------- --------- ---------- ------------
Earnings before
income taxes $ 731,069 $(205,054) $ 732,283 $ 76,762 $ 1,335,060
=========== ========= ========== ========== ============
Identifiable
assets $81,962,820 $ 764,201 $20,573,980 $ 457,256 $103,758,257
=========== ========= =========== ========== ============
</TABLE>
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
13) Business Segment Information (Continued)
- --------------------------------------------
<TABLE>
<CAPTION>
1993
-----
Life Cemetery/
Insurance Corporate Mortuary Mortgage Consolidated
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net investment
income $3,059,424 $21,235 $ 392,715 $ -- $ 3,473,374
Other revenues 5,588,015 35,964 6,610,771 788,032 13,022,782
---------- ------- ---------- -------- -----------
8,647,439 57,199 7,003,486 788,032 16,496,156
========== ======= ========== ======== ===========
Expenses:
Death and other
policy benefits 2,414,817 -- -- -- 2,414,817
Increase in future
policy benefits 2,005,048 -- -- -- 2,005,048
Amortization of
deferred policy
acquisition costs 943,387 -- -- -- 943,387
General,
administrative
and other costs 2,763,250 28,559 6,216,203 655,245 9,663,257
---------- ------- ---------- -------- ----------
8,126,502 28,559 6,216,203 655,245 15,026,509
---------- ------- ---------- -------- ----------
Earnings before
income taxes $ 520,937 $ 28,640 $ 787,283 $132,787 $ 1,469,647
=========== ======== =========== ======== ===========
Identifiable
assets $55,240,540 $733,542 $19,463,228 $483,900 $75,921,210
=========== ======== =========== ======== ===========
</TABLE>
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
13) Businesss Segment Information (Continued)
- ---------------------------------------------
<TABLE>
<CAPTION>
1992
----
Life Cemetery/
Insurance Corporate Mortuary Consolidated
--------- --------- -------- --------------
<S> <C> <C> <C> <C>
Revenues:
Net investment
income $ 3,091,578 $ 29,515 $ 445,969 $ 3,567,062
Other revenues 5,088,469 35,302 6,041,924 11,165,695
----------- --------- ---------- -----------
8,180,047 64,817 6,487,893 14,732,757
----------- --------- ---------- -----------
Expenses:
Death and other
policy benefits 2,428,573 -- -- 2,428,573
Increase in future
policy benefits 1,472,138 -- -- 1,472,138
Amortization of
deferred policy
acquisition costs 728,873 -- -- 728,873
General,
administrative and
other costs 2,492,851 495,570 6,148,548 9,136,969
----------- --------- ----------- -----------
7,122,435 495,570 6,148,548 13,766,553
----------- --------- ----------- -----------
Earnings before
income taxes $ 1,057,612 $(430,753) $ 339,345 $ 966,204
=========== ========= =========== ===========
Identifiable assets $50,865,114 $ 847,868 $18,841,871 $70,554,853
=========== ========= =========== ===========
</TABLE>
<PAGE> Schedule I
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Summary of Investments
Other than Investments in Related Parties
As of December 31, 1994:
- -----------------------
<TABLE>
<CAPTION>
Amount at
Which
Shown
Estimated in the
Type of Investment Amortized Fair Balance
- ------------------ Cost Value Sheet
---------- --------- ----------
<S> <C> <C> <C>
Fixed maturity securities
held to maturity:
Bonds:
United States
Government and
government agencies
and authorities $10,146,365 $ 9,945,824 $10,146,365
States,
municipalities and
political
subdivisions 194,913 167,836 194,913
Mortgage backed
securities 2,637,332 2,469,440 2,637,332
Public utilities 7,781,639 7,782,547 7,781,639
All other corporate 18,503,591 18,215,325 18,503,591
Redeemable preferred
stocks 133,788 114,508 133,788
----------- ----------- -----------
Total $39,397,628 $38,695,480 $39,397,628
=========== =========== ===========
Equity securities,
available for sale:
Common Stocks:
Public utilities 297,202 347,146 347,146
Banks, trusts and
insurance
companies 116,090 175,285 175,285
Industrial,
miscellaneous
and all other 3,011,812 3,076,995 3,076,995
Nonredeemable
preferred stocks 502,819 550,287 550,287
----------- ---------- ----------
Total 3,927,923 4,149,713 4,149,713
----------- ---------- ----------
Mortgage loans on
real estate 14,681,293 14,681,293
Real estate 7,586,650 7,586,650
Policy loans 2,670,989 2,670,989
Other investments 4,690,630 4,690,630
----------- -----------
Total investments $72,955,113 $73,176,903
=========== ===========
</TABLE>
<PAGE> Schedule II
SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------
Assets: 1994 1993
- ------ ----- ------
<S> <C> <C>
Short-term investments $660,405 $721,886
Cash (outstanding checks in
excess of deposits) 39,041 (8,959)
Investment in affiliates,
at equity 22,162,208 18,070,321
Receivables:
Receivable from affiliates 1,453,570 1,408,569
Other 16,585 18,040
----------- -----------
Total receivables 1,470,155 1,426,609
Property, plant and
equipment, at cost,
net of accumulated
depreciation of $262,594
for 1994 and $258,216
for 1993 50,815 2,351
Other assets 54 76,824
----------- -----------
Total assets $24,382,678 $20,289,032
=========== ===========
</TABLE>
See accompanying notes to parent company only financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Schedule II, Continued)
SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)
Balance Sheets (Continued)
December 31,
-----------
1994 1993
------ ----
<S> <C> <C>
Liabilities:
- -----------
Bank loans payable (note 1):
Current installments $ 187,316 $ 213,656
Long-term 2,671,861 314,367
Notes and contracts payable
(note 2):
Current installments 425 425
Long-term 55,353 55,353
Advances from affiliated
companies (note 3) 947,936 454,591
Accounts payable and
accrued expenses 20,203 75,171
Other liabilities 394,675 308,255
Income Taxes 126,364 33,142
---------- ----------
Total liabilities 4,404,133 1,454,960
---------- ----------
Stockholders' equity:
- ---------------------
Common Stock
Class A: $2 par value
Authorized 10,000,000
shares, issued
3,558,406 shares in
1994 and 3,322,818
shares in 1993 $7,116,814 $6,645,636
Class C: $0.40 par
value Authorized
7,500,000 shares,
issued 2,275,045
shares in 1994
and 2,171,915
shares in 1993 910,018 868,766
Paid-in capital 7,214,061 6,726,614
Unrealized appreciation
of investments 221,790 352,412
Retained earnings 6,154,694 5,879,476
----------- -----------
21,617,377 20,472,904
Treasury stock at cost
(532,015 Class A
shares and 24,281
Class C shares
in 1994; 506,677
Class A shares and
23,125 Class C shares
in 1993, held
by affiliated
companies) (1,638,832) (1,638,832)
----------- -----------
Net Stockholders'
Equity 19,978,545 18,834,072
----------- -----------
Total liabilities
and Stockholders'
equity $24,382,678 $20,289,032
=========== ===========
See accompanying notes to parent company only financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II, (Continued)
SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)
Statements of Earnings
Year Ended December 31,
-----------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Revenue:
Net investment
income $ 23,379 $ 21,235 $ 29,515
Realized loss on
investments -- (98,859) --
Other 568,971 656,023 625,102
---------- --------- --------
Total revenue 592,350 578,399 654,617
---------- --------- --------
Expenses:
General and
administrative
expenses 209,500 (18,773) 423,013
Interest expense 40,607 64,047 103,434
---------- ----------- ---------
Total expenses 250,107 45,274 526,447
---------- ----------- ---------
Earnings before income
taxes, and earnings
of subsidiaries 342,243 533,125 128,170
Income tax expense (93,222) (500) --
Equity in earnings of
subsidiaries 790,738 550,916 846,870
---------- ---------- ----------
Net earnings $1,039,759 $1,083,541 $ 975,040
========== ========== ==========
</TABLE>
See accompanying notes to parent company only financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Schedule II, (Continued)
SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)
Statements of Cash Flows
Year Ended December 31,
-----------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Cash flows from
operating activities:
Net earnings $1,039,759 $1,083,541 $975,040
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation and
amortization 4,378 2,821 9,554
Provision for loss on
accounts receivable -- (98,859) --
Gain on sale of investment
to affiliate -- (121,898) --
Change in assets and liabilities:
Undistributed earnings
of affiliates (790,731) (550,916) (846,870)
Accounts receivable (43,546) 44,489 (211,074)
Other assets 76,770 19,533 192,736
Accounts payable and
accrued expenses (54,968) (119,140) 28,828
Other liabilities 86,420 58,262 148,991
Income taxes 93,222 500 --
--------- ---------- --------
Net cash provided by
operating activities 411,304 318,333 297,205
Cash flows from investing
activities:
Proceeds from sale of
equity securities -- 203,248 14
Proceeds from sale of
short term investments 61,485 54,652 100,113
Investment in
subsidiaries (3,196,446) (147,451) (40,085)
Purchase of Property
plant & equipment (52,842) -- --
------------ --------- --------
Net cash provided by
(used in) investing activities (3,187,803) 110,449 60,042
Cash flows from financing
activities:
Proceeds from advances
from affiliates 493,345 -- --
Payments of notes and
contracts payable (528,023) (384,055) (358,703)
Proceeds from
borrowings on notes
and contracts payable 2,859,177 1,710 (55,487)
----------- --------- ---------
Net cash provided by (used in)
financing activities 2,824,499 (382,345) (414,190)
----------- --------- ---------
Net (Decrease)
increase in cash 48,000 46,437 (56,943)
Cash at beginning of year (8,959) (55,396) 1,547
----------- ---------- ---------
Cash at end of year $ 39,041 $ (8,959) $ (55,396)
=========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II, (Continued)
SECURITY NATIONAL FINANCIAL CORPORATION
Notes to Parent Company Only Financial Statements
(1) Bank Loans Payable
Bank loans payable are summarized as follows:
December 31,
-------------
1994 1993
----- ----
<S> <C> <C>
Prime rate plus 1/2% (8.5% at
December 31, 1994) note
payable in monthly
installments of $36,420 $2,859,177 $528,023
Less current installments 187,316 213,656
---------- --------
Bank loans, excluding
current installments $2,671,861 $314,367
========== ========
</TABLE>
(2) Notes and Contracts Payable
- --------------------------------
Notes and contracts are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------
1994 1993
---- ----
<S> <C> <C>
12% notes payable to former
stockholders of American
Home Security Life Insurance
Company, with interest payable
semi-annually and total
principal due April, 1989 $ 425 $ 425
7 year notes due April 16, 1996,
1/2% over U.S. Treasury
6 month bill rate 27,166 27,166
10 year notes due April 16,
1999, 1% over U.S.
Treasury 6 month bill rate 28,187 28,187
------- -------
Total notes and contracts 55,778 55,778
Less current installments 425 425
------- -------
Notes and contracts,
excluding current
installments $55,353 $55,353
======= =======
</TABLE>
The following tabulation shows the combined maturities of bank
loans payable and notes and contracts payable:
<TABLE>
<CAPTION>
<C> <C>
1995 $ 187,741
1996 232,053
1997 224,170
1998 245,130
1999 296,312
Thereafter 1,729,549
----------
$2,914,955
==========
</TABLE>
(3) Advances from Affiliated Companies
- ---------------------------------------
<TABLE>
<CAPTION>
December 31,
-------------
1994 1993
---- ----
<S> <C> <C>
Non-interest bearing advances
from affiliates:
Security National Life
Insurance Company $454,491 $454,591
-------- --------
$454,591 $454,591
======== ========
</TABLE>
(4) Dividends
- --------------
No dividends have been paid to the registrant for each of
the last three years by any subsidiaries.
<PAGE>
<TABLE>
<CAPTION>
Schedule IV
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Reinsurance
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed to
Amount Companies Companies Amount Net
------ --------- ---------- ------ ------------
<S> <C> <C> <C> <C> <C>
1994
- ----
Life Insurance
in force ($000) $ 366,522 $ 35,073 $69,998 $ 401,447 .0299%
========== ======== ======= ========== ======
Premiums:
Life Insurance 4,852,223 108,076 -- 4,744,147 N/A
Accident and
Health Insurance 15,403 957 -- 14,446 N/A
---------- -------- --------- ---------- -----
Total premiums $4,867,626 $109,033 $ -- $4,758,593 N/A
========== ======== ========= ========== =====
1993
- ----
Life Insurance
in force ($000) $ 310,260 $ 16,396 $ 135 $ 293,999 0.0459%
========== ======== ====== ========== ======
Premiums:
Life Insurance $4,855,633 $ 95,140 -- $4,760,493 N/A
Accident and
Health Insurance 17,655 1,046 -- 16,619 N/A
---------- -------- ------- ---------- ----
Total premiums $4,873,288 $ 96,186 -- $4,777,112 N/A
========== ======== ======= ========== ====
1992
- ----
Life Insurance
in force ($000) $ 318,737 $ 20,204 $ 283 $ 298,816 0.1%
========== ======== ====== ========== ====
Premiums:
Life Insurance $4,517,724 $ 46,007 $ (232) $4,471,485 N/A
Accident and
Health Insurance 23,432 1,440 (1) 21,991 N/A
---------- -------- ------ ---------- ----
Total premiums $4,541,156 $ 47,447 $ (233) $4,493,476 N/A
========== ======== ====== ========== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule V
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Balance Additions Deductions, Balance
at Charged Disposals at
Beginning to Costs and End of
of Year and Expenses Write-offs Year
----------- ------------ ---------- -------
<S> <C> <C> <C> <C>
For the Year Ended
December 31, 1994
- -------------------
Accumulated depreciation
on real estate $1,000,113 $262,740 $ -- $1,262,853
Accumulated depreciation
on property, plant
and equipment 2,622,935 374,503 71,532 2,925,906
Allowance for doubtful
accounts 1,949,553 79,752 105,497 1,923,808
Allowance for doubtful
loans 158,553 -- -- 158,553
For the Year Ended
December 31, 1993
- --------------------
Accumulated depreciation
on real estate $ 738,242 $261,871 $ -- $1,000,113
Accumulated depreciation
on property, plant
and equipment 2,327,249 295,686 -- 2,622,935
Allowance for doubtful
accounts 2,931,025 73,250 1,054,722 1,949,553
Allowance for doubtful
loans 130,000 28,553 -- 158,553
For the Year Ended
December 31, 1992
- -------------------
Accumulated depreciation
on real estate $ 673,833 $ 94,474 $ 30,065 $ 738,242
Accumulated depreciation
on property, plant
and equipment 2,023,152 304,097 -- 2,327,249
Allowance for doubtful
accounts 3,002,901 -- 71,876 2,931,025
Allowance for doubtful
loans -- 130,000 -- 130,000
</TABLE>
<PAGE>
Item 9. Changes In and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None
PART III
Item 10. Directors and Executive Officers
- -----------------------------------------
There is incorporated by reference herein information
contained in the registrant's definitive proxy statement
in connection with the Company's 1995 annual shareholders
meeting.
Item 11. Executive Compensation
- -------------------------------
There is incorporated by reference herein information
contained in the registrant's definitive proxy statement
in connection with the Company's 1995 annual shareholders
meeting.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
There is incorporated by reference herein information
contained in the registrant's definitive proxy statement
in connection with the Company's 1995 annual shareholders
meeting.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
There is incorporated by reference herein information
contained in the registrant's definitive proxy statement
in connection with the Company's 1995 annual shareholders
meeting.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a)(1)(2) Financial Statements and Schedules
----------------------------------
See "Index to Consolidated Financial Statements
and Supplemental Schedules" under Item 8 above.
(a)(3) Exhibits
--------
The following Exhibits are filed herewith pursuant
to Rule 601 of Regulation S-K or are incorporated
by reference to previous filings.
Exhibit
<TABLE>
<CAPTION>
Table No Document
-------- --------
(a)(3) Exhibits:
<C> <S>
3.A. Articles of Restatement of Articles of
Incorporation***
B. Bylaws*
4.A. Specimen Class A Stock Certificate*
B. Specimen Class C Stock Certificate*
C. Specimen Preferred Stock Certificate and
Certificate of Designation of Preferred Stock*
9. Not applicable
<PAGE>
10. A. Employment Agreement with George R. Quist*
B. Restated and Amended Employee Stock Ownership
Plan and Trust Agreement*
C. Deferred Compensation Agreement with George
R. Quist**
D. 1993 Stock Option Plan***
E. Articles of Incorporation of Security
National Mortgage Company***
F. Bylaws of Security National Mortgage
Company***
G. Stock and Real Estate Purchase Agreement with
Sunset Funeral Homes, Inc. and Chandler O.
Hassett***
H. Warranty Deed with Chandler O. Hassett and
the Estate of Mary M. Hassett re Sunset
Funeral Homes, Inc.***
I. Deed of Release and Full Reconveyance with
Chandler O. Hassett and the Estate of Mary M.
Hassett re Sunset Funeral Homes, Inc.***
J. Loan and Trust Deed Participation Agreement
with the Capson Family***
K. Promissory Note with University Partners,
Ltd.***
L. Trust Deed with Assignment of Rents with
University Partners, Ltd.***
M. Promissory Note with Bruce Manka***
N. Utah Deed of Trust with Assignment of Rents
with Key Bank of Utah***
O. Assignment of Leases, Rents and Contracts
with Key Bank of Utah.***
P. Purchase and Sale Agreement with Aetna Life
Insurance Company***
Q. Promissory Note with Bear Lake West, Inc.
II***
R. Security Agreement and Security Assignment
with Bear Lake West, Inc. II***
S. Promissory Note with 300 West Associates***
T. Loan Agreement with 300 West Associates***
U. Trust Deed with Assignment of Rents with 300
West Associates***
V. Promissory Note with Parrish Lane Townhomes,
L.C.***
W. Trust Deed with Assignment of Rents with
Parrish Lane Townhomes, L.C. as Trustor***
<PAGE>
X. Promissory Note with Margin Properties,
Diamond Rental Centers, Inc., Lorin R.
Winegar and Maun T. Peterson***
Y. Loan Agreement with Margin Properties,
Diamond Rental Centers, Inc., Lorin R.
Winegar and Maun T. Peterson***
Z. Stock Purchase Agreement with Capital
Investors Life Insurance Company and Suncoast
Financial Corporation****
AA. Profit Sharing Agreement with Suncoast
Financial Corporation*****
BB. Service Agreement with Suncoast Financial
Corporation*****
CC. Promissory Note with Key Bank of Utah*****
DD. Loan and Security Agreement with Key Bank of
Utah*****
EE. General Pledge Agreement with Key Bank of
Utah*****
FF. Purchase and Sale Agreement with Escrow
Instructions with the Carter Family Trust
and the Leonard M. Smith Family Trust
GG. Note Secured by Purchase Price Deed of Trust
and Assignment of Rents with the Carter
Family Trust and the Leonard M. Smith Family
Trust
HH. Deed of Trust and Assignment of Rents with
the Carter Family Trust and the Leonard M.
Smith Family Trust
II. Stock Insurance Agreement with Greer-Wilson
Funeral Home, Inc. and Page E. Greer
JJ. Promissory Note with Page E. and Patricia R.
Greer
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
11. Statement Re: Computation of Per-share Earnings
12. Not applicable
13. Not applicable
18. Not applicable
19. Not applicable
22. Subsidiaries of the Registrant
23. Not applicable
24. Not applicable
25. Not applicable
</TABLE>
*Incorporated by reference from Registration
Statement on Form S-1, as filed on June 29, 1987.
<PAGE>
**Incorporated by reference from Annual Report on
Form 10-K, as filed on March 31, 1989.
***Incorporated by reference from Annual Report on
Form 10-K, as filed on March 31, 1994.
****Incorporated by reference from Report on Form
8-K, as filed on November 2, 1994.
*****Incorporated by reference from Report on Form
8-K as filed on February 24, 1995.
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K with the
Securities and Exchange Commission on November 2,
1994. The report supplied information under
Section 2 thereof, captioned "Acquisition or
Disposition of Assets," which was related to the
acquisition of Capital Investors Life Insurance
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SECURITY NATIONAL FINANCIAL CORPORATION
Dated: April 13, 1995 By: George R. Quist,
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following
persons in counterpart on behalf of the Company on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <S> <S>
George R. Quist Chairman of the April 13, 1995
Board, President and
Chief Executive Officer
Scott M. Quist (Principal Executive April 13, 1995
Officer) First Vice
President, General
Counsel, Treasurer
and Director (Principal
Accounting Officer)
William C. Sargent Senior Vice President, April 13, 1995
Secretary and Director
Charles L. Crittenden Director April 13, 1995
Sherman B. Lowe Director April 13, 1995
R.A.F. McCormick Director April 13, 1995
Richard E. Myers Director April 13, 1995
W. Lowell Steen Director April 13, 1995
Nathan H. Wagstaff Director April 13, 1995
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Year Ended December 31, 1994
SECURITY NATIONAL FINANCIAL CORPORATION
Commission File No. 0-9341
E X H I B I T S
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
Exhibit No. Document Name
- ----------- ---------------
<C> <S>
94.10-FF Purchase and Sale Agreement with Escrow
Instructions with the Carter Family Trust and
the Leonard M. Smith Family Trust
94.10-GG Note Secured by Purchase Price Deed of Trust and
Assignment of Rents with the Carter Family Trust
and the Leonard M. Smith Family Trust
94.10-HH Deed of Trust and Assignment of Rents with the
Carter Family Trust and the Leonard M. Smith
Family Trust
94.10-II Stock Insurance Agreement with Greer-Wilson
Funeral Home, Inc. and Page E. Greer
94.10-JJ Promissory Note with Page E. and Patricia R.
Greer
94.11 Statement Re: Computation of Per-share Earnings
</TABLE>
<PAGE>
94.10-FF
Purchase and Sale Agreement with Escrow Instructions
with the Carter Family Trust and the Leonard M. Smith
Family Trust
<PAGE>
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
---------------------------
THIS AGREEMENT, dated as of this ____ day of February,
1995, by and between:
PAUL THOMAS CARTER and MAJEL L. CARTER, as Co-
Trustees of the CARTER FAMILY TRUST U/D/T DATED
MARCH 8, 1987; LEONARD M. SMITH and GRACE A.
SMITH, as Co-Trustees of the LEONARD M. SMITH
FAMILY TRUST DATED SEPTEMBER 23, 1988
(herein referred to as "Seller"), and
CALIFORNIA MEMORIAL ESTATES, INC., a Utah
corporation (herein referred to as "Buyer")
is entered into with reference to the recitals set forth in
Section 1 below and constitutes (a) a contract of purchase-
and-sale between the parties; and (b) escrow instructions to
Stewart Title Company of San Diego ("Escrow Agent"), the
consent of which appears at the end hereof.
1. RECITALS
--------
1.1 Ownership and Description. Seller owns and
-------------------------
holds the fee title to the real property described in
Exhibit "A" attached hereto and depicted on Exhibit "B",
attached hereto ("Property").
1.2 Intention. Buyer desires to purchase, and
---------
Seller desires to sell, the Property pursuant to the terms
and conditions set forth in this Agreement.
1.3 Regulatory Approvals. Prior to entering into
--------------------
this Agreement, Buyer has obtained discretionary approvals
from the County of San Diego for development of the Property
as a cemetery. During this process, Buyer has investigated
and resolved numerous issues relating to the Property,
including, but not limited to, the existence of sensitive
biological habitat and the application of the Endangered
Species Act and the California Environmental Quality Act,
issues relating to archaeology, groundwater contamination,
water supply, traffic, intensity of use, offsite mitigation,
liquid waste disposal, and the ability to utilize the
Property under the County of San Diego's Zoning Ordinance
and Resource Protection Ordinance.
2. AGREEMENT OF SALE
-----------------
2.1 Purchase Price. Seller hereby agrees to sell,
--------------
and Buyer hereby agrees to purchase, through escrow, the
Property for a total purchase price of One Million One
Hundred Sixty-Two Thousand Dollars ($1,162,000), subject to
the terms and conditions set forth herein. The total
purchase price shall be payable through escrow on or before
the closing pursuant to the following summary:
<TABLE>
<CAPTION>
<C> <S> <C>
A. Cash Down Payment to be deposited
in Escrow $ 100,000.00
B. Deferred balance in the form of
an interest-bearing Promissory
Note secured by a Deed of Trust
as provided in Section 2.3 $1,062,000.00
</TABLE>
<PAGE>
2.2 Deferred Balance Note. The Deferred Balance
---------------------
Promissory Note referred to in Section 2.1.B. shall be in
the form attached hereto as Exhibit "C" and shall be secured
by a first Deed of Trust using title insurer's usual form
encumbering the Property. The Deed of Trust shall contain
acceleration provisions as provided in the Note.
3. OPENING OF ESCROW
-----------------
Concurrent with the execution of this Agreement, Buyer
and Seller shall cause an escrow for the purpose of the sale
of the Property to be opened at Stewart Title Company of San
Diego, 7676 Hazard Center Drive, San Diego, California
92108. This Agreement shall constitute escrow instructions.
4. TITLE
-----
4.1 Grant Deed. Seller shall convey title to Buyer
----------
by Grant Deed using Escrow Agent's usual form. Title shall
be free of all monetary liens and encumbrances, except non-
delinquent real property taxes, and subject only to such
other matters as are allowed pursuant to Section 10.1.3.
4.2 Preliminary Title Report. Attached hereto as
------------------------
Exhibit "D" is Stewart Title Company's Preliminary Title
Report No. 06-148597 (the "Report") for the Property showing
the condition of title to the Property as of 7:30 a.m.,
December 1, 1994, which said Report is accepted and
approved.
5. CONDITIONS PRECEDENT AND COVENANTS
----------------------------------
5.1 Conditions. The close of escrow is subject to
----------
the following condition:
5.1.1 Title Policy. Escrow Agent is able to
procure the title policy as required in Section 10.1.3,
subject only to (a) non-delinquent real property taxes and
assessment; (2) Items 2 through 13 shown on Schedule B of
the Report; and (3) any voluntary liens or encumbrances
imposed by Buyer.
5.2 Waiver of Conditions. The foregoing condition
--------------------
precedent may be waived, and if so waived, shall be of no
further effect hereunder. Any such waiver shall be
effective only if the same is
(a) in writing signed by Buyer and Seller; and (b) delivered
to Escrow Agent on or before the date the waived condition
is to be satisfied.
5.3 Non-Satisfaction of Conditions. In the event
------------------------------
the foregoing condition is neither satisfied nor waived
within the time specified therefor, Buyer or Seller may
terminate the escrow by written demand therefor delivered to
the other party and Escrow Agent. The making of such demand
shall be optional, not mandatory; no delay in the making of
such demand shall affect the rights hereunder of the party
making the same. In the event such demand is made:
<PAGE>
(a) Escrow Agent shall return to every party the
funds and documents theretofore deposited by such party
unless Escrow Agent decides (in its uncontrolled discretion)
the protection of its interest requires otherwise; in which
case Escrow Agent will interplead the deposited funds and
documents in a court of competent jurisdiction.
(b) Each party shall pay one-half (1/2) of Escrow
Agent's fees and incurred expenses, if any. Said return of
funds and/or documents shall not affect the right of Buyer
to obtain the specific performance hereof or the demand of a
party to recover from the other party for breach of this
contract (including, but not limited to, recovery of any
sums paid pursuant to the preceding sentence).
6. OBLIGATIONS AND DISCLOSURES
---------------------------
6.1 Escrow Non-Liability. Escrow Agent shall have
--------------------
no concern with or liability or responsibility for this
Section.
6.2 Investigation. Buyer represents and warrants
-------------
that it has conducted investigations and employed
consultants as it has deemed necessary to investigate the
Property to determine its suitability for the development.
Buyer acknowledges that on or prior to the Closing Date,
Buyer has, or will have, examined and approved all things
concerning the Property which Buyer deems material to its
purchase and the use, development and resale of the
Property, including, but not limited to, topography,
geology, condition of the soil, condition of title to the
Property, availability and capacity of utilities and
sanitary facilities including, without limitation, water,
sewer, electricity, gas, telephone, cable television,
suitability for intended use, feasibility of development,
zoning, availability of fire and police protection, the
possibility of moratoria, governmental land use regulations,
and the feasibility and availability of building permits and
other entitlements from any governmental agency for the
development of the Property. Buyer understands and agrees
that Seller does not, in any respect, guaranty, warrant or
represent that any development of the Property will be
permitted. Buyer shall accept the Property in an "as is,
where is" condition. Buyer warrants and represents that
Buyer is purchasing the Property solely in reliance on
Buyer's own investigation. The representations and
warranties contained in this Section 6.2 only extend to the
representations and warranties made by Buyer and Seller, and
not to other persons or business entities.
6.3 Right of Entry. During the term of the escrow,
--------------
Buyer and its representatives, agents and independent
contractors shall have the right to enter onto the Property
for the purpose of obtaining any and all information
regarding the Property as Buyer deems appropriate,
including, but not by way of limitation, engineering and
survey studies and soils tests. Buyer agrees to and does
hereby hold Seller harmless from and against any loss,
<PAGE>
liability or damage resulting from the activities of Buyer,
its representatives, agents and independent contractors, or
anyone acting pursuant to authorization from Buyer, in
relation to the Property, and from and against any
mechanics' liens or claims of lien resulting therefrom;
provided, however, that Buyer shall not be liable or
responsible for damage to the Property which is reasonably
necessary to the investigation of its physical
characteristics, including soils tests and surveying. Buyer
shall, however, at its sole cost and expense, return the
Property as nearly as is practicable to its physical
condition immediately prior to his activities thereon and
shall repair any physical damage resulting from its
activities thereon.
6.4 Disclosure. Seller hereby discloses that during
----------
its ownership a three (3) bedroom home on the Property was
demolished and most of the debris hauled off the Property.
One small portion of the home, along with approximately six
(6) old cars, were flattened and bulldozed into a canyon and
are visible. Seller further discloses that San Diego County
may, at some future date, realign Dehesa Road, the route of
which will go through the Property. Buyer shall satisfy
itself as to this realignment, together with any and all
utility services and the costs for obtaining such services
for the Property. Seller further discloses that in 1989
Seller received notice of certain materials on the Property
in the nature of toxic and hazardous waste. Hazardous
Materials were discovered on the Property and the County of
San Diego sent a notice to Seller to remove said Materials.
To the best of Seller's knowledge, all of such materials
were removed from the Property and disposed of as provided
by law.
6.5 Right of Inquiry. During the term of this
----------------
escrow, Buyer and its representatives, employees, agents and
independent contractors shall have the right to (a) meet
with all city, county, district and other governmental
entities and agencies, and with all persons or other
entities with whom Seller or others have contractual
arrangements in connection with or relating to the Property;
(b) discuss with any such entities, agencies or persons the
terms of this Agreement, the terms of any contractual
arrangements between Seller and any such entity, agency or
person and Buyer's proposed development of the Property; and
(c) make any applications to the California Department of
Real Estate or any other governmental agency, provided the
same will not, in the event escrow does not close, commit
Seller or the Property to any matter so applied for.
6.6 Hazardous Materials. Except as provided in
-------------------
Section 6.4, above, Seller warrants that it has no actual
knowledge of the existence of Hazardous Materials on the
Property. Buyer represents and warrants that prior to the
Closing Date, Buyer shall exercise due diligence in
investigating whether the Property contains any Hazardous
Material. Buyer acknowledges that Buyer will have relied on
its own examination, knowledge and expertise with respect to
a toxic survey and its own investigation and survey of the
Property with respect to Hazardous Materials.
<PAGE>
As a material inducement to Seller, without which
Seller would not have agreed to sell the Property to Buyer
on the terms set forth herein, Buyer, for itself and its
partners, employees, agents, attorneys, shareholders,
successors and assigns (collectively, "Releasing Parties"),
hereby fully and forever releases Seller, and each of
Seller's partners, employees, agents, attorneys,
shareholders, successors and assigns ("Released Parties"),
from any and all present or future liability, claims,
demands, actions, causes of action and rights (contingent,
accrued, inchoate, or otherwise) of any kind, whether
currently known or not ("Claims"), which Buyer may have
against any of the Released Parties, arising out of or
connected in any way with the actual or alleged presence,
use, generation, storage, transportation, release or
discharge of Hazardous Materials on, beneath, above, or in
the vicinity of the Property.
Buyer waives and releases Seller from any and all
present or future Claims it may have against the Released
Parties arising under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any other federal, state or local law,
whether statutory or common law, ordinance or regulation,
pertaining to the presence, use, generation, storage,
transportation, release, discharge, or cleanup (including
paying the costs thereof) of Hazardous Materials on,
beneath, above, or in the vicinity of the Property. In
connection with the foregoing releases, Buyer expressly
waives all rights and benefits under California Civil Code
section 1542, which provides as follows:
"A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time of executing the
release, which if known by him must have
materially affected his settlement with the
debtor."
Buyer represents that it has had the opportunity to discuss
the meaning and effect of this waiver with legal counsel.
Buyer warrants that this waiver is informed, knowing and
voluntary.
6.7 Additional Consideration. Buyer and Seller
------------------------
acknowledge that as additional consideration for this
Agreement, Buyer shall convey to Seller thirty-two (32)
interment plots in the manner provided by law, without cost,
and to Rob Hemingway sixteen (16) interment plots, without
cost, for which Escrow Agent shall have no concern or
liability. Such conveyances to be delivered to Seller and
to Rob Hemingway not later than thirty (30) days after
dedication of the Property for cemetery purposes, such plots
to be selected based on the mutual agreement of Seller,
Buyer and Rob Hemingway, respectively.
7. SELLER'S DELIVERIES TO ESCROW
-----------------------------
Seller shall deliver to Escrow Agent, prior to the
Closing Date, the Grant Deed on Escrow Agent's usual form,
conveying the Property to Buyer, executed and acknowledged by
Seller and/or such other persons as the title insurer may
require in order to issue the title policy.
8. BUYER'S DELIVERIES TO ESCROW
----------------------------
Buyer shall deliver to Escrow Agent, prior to the
Closing Date, the following: (a) cash pursuant to Section
2.1.A; (b) Deferred Balance Promissory Note; and (c) such
sums as are necessary to pay Buyer's escrow and other
charges pursuant to Section 11. All such documents shall be
fully executed, and if to be recorded, shall also be
acknowledged.
9. CLOSE OF ESCROW
---------------
Escrow shall close on or before February 3, 1995
("Closing Date"), as provided in this Agreement.
10. THE CLOSING
-----------
10.1 Closing Procedure. Escrow Agent shall close
-----------------
the escrow by recording the following documents in the
following order: (a) Grant Deed; (b) Deferred Balance Deed
of Trust; (c) such other documents as may be necessary to
procure the title policy; and (c) delivering funds and
documents as set forth in the Section entitled "Escrow
Agent's Delivery of Funds and Documents" if, AND ONLY IF,
each of the following conditions has been satisfied:
10.1.1 Delivery of Funds and Instruments. All funds
and instruments described in Sections 7 and 8 have been
delivered to Escrow Agent.
10.1.2 Satisfaction of Conditions. The condition set
forth in Section 5.1.1 has been, or upon such closing shall
be, satisfied or waived.
10.1.3 Title Policy. Escrow Agent has procured
Stewart Title Company of San Diego's CLTA policy of title
insurance with liability in the amount of the Purchase
Price, insuring that fee title to the Property vests in
Buyer, subject only to non-delinquent city and county
general and special taxes, and the matters pursuant to
Section 5.1.1. Buyer shall have the option to specify the
substitution of an ALTA policy instead of a CLTA policy by
giving written notice to Seller and Escrow Agent, provided
the same does not delay the close of escrow.
10.2 Early Closing. If all the conditions set forth
-------------
in Sections 10.1.1 through 10.1.3 become satisfied at a date
earlier than the Closing Date, Escrow Agent shall so close
the escrow at such earlier date.
10.3 Failure to Close - Termination. If Escrow Agent
------------------------------
cannot close the escrow on or before the Closing Date, the
escrow shall be terminated and Escrow Agent shall comply
with Section 10.3.1.
10.3.1 Procedure on Termination. In the event of
such termination, (a) Escrow Agent shall return to each
party the funds and documents deposited by such party,
<PAGE>
unless Escrow Agent decides (in its uncontrolled discretion)
the protection of its interest requires otherwise; and
(b) each party shall pay one-half (1/2) of Escrow Agent's
fees and incurred expenses, if any.
10.3.2 Effect of Termination. Said return of funds
and/or other documents shall not affect the right of Buyer
to obtain the specific performance hereof, or the demanding
party to recover against the other party for breach of this
contract (including, but not limited to, recovery of any
sums paid pursuant to Section 10.3.1).
11. PRORATION, FEES AND COSTS
-------------------------
11.1 Taxes. Escrow Agent will prorate (i.e.,
-----
apportion) between the parties, in cash, to the close of
escrow, only county, city and special district (if any)
taxes, based on the latest information available to Escrow
Agent.
Escrow Agent shall not be liable or responsible for
the proration or collection of supplemental taxes, if any,
assessed pursuant to Chapter 498 of Stats. 1983 of the State
of California.
11.2 Basis of Proration. Prorations will be made on
------------------
the basis of a thirty (30) days month.
11.3 Seller's Payment of Charges and Fees. Seller
------------------------------------
will pay (a) county Documentary Transfer Tax, in the amount
Escrow Agent determines to be required by law; (b) the CLTA
title policy premium; (c) one-half (1/2) of Escrow Agent's
fee; (d) fees for beneficiaries' statements; (e) usual
Seller's document-drafting and recording charges; and
(f) user tax, if any.
11.4 Buyer's Payment of Charges and Fees. Buyer will
-----------------------------------
pay (a) one-half (1/2) of Escrow Agent's fee; and (b) usual
Buyer's document-drafting and recording charges. If Buyer
elects to require an ALTA policy of title insurance, Buyer
shall pay the difference in cost only between the cost of
the CLTA policy title premium and the ALTA title policy
premium.
12. ESCROW AGENT'S DELIVERY OF FUNDS AND DOCUMENTS
----------------------------------------------
12.1 Recordation of Documents. Escrow Agent will
------------------------
cause the County Recorder of San Diego County to mail the
Grant Deed (and each other document which is herein
expressed to be, or by general usage is, recorded) after
recordation to the grantee or beneficiary acquiring rights
under said document.
12.2 Delivery of Documents. Escrow Agent will, at
---------------------
close of escrow, deliver by United States Mail (or will hold
for personal pickup, if requested) each non-recorded
document received hereunder by Escrow Agent to the payee
acquiring rights under said document.
<PAGE>
12.3 Delivery of Funds. Escrow Agent will, at the
-----------------
close of escrow, deliver by United States Mail (or will hold
for personal pickup, if requested) (a) to Seller, or order,
any funds and documents Seller will be entitled to; and
(b) to Buyer, or order, any excess funds theretofore
delivered to Escrow Agent or Buyer.
12.4 Conformed Copies. Escrow Agent will, following
----------------
the close of escrow, deliver to Buyer and Seller a copy
(conformed to show recording date[s]) of the Grant Deed, and
each document recorded to place title in the condition
required by this Agreement.
12.5 Tax Stamps. Escrow Agent will, following the
----------
recording of the Grant Deed, place documentary transfer tax
stamps on said Deed.
13. SELLER'S WARRANTIES
-------------------
13.1 Authority. Seller warrants that it has the
---------
authority to enter into this Agreement, and that it knows of
no actions, claims, claims for possession, including adverse
possession, or litigation pending concerning the Property as
of the date of this Agreement. Seller will advise Buyer if
it becomes aware of any such actions, claims, claims for
possession, or litigation concerning the Property after the
date of this Agreement.
13.2 Notice of Violation. Except as provided in
-------------------
Section 6.4, Seller represents and warrants the following:
Seller has not received notice from any governmental agency
of any uncured violation of law or governmental regulation
affecting the Property, including those relating to
Hazardous Materials; and there are no off-record leases,
easements, encumbrances or claims affecting title,
possession or use as to any part of the Property known to
Seller.
13.3 Consent to Cemetery Use. Seller acknowledges
-----------------------
that Buyer is purchasing the Property for the development of
a cemetery, and that Buyer intends to dedicate the Property
for cemetery purposes as provided for in Health and Safety
Code section 8550, et seq. and sell interment plots. Seller
hereby agrees and warrants that, provided Buyer is not in
material default of this Agreement, Seller will consent to
the dedication of the Property for cemetery purposes and
will execute appropriate documents evidencing that consent
if and when presented therewith by Buyer. Seller further
consents to the immediate sale of interment plots by Buyer
in the ordinary course of business, subject only to the
limitation contained in the Promissory Note; provided,
further, that payments shall be made so that at no time will
the percent of the total purchase price paid, including a
credit of $238,000, ever be less than 1.3 times the
percentage of the total interment plots sold as of that
time.
14. BUYER'S WARRANTIES
------------------
14.1 Authority. Buyer warrants that it has the
---------
authority to enter into this Agreement.
<PAGE>
14.2 Completion of Pre-Closing Obligations. To the
-------------------------------------
extent that any of the pre-closing obligations set forth in
Section 8 have not been completed or performed prior to the
close or consummation of this escrow, the same shall remain
in full force and effect as post-closing obligations. In
addition to the foregoing, Buyer shall not unreasonably
withhold its approval or execution of any document required
to effectuate the foregoing.
15. SURVIVAL OF AGREEMENT
---------------------
To the extent that they constitute an agreement
between Seller and Buyer, the executory provisions of this
Agreement and the covenants of Buyer to Seller and Seller to
Buyer shall survive the close and consummation of this
escrow and shall remain in full force and effect.
16. ASSIGNMENT BY BUYER
-------------------
16.1 Seller's Approval Required. Buyer shall not
--------------------------
have the right or power to assign its rights hereunder
without first having obtained Seller's written approval.
Buyer, any such person or entity, or any such assignee,
shall, in writing, request Seller's written approval of any
proposed assignment, and such written request shall be
accompanied by (a) financial statements of the proposed
assignee, prepared by a certified public accountant in
accordance with generally accepted accounting principles, so
as to reflect the assignee's financial condition as of a
date not earlier than three (3) months prior to the date of
such written request; (b) a statement of the proposed
assignee's development experience; (c) a written agreement
executed by the assignee obligating the assignee to perform
the assignor's obligations hereunder; and (d) the proposed
agreement between Buyer and the assignee for the assignment
of this Agreement. Any such assignment shall be null and
void and of no effect unless it is accompanied by a written
agreement executed by the assignee obligating the assignee
to perform the assignor's obligations hereunder. Buyer
shall, no later than five (5) days prior to the Closing
Date, advise Escrow Agent and Seller of any such approved
assignment or such assignment shall be null and void and of
no effect. Approval of any one assignment shall not
constitute a waiver of Seller's right to approve or
disapprove any subsequent proposed assignment.
16.2 Effect of Assignment. In the event of any such
--------------------
approved assignment, the assignee shall be and become
obligated under the terms of this Agreement (i) the grantee
of the Seller's Grant Deed; (ii) the insured under the title
policy; (iii) the person(s) having the right or obligation
to (a) deliver statements, (b) deliver documents, (c) give
approvals, (d) waive conditions, or (e) make demands, all as
may be permitted or required by this Agreement.
16.3 Assignor's Liability. No assignment of Buyer's
--------------------
rights hereunder shall relieve the assignor of any of its
obligations hereunder.
17. REAL ESTATE COMMISSION
----------------------
The parties acknowledge the existence of a separate
Real Estate Commission obligation as set forth in an
agreement provided Escrow Company, the terms of which shall
<PAGE>
survive the Close of Escrow. As a matter of disclosure
LEONARD M. SMITH and GRACE A. SMITH are licensed California
real estate Licensees. The parties acknowledge that L. M.
Smith Realty Associates is the broker exclusively repre-
senting seller, and Golden Co./Rob Hemingway is the broker
exclusively representing Buyer. Notwithstanding the above,
Buyer warrants to Seller that the Buyer has incurred no
obligation for a real estate broker's or salesman's
commission by reason of this Agreement or the transaction
contemplated hereby for which Seller would be liable.
18. NOTICES
-------
Unless otherwise specifically provided herein, all
notices, demands, or other communications given hereunder
shall be in writing and shall be deemed delivered as of
actual personal delivery, or except as to Escrow Agent who
may use regular mail, as of the second business day after
mailing by United States registered or certified mail,
return receipt requested, postage prepaid, addressed as
follows:
If to Seller, to: Leonard M. Smith
8807 Grossmont Boulevard
La Mesa, CA 91941
If to Buyer, to: G. Robert Quist
California Memorial Estates, Inc.
5300 360 West, Suite 310
Salt Lake City, UT 84123
With a Copy to: Scott M. Quist
California Memorial Estates, Inc.
5300 360 West, Suite 310
Salt Lake City, UT 84123
And: Randall A. Mackey, Esq.
Mackey, Price & Williams
170 S. Main Street, Suite 900
Salt Lake City, UT 84101
If to Escrow Agent, to: Stewart Title Company of
San Diego
7676 Hazard Center Drive
San Diego, CA 92108
Attn: Juliette Martinez
or such other address, or to such other person, as any party
shall designate to the others for such purpose in the manner
hereinabove set forth.
19. EXTENT OF ESCROW AGENT'S RESPONSIBILITY
---------------------------------------
19.1 Escrow Agent Liability. Escrow Agent shall not
----------------------
be liable for any of its acts or omissions unless the same
shall constitute negligence or willful misconduct.
19.2 Informing Parties. Escrow Agent shall have no
-----------------
obligation to inform any party of any other transaction or
of facts within escrow Agent's knowledge, even though the
same concerns the Property, provided such matters do not
prevent Escrow Agent's compliance with this Agreement.
<PAGE>
19.3 Responsibility for Documents. Escrow Agent
----------------------------
shall not be responsible for (a) the sufficient or
correctness as to form or the validity of any document
deposited with Escrow Agent; (b) the manner of execution of
any such deposited document, unless such execution occurs in
Escrow Agent's premises and under its supervision; or
(c) the identity, authority, or rights of any persons
executing any document deposited with Escrow Agent.
19.4 Conflicting Demands and Claims. Should Escrow
------------------------------
Agent receive or become aware of conflicting demands or
claims with respect to the escrow, the rights of any party
hereto, or funds, documents, or property deposited with
Escrow Agent, Escrow Agent shall have the right to
discontinue any further acts until such conflict is resolved
to its satisfaction, and it shall have the further right to
commence or defend any action for the determination of such
conflict. The parties shall, immediately after demand
therefor by Escrow Agent, reimburse Escrow Agent (in such
respective proportions as the court shall determine) any
reasonable attorneys' fees and court costs incurred by
Escrow Agent pursuant to this Paragraph.
20. GENERAL PROVISIONS
------------------
20.1 Gender. The use herein of (a) the neuter gender
------
includes the masculine and the feminine; and (b) the
singular number includes the plural, whenever the context so
requires.
20.2 Possession. Escrow shall have no concern or
----------
liability for this matter. Possession of the subject
Property will be delivered to Buyer as of the close of
escrow.
20.3 Good Faith. Seller and Buyer agree to execute
----------
all such instruments and documents, and to take all actions
as may be required in order to consummate the purchase and
sale contemplated herein, and to use their best efforts to
accomplish the close of this escrow in accordance with the
provisions hereof.
20.4 Captions/Counterparts. Captions in this
---------------------
Agreement are inserted for convenience of reference only and
do not define, describe or limit the scope or the intent of
this Agreement, or any of the terms hereof. This Agreement
may be executed in counterparts, each of which shall be
deemed an original, and all of which shall constitute one
and the same instrument.
20.5 Escrow Defined. Whenever used in this
--------------
Agreement, the term "Escrow" shall mean the Escrow created
by this Agreement.
20.6 Cash Defined. Whenever used in this Agreement,
------------
the term"Cash" means currency, cashier's checks, or Federal
Funds wire transferred into Escrow Agent's bank account.
20.7 Exhibits. All exhibits referred to herein and
--------
attached hereto are a part hereof.
<PAGE>
20.8 Entire Agreement. Except for the additional
----------------
agreement referenced in Paragraphs 6.7 and 17, above, this
Agreement contains the entire agreement between the parties
relating to the transactions contemplated hereby, and all
prior or contemporaneous agreements, understandings,
representations and statements, oral or written, are merged
herein.
20.9 Modification. No modification, waiver,
------------
amendment, discharge or change of this Agreement shall be
valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver,
amendment, discharge or change is or may be sought.
20.10 Litigation. In the event either party
----------
commences litigation relating to or arising out of this
Agreement, including any action or proceeding for the
judicial interpretation, enforcement or rescission hereof,
the prevailing party shall be entitled to a judgment against
the other for an amount including reasonable attorneys' fees
and court and other costs incurred.
20.11 Successors. All terms of this Agreement shall
----------
be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective legal
representatives, successors, assigns, trusts and
beneficiaries thereof.
20.12 Construction. This Agreement shall be
------------
construed and enforced in accordance with the laws of the
State of California.
20.13 Survival. All obligations referred to herein
--------
to be performed at a time or times after the close of the
escrow, and all warranties and representations contained
herein, shall survive the close of the escrow and the
delivery of Seller's Grant Deed.
20.14 Time of Essence. Time is of the essence of
---------------
this Agreement.
20.15 Hazardous Materials. "Hazardous Materials"
-------------------
means flammable explosives, radioactive materials, hazardous
wastes, petroleum products, toxic substances and related
materials, including, but not limited to, those substances
defined as "hazardous substances," "hazardous materials," or
"toxic substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. section 9601, et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. section 1801, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
section 6901, et seq.; the California Hazardous Waste
Control Act and the Carpenter-Presley-Tanner Hazardous
Substance Account Act, California Health and Safety Code
section 25100, et seq., and section 25300, et seq.; the Safe
Drinking Water and Toxic Enforcement Act, California Water
Code Section 13000, et seq.; and in the regulations adopted
and publications promulgated pursuant to all such federal
and state laws.
<PAGE>
THIS AGREEMENT has been executed in San Diego,
California, as of the date set forth at the beginning
hereof.
"SELLER"
PAUL THOMAS CARTER and MAJEL L. CARTER,
as Co-Trustees of the CARTER FAMILY
TRUST U/D/T DATED MARCH 8, 1987;
LEONARD M. SMITH and GRACE A. SMITH, as
Co-Trustees of the LEONARD M. SMITH
FAMILY TRUST DATED SEPTEMBER 23, 1988
By:____________________________
By:____________________________
By:____________________________
By:____________________________
"BUYER"
CALIFORNIA MEMORIAL ESTATES, INC.,
a Utah corporation
By:_____________________________
SCOTT M. QUIST, First Vice President
By:_____________________________
WILLIAM C. SARGENT, Secretary
<PAGE>
94.10-GG
Note Secured by Purchase Price Deed of Trust
and Assignment of Rents with the Carter
Family Trust and the Leonard M. Smith Family Trust
<PAGE>
DO NOT DESTROY THIS NOTE. When paid, this Note, with Deed
of Trust securing same, must be surrendered to Trustee for
cancellation before reconveyance will be made.
NOTE SECURED BY PURCHASE PRICE DEED OF TRUST
AND
ASSIGNMENT OF RENTS
<TABLE>
<CAPTION>
<C> <S>
$1,062,000 San Diego, California
February 3, 1995
</TABLE>
For value received, the undersigned promises to pay in
installments as hereinafter stated to PAUL THOMAS CARTER and
MAJEL L. CARTER, Co-Trustees of the CARTER FAMILY TRUST
U/D/T DATED MARCH 8, 1987; LEONARD M. SMITH and GRACE A.
SMITH, as Co-Trustees of the LEONARD M. SMITH FAMILY TRUST
DATED SEPTEMBER 23, 1988, or order, at 8807 Grossmont
Boulevard, Le Mesa, California 91941, or such other place as
the holder thereof may from time to time direct payor in
writing, the principal sum of One Million and Sixty-Two
Thousand Dollars ($1,062,000), together with interest
thereon, at the rate of Nine Percent (9%) per annum, and
payable as hereinafter provided;
Twelve (12) equal monthly payments of Five
Thousand Dollars ($5,000) shall be made, which
said payments shall be applied only to principal
with the first payment due on March 3, 1994, and
the remaining eleven (11) payments due on the 3rd
of each of the next successive eleven (11)
months.
Thereafter, equal monthly payments of principal
and interest shall be made in the amount of Ten
Thousand Dollars ($10,000) per month with the
first payment due on March 3, 1996, and
continuing on the 3rd day of each successive
month thereafter until the full amount of
principal and interest is paid.
Interest shall not accrue on any portion of the
unpaid balance until February 3, 1996.
A principal payment of One Hundred Thousand
Dollars $100,000.00) is to be made on or before
either (a) fifteen (15) days after the date the
California Cemetery Board issues approval of
Buyer's application for Certificate of Authority,
or (b) February 3, 1996, whichever occurs first.
Notwithstanding the above, all accrued and unpaid interest
and all unpaid principal shall be due and payable no later
than the date by which seventy-five percent (75%) of all
individual interment plots are sold.
The privilege is hereby reserved to make, at any time(s),
without penalty or charge, additional principal payments.
Any additional principal payments paid shall be credited to
the next following principal installment(s) due hereunder.
<PAGE>
In the event of default in making any installments or
payment required hereunder, the whole sum of principal and
accrued interest shall, at the option of the holder hereof,
and without necessity of notice or demand of any kind, be
and become immediately due and payable.
Time is of the essence hereof. Principal and interest shall
be due and payable in lawful money of the United States of
America. Every party who is now or hereafter becomes liable
for the payment of this Note waives diligence, presentment,
protest, demand for payment, notice of protest, dishonor and
notice of nonpayment of this Note, and expressly agrees that
this Note, or any payment hereunder, may be extended from
time to time, and consents to the acceptance of further
security for this Note, all without in any way affecting the
liability of any such party.
If the holder of this Note either (i) refers it to an
attorney for collection, (ii) seeks legal advice following a
default under this Note or under the Deed of Trust, or other
security agreement(s) securing this Note, (iii) commences an
action on this Note or the Deed of Trust or other security
agreement(s) securing this Note, including, but not limited
to, judicial or trustee's power-of-sale foreclosure, (iv)
engages an attorney to appear in any judicial action or
nonjudicial proceeding commenced by any person (a) in a
federal bankruptcy proceeding brought by or against payor,
or its successor in ownership of the property encumbered by
the Deed of Trust securing this Note, (b) for condemnation
of any part of the property so encumbered, (c) in connection
with any state or federal tax lien claimed against the
property so encumbered, or (d) involving mechanics' or
materialmen's liens or stop notices claimed with respect to
the property so encumbered, or (v) engages an attorney to
enforce an assignment of rents on property mortgaged,
pledges or otherwise, serving as security for this Note by
the appointment of a receiver, or otherwise, then, in any of
such events, the undersigned, and each person who assumes
the obligations evidenced hereby or who becomes the owner of
any security for this Note, promises to pay reasonable
attorneys' fees for services performed by the holder's
attorney, and all costs and expenses incurred incident to
such engagement.
This Note is secured by a Purchase Price Deed of Trust and
Assignment of Rents of even date herewith to Stewart Title
Company of San Diego, Trustee.
The Deed of Trust contains provisions for the acceleration
of the Maturity Date hereof upon the occurrence of certain
stated events, including, without limitation, any sale,
transfer, hypothecation, assignment, whether voluntary,
involuntary, or by operation of law, of all or any part of
the property described in the Deed of Trust, or any interest
in that property, other than the sale or transfer of
individual interment plots occurring in the ordinary course
of business, or other than as expressly permitted by Payee
in writing.
CALIFORNIA MEMORIAL ESTATES, INC.
a Utah corporation
By: Scott M. Quist, First Vice President
<PAGE>
94.10-HH
Deed of Trust and Assignment of Rents with the
Carter Family Trust and the Leonard M. Smith Family Trust
<PAGE>
RECORDING REQUESTED BY
WHEN RECORDED,
PLEASE MAIL THIS INSTRUMENT TO:
Worley, Schwartz, Garfield & Rice
Attn: Robert Rice, Esq.
401 "B" St.,
San Diego, CA 92101-4245
ESCROW NO C1042883
TITLE NO 06-148596
- ------------------------------------------------------------------------------
APN: 512-110-03 & 06
DEED OF TRUST AND ASSIGNMENT OF RENTS.
THIS DEED OF TRUST, made this 1st day of February, 1995,
between CALIFORNIA MEMORIAL ESTATES, A UTAH CORPORATION
herein called TRUSTOR, whose address is 5300 South 360
West, Salt Lake City, Utah 84123
STEWART TITLE COMPANY OF SAN DIEGO, a California
Corporation, herein called TRUSTEE and SEE RIDER ATTACHED
herein called BENEFICIARY:
Witnesseth: Trustor hereby grants to Trustee, in trust,
with power of sale, all that real property in the County of
San Diego, State of California, described as:
THE SOUTH HALF OF THE SOUTHWEST QUARTER, EXCEPT THE SOUTH
218 FEET THEREOF, AND THE NORTHEAST QUARTER OF THE SOUTHWEST
QUARTER OF SECTION 9, TOWNSHIP 16 SOUTH, RANGE 1 EAST, SAN
BERNADINO MERIDIAN, IN THE COUNTY OF SAN DIEGO STATE OF
CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF
together with all appurtenances in which Trustor has any
interest, including water rights benefiting said real
property whether represented by shares of a company or
otherwise: and,
FOR THE PURPOSE OF SECURING: (1) Performance of each
agreement of Trustor incorporated by reference or contained
herein: (2) payment of one promissory note of even date
herewith made by Trustor, payable to Beneficiary, or order,
in the principal sum of $1,062,000.00; (3) payment of such
additional sums as may from time to time be hereafter
borrowed from the Beneficiary or his successors in interest
by the then record owner of said real property when
evidenced by endorsement on the reverse side of the existing
note or notes, or, by another promissory note or notes, with
each additional advance denoted by endorsement on the Deed
of Trust and each prior note.
To protect the security of this Deed of Trust, Trustor
agrees by the execution and the delivery of this Deed of
Trust, and the notes secured hereby that the provisions of
Section A, including paragraphs 1 to 5 thereof, and
<PAGE>
the provisions of Section B, including paragraphs 1 to 9
thereof, of that certain Fictitious Deed of Trust recorded
on November 22, 1972, as Document No. 313530 of Official
Records, in the office of the County Recorder of San Diego
County, California, shall be and they are hereby
incorporated herein and made an integral part hereof for all
purposes as fully as though set forth herein at length; and
that the reference to lands, obligations, and parties in
said provisions shall be construed to refer to the lands,
obligations and parties set forth in this Deed of Trust. A
copy of said provisions is printed on the reverse side of
this Deed of Trust. Beneficiary or its agent may make such
changes as is allowed by law for the furnishing of a
Beneficiary's Statement showing the status of principal,
interest, and payments due on the note secured hereby. The
undersigned Trustor requests that a copy of any notice of
default and any notice of sale hereunder be mailed to him at
his address hereinafter set forth.
If the trustor shall sell, convey or alienate said property
or any part thereof, or any interest therein, or shall be
divested of his title or any interest herein in any manner
or way, whether voluntarily or involuntarily, without the
written consent of the beneficiary being first had and
obtained, beneficiary shall have the right, at its option,
to declare any indebtedness or obligation secured hereby,
irrespective of or the maturity date specified in any note
evidencing the same, immediately due and payable. Provided,
however, that this acceleration provision shall not apply to
the sale of interment plots in the ordinary course of
business. Provided, further that the Note shall be fully
paid prior to 75% of all the interment plots being sold.
Payment on the Note shall be made so that no time will the
percentage of the total purchase price paid, including a
credit of $238,000, ever be less than 1.3 times the
percentage of the total interment plots sold as of that
time.
Disbursements shall be deemed to be a portion of the expense
of this Trust, and secured hereby, and Trustor agrees to pay
immediately and without demand, all sums so expensed by
Beneficiary or Trustee, with interest from date of
expenditure at seven percent per annum.
IT IS MUTUALLY AGREED THAT:
(1) Should the property hereinbefore set forth ever become
subject to any lien for the purpose of securing the payment
of any taxes levied upon personal property of any kind or
character other than household goods and furniture located
in and/or situated on said real property above described,
then the Beneficiary shall have, and is hereby given the
right, to his option, to declare all sums secured hereby
immediately due and payable.
(2) Any award of damages in connection with any
condemnation for public use or injury to said property or
any part thereof is hereby assigned, and shall be paid to
<PAGE>
Beneficiary who may apply or release such moneys received by
him in the same manner and with the same effect as above
provided for disposition of proceeds of fire or other
insurance.
(3) By accepting payment of any sum secured hereby after
its due date, Beneficiary does not waive his right either to
require prompt payment when due of all other sums so secured
or to declare for failure so to pay.
(4) At any time, or from time to time, without liability
therefor, and without notice, upon written request of
Beneficiary and presentation of this Deed of Trust and the
note or notes secured thereby for endorsement, and without
affecting the personal liability of any person for payment
of the indebtedness secured hereby, Trustee may reconvey any
part of said property, and upon written request of
Beneficiary, stating that all sums secured thereby have been
paid, and upon surrender of this Deed of Trust and the note
or notes secured thereby to the Trustee for cancellation and
retention, and upon payment of its fees, Trustee shall
reconvey without covenant or warranty, the property then
held hereunder. The recitals in any such partial or full
reconveyance of any matters or facts shall be conclusive
proof of the truthfulness thereof. The grantee in any such
reconveyance may be described as "the person or persons
legally entitled thereto". Five years after issuance of a
full reconveyance, Trustee may destroy said note and this
Deed of Trust, unless directed in such request to retain
them.
(5) Upon endorsement of this Deed of Trust and the note or
notes secured thereby denoting any extension agreement; or
any agreement; or any agreement subordinating the lien or
charge of said Deed of Trust, or any agreement modifying the
note or notes secured by said Deed of Trust; or the deeding
of any easement on said property; or the making of any map
or plat of said property; the consent and joinder of the
Trustee in such subordination agreement, deed or map, shall
not be required.
(6) Upon default by Trustor in payment of any indebtedness
secured hereby or in performance of any agreement hereunder,
Beneficiary may declare all sums secured hereby immediately
due and payable by delivery to Trustee of written
declaration of default and demand for sale and of written
notice of default and of election to cause said property to
be sold, which notice Trustee shall cause to be filed for
record. Beneficiary also shall deposit with Trustee this
Deed of Trust, said note and all documents evidencing
expenditure secured hereby. After the lapse of such time as
may then be required by law following the recordation of
said notice of default, and notice of sale having been given
as then required by law, Trustee, without demand on trustor,
shall sell said property at the time and place fixed by it
in said notice of sale, either as a whole or in separate
parcels, and in such order as it may determine, at public
auction to the highest bidder for cash in lawful money of
the United
<PAGE>
States, payable at the time of sale. Trustee may, from time
to time, postpone the sale of all, or nay portion of said
property by the publication, prior to the date of sale so
advertised, of one notice of postponement in the same
newspaper or newspapers in which the original notice of sale
is so postponed, or is postponed in any other manner, or if
the sale for any reason is not held within one year from the
tie set for the first sale, the Trustee, at his election
shall have the right to again give notice of sale as then
required by law for an original sale. Trustee shall deliver
to such purchaser its deed conveying the property so sold,
but without any covenant or warranty, express or implied.
The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person,
including Trustor, Trustee or Beneficiary as herein defined,
may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and
of this Trust, including cost of title in connection with
sale, Trustee shall apply the proceeds of sale to payment of
all sums expended under the terms hereof, not then repaid,
with accrued interest at seven percent per annum; all other
sums then secured hereby; and the remainder, if any, to the
person or persons legally entitled thereto.
(7) Beneficiary may from time to time, by instrument in
writing, substitute a successor or successors to any Trustee
named herein or acting hereunder; which instrument when
executed, acknowledged and recorded in the office of the
Recorder of the county or counties where said property is
situated, shall be conclusive proof of proper substitution
of such successor Trustee or Trustees, who shall, without
conveyance from the Trustee predecessor, succeed to all its
title, estate, rights, powers and duties. Said instrument
must contain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Deed of
Trust is recorded, and the name and address of the new
Trustee. If notice of default shall have been recorded,
this power of substitution cannot be exercised until after
the costs, fees and expenses of the then acting Trustee
shall have been paid to such Trustee, who shall endorse
receipt thereof upon such instrument of substitution. The
procedure herein provided for substitution of Trustees shall
be exclusive of all other provisions of substitution,
statutory or otherwise.
(8) This Deed of Trust applies to, inures to the benefit
of, and binds all parties hereto, their heirs, legalese,
devisees, administrators, executors, successors and assigns.
The term "Beneficiary" shall mean the owner and holder,
including pledgees, of the note secured hereby, whether or
not named as Beneficiary herein. In this Deed of Trust,
whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number
includes the plural.
(9) Trustee accepts this Trust when this Deed of Trust,
duly executed and acknowledged is made a public record as
provided by law. Trustee is not obligated to notify any
party hereto of a pending sale under any other Deed of
Trustor of any action or proceeding in which Trustor,
Beneficiary or Trustee shall be a party unless brought by
Trustee.
State of Utah
County of Salt Lake
On January 31, 1995 before me, Diana C. Olson,
Notary Public
personally known to me - OR - [ ] proved to me on the
basis of satisfactory evidence
to be the person(s) whose
name(s) is/are subscribed to
the within instrument and
acknowledged to me that
he/she/they executed the same
in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on
the instrument the person(s),
or the entity upon behalf of
which the person(s) acted,
executed the instrument.
WITNESS my hand
and official seal:
Diana C. Olson
<PAGE>
94.10-II
Stock Insurance Agreement with Greer-Wilson
Funeral Home, Inc. and Page E. Greer
<PAGE>
STOCK ISSUANCE AGREEMENT
by and among
SECURITY NATIONAL FINANCIAL CORPORATION
and
GREER-WILSON FUNERAL HOME, INC.
AND PAGE E. GREER
Providing for the issuance of 97,800 shares of
Common Stock of Greer-Wilson Funeral Home, Inc.
March 8, 1995
<PAGE>
STOCK ISSUANCE AGREEMENT
THIS STOCK ISSUANCE AGREEMENT (the "Agreement") is made and
entered into effective as of this 8th day of March, 1995, by
and among Security National Financial Corporation, a Utah
corporation ("SNFC"), Greer-Wilson Funeral Home, Inc., an
Arizona corporation (the "Company") and Page E. Greer
(hereinafter "Greer").
W I T N E S E T H:
WHEREAS, SNFC desires to receive from the Company, and the
Company desires to issue to SNFC 97,800 newly issued and
authorized shares of Common Stock of the Company, no par value
(the "Shares"), representing after the issuance of such Shares
97.8% of the total issued and outstanding shares of Common
Stock of the Company; and
WHEREAS, Page E. Greer is currently the President and a
director of the Company;
NOW THEREFORE, in consideration of the premises and the mutual
and dependent promises hereinafter contained, the parties
hereto do represent, warrant, covenant and agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Issuance of Shares. The Company agrees to issue and
------------------
deliver to SNFC the shares upon the terms and conditions
described in this Article.
1.2 Agreement to Consummate Transactions. Subject to the
------------------------------------
terms and conditions of this Agreement, SNFC and the Company
agree to consummate or cause to be consummated the transaction
contemplated by Paragraphs 1.3 through 1.9 of this Agreement
(the "Transaction").
1.3 Board of Director Approval. SNFC will submit to its
--------------------------
Board of Directors for approval this Agreement at a meeting to
be held on or before March 8, 1995, or on such later date as
may be agreed to by the parties. This Agreement must be
approved without condition by the Board of Directors of SNFC
at such meeting as a condition precedent to SNFC's obligations
under this Agreement.
1.4 Closing. The Closing with respect to the Transaction
-------
shall be held on March 8, 1995, at 4:00 p.m., local time at
the offices of Farley, Robinson & Larsen, 100 West Clarendon,
Suite 200, Phoenix, Arizona, or at such earlier or later time
and such place as may be agreed upon by the parties, such time
being referred to herein as "Closing."
1.5 Contribution of Capital. In consideration for the
-----------------------
issuance of the Shares to SNFC at the Closing, SNFC agrees (i)
to contribute $430,000 to the Company for the payment of the
accounts payable, including preneed deposits, as set forth in
Schedule 1.5 hereof (the "Accounts Payable") or to assume
payment of the Accounts Payable, and (ii) to pay, renegotiate,
bring current or refinance the Company's existing mortgage
loan indebtedness.
<PAGE>
1.6 Issuance of Shares. The Company agrees to issue and
------------------
deliver to SNFC the Shares consisting of 97,800 shares of the
Company's Common Stock. At the Closing Date, the Company will
deliver the stock certificate representing the Shares to SNFC.
1.7 Condition Precedent to SNFC's Obligations. The Company
-----------------------------------------
shall furnish to SNFC a description of the real and personal
properties owned by the Company.
1.8 Conditions Precedent to the Company's Obligations.
-------------------------------------------------
Prior to Closing, SNFC shall furnish to the Company the
following:
(a) None.
1.9 Consummation of Transaction. If at the Closing no
---------------------------
condition exists which would permit any of the parties to
terminate the Agreement or a condition then exists and the
party entitled to terminate because of that condition elects
not to do so, then the Transaction shall be consummated on
such date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND GREER
The Company and Greer represent, warrant and agree as follows:
2.1 Corporate Existence. The Company is a corporation duly
-------------------
organized, validly existing and in good standing under the
laws of the State of Arizona, having full corporate power and
authority to own all its respective properties and to carry on
its business as it is now being conducted.
2.2 Subsidiaries. The Company has no subsidiaries or equity
------------
interest in other corporations except as set forth on Schedule
2.2.
2.3 Capital Stock of Greer-Wilson Funeral Home. The Company
------------------------------------------
has an authorized capital stock consisting of 100,000 shares
of common stock, no par value, of which 2,200 shares are
issued and outstanding, fully paid and nonassessable. The
Company does not have outstanding any options or warrants to
purchase, or contracts to issue, or contracts or any other
rights entitling anyone to acquire securities convertible into
shares of its capital stock.
2.4 Financial Statements by the Company. Attached hereto
-----------------------------------
and incorporated herein by this reference as Exhibits A and B,
respectively, is the Company's financial statements for the
year ended March 31, 1994, and the Company's most current
financial statement reflecting the period from April 1, 1994
to September 30, 1994 (the "Interim Statement"), including a
balance sheet and statement of operations. To the best of
Greer's and the Company's knowledge, the foregoing financial
statements fairly reflect the condition of the Company as of
the time of such statements, and shall not contain any
materially false statements of fact or omit to state a fact
necessary to make the statements set forth therein not
misleading in light of the circumstances under which such
statements are made.
<PAGE>
2.5 Timely Tax Filing. In respect of these matters which
-----------------
materially affect the operations of the Company or the value
of its assets, and to the best of Greer's and the Company's
knowledge, the Company has filed all federal, state and local
tax returns required to be filed by it and has paid all
federal, state and local taxes required to be paid with
respect to the periods covered by such returns, except for the
property taxes that are due and owing on certain real property
owned by the Company. Except for such unpaid personal and
real property taxes, the Company is not delinquent in the
payment of any tax assessment, or government charge, nor does
the Company have any tax deficiencies proposed or assessed
against it, and the Company has not executed any waiver of the
statute of limitations on the assessment or collection of any
tax.
2.6 Assets Free of Encumbrances. Except as set forth in
---------------------------
Schedule 2.6, and to the extent that ownership of any of the
following is material to the operations of the Company or the
value of its assets, to the best of Greer's and the Company's
knowledge, the Company owns free and clear of any lien, claim,
charge, option or encumbrance all the property reflected in
its September 30, 1994 balance sheet and the Interim Statement
to be included as Exhibit B hereof and all the property
acquired by it since such dates, except such property as has
been disposed of by it in the ordinary course of business.
2.7 Litigation. Except as set forth in Schedule 2.7 and
----------
Exhibit C, attached hereto and incorporated herein by this
reference, there are no actions, suits or proceedings pending
or, to the best of Greer's and the Company's knowledge,
threatened against or affecting the Company, including any of
its properties, or any aspect of its business, which may
materially affect the operations of the Company or the value
of its assets, and the Company is not charged with or, to the
best of Greer's and the Company's knowledge, under
investigation with respect to any violation of any provisions
of any federal, state or local law or administrative rule or
regulation.
2.8 Corporate Transactions. Except for contracts referred
----------------------
to in Schedule 2.8 and Exhibit C hereto, to the best of
Greer's and the Company's knowledge, the Company is not a
party or subject to (i) any agreement with any officer,
director, consultant or employee which is not terminable by it
at a cost not in excess of one month's salary or wages, (ii)
any contract or agreement with any labor union, (iii) any
lease with respect to any property, real or personal, which is
not terminable by it on not more than 30 days notice, (iv) any
license agreement, whether as licensor or licensee, (v) any
contract or agreement for the purchase of any commodity,
material, or equipment not in the ordinary course of business,
except such purchase orders for less than $500 each, such
orders not exceeding $5,000 in the aggregate, (vi) any
contract or agreement entered into otherwise than for the sale
of its products in the ordinary course of business, (vii) any
contract or agreement including an expenditure by the Company
not in the ordinary course of business and more than $1,000,
(viii) any contract or agreement which is not terminable by it
on not more than 90 days' notice, or (ix) any contract or
agreement not assignable without the consent of some other
person or party.
<PAGE>
2.9 No Contingent Liabilities. To the best of Greer's and the
-------------------------
Company's knowledge, and to the extent the following may be
material to the operations or value of assets of the Company,
there are no liabilities of the Company contingent or
otherwise, whether or not accrued or accruable and whether or
not determined or determinable, other than liabilities which
are reflected or for which an adequate reserve has been
provided on the September 30, 1994 balance sheet and the
Interim Statement of the Company as reflected in this
Agreement and other than liabilities incurred by the Company
in the ordinary course of business since such dates.
2.10 Financial Condition. Except as set forth in Schedule
-------------------
2.10 and Exhibit C hereto, to the best of Greer's and the
Company's knowledge, since the date of the Interim Statement
there has not been:
(a) Any material adverse change in the financial condition,
assets, liabilities, business or operations of the Company
other than changes in the ordinary course of its business,
none of which has been materially adverse;
(b) Any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any property
or the business of the Company;
(c) Any declaration, setting aside, or payment of a dividend
or other distribution in respect of the capital stock of the
Company or other direct or indirect redemption, purchase or
other acquisition of any of its stock;
(d) Any increase in the rate of compensation payable or to
become payable by the Company to any of its officers,
employees or agents over the rates in effect other than
general increases to personnel made in accordance with past
practice;
(e) Any disposition, mortgage, pledge, or subjection to any
lien, claim, charge, option or encumbrance of any property or
asset of the Company, any commitment or any liability incurred
by the Company or any cancellation or compromise of any debt
or claim of the Company, which would materially and adversely
affect the properties or the business of the Company.
(f) Any discharge or satisfaction by the Company of any lien,
claim, charge, option or encumbrance or payment by it of any
obligation or liability which was not incurred in the ordinary
course of its business; or
(g) Any waiver of any right of the Company of substantial
value.
2.11 No Finder's Fee. Neither the Company nor Greer has
---------------
employed any broker, finder or agent or incurred any brokerage
commission, finder's fee or agency commission in connection
with the Transaction contemplated by this Agreement.
<PAGE>
2.12 Authority. The Company has the full power and authority
---------
to carry out the terms of this Agreement and has taken all
requisite action to authorize the execution and delivery of
all documents that may be required to complete the
Transaction. This Agreement has been duly executed and
delivered by the Company and is enforceable against the
Company in accordance with its terms.
2.13 List of Contracts. To the best of Greer's and the
-----------------
Company's knowledge, Schedule 2.13 and Exhibit C hereto
contain a list of all material contracts (including a form of
each kind of preneed contract), together with their expiration
dates, to which the Company is a party. The Company and Greer
have furnished to SNFC a list of all preneed contracts,
including the name of each owner and the date of the contract.
2.14 Collective Bargaining Agreements. The Company is not a
--------------------------------
party or bound by any collective bargaining agreement or other
labor agreement with any bargaining agent (exclusive or
otherwise) of any of its employees.
2.15 Overtime, Back Wage, Vacation and Discrimination Claims.
-------------------------------------------------------
Except as described in Schedule 2.15 and Exhibit C hereto, to
the best of Greer's and the Company's knowledge, no present or
former employee of the corporation has any claim against the
Company (whether under federal or state law, under employment
agreement, or otherwise) on account of or for (i) overtime
pay, other than overtime pay done in the current payroll
period; (ii) wages or salary for any period other than the
current payroll period; (iii) any material violation of any
statute, ordinance or regulation relating to minimum wages or
maximum hours of work; (iv) vacation, personal, or sick pay;
or, (v) wrongful termination of employment or breach of
employment agreement. No person or party (including but not
limited to governmental agencies of any kind) has filed, or to
the knowledge of the Company, has threatened to file any claim
against the Company under or rising out of any statute,
ordinance or regulation relating to discrimination of
employment or employment practices.
2.16 Profit Share Arrangements, Bonuses. To the best of
----------------------------------
Greer's and the Company's knowledge, the Company is not a
party to or obligated by any contract, agreement or
undertaking by the terms of which any person, firm,
corporation, business trust or other entity is or may be
entitled to share in the gross receipts, earnings or profits
of the Company.
2.17 Pension and Other Deferred Compensation. To the best of
---------------------------------------
Greer's and the Company's knowledge, the Company has no
pension or retirement income plan, contract or arrangement in
force. The Company has no deferred compensation contracts or
arrangements with any person or party whatsoever or any
residual liability under any such plan.
2.18 Benefit Claims. To the best of Greer's and the
--------------
Company's knowledge, no person has any material claim under
which the Company has any material liability under any health,
sickness, disability, medical, surgical, hospital, or similar
<PAGE>
benefit plan or arrangement maintained by the
Company or to or by which the Company is obligated under any
workmen's compensation or similar fully covered subject only
to standard deductibles by insurance maintained with reputable
financially responsible insurers licensed or permitted to do
business in Arizona.
2.19 No Discrimination. To the best of Greer's and the
-----------------
Company's knowledge, the Company has not unlawfully
discriminated with respect to any employee, contract holder,
agent or other person.
2.20 Hazardous Waste in Environmental Matters. To the best
----------------------------------------
of Greer's and the Company's knowledge, (a) no toxic or
hazardous waste, substance, or material of any kind or nature
has been stored at, disposed of, or is located in, on, or
about the premises owned by the Company; (b) no toxic or
hazardous waste substance or material of any kind has been
buried or accumulated in, on, or about the premises or has
been used in the Company's business. The premises are not
contaminated by and do not contain any hazardous or toxic
waste, substance or material, except those commonly used in
mortuaries; (c) no permit is required from any environmental
protection agency for the use or maintenance of the premises;
and (d) no notice of any kind has been received by the Company
from any governmental authority alleging that the Company has
failed to comply with any applicable law, ordinance,
regulation, statute, rule or restriction relative to hazardous
waste, substance, or material environmental matters pertaining
to or affecting the premises or its businesses.
2.21 Change in Condition. Since September 30, 1994, except
-------------------
as set forth in Schedule 2.21 and Exhibit C hereto, there has
been no change in the assets or liabilities or financial or
business condition of the Company from that set forth in the
most recent balance sheet except changes in the ordinary
course of business, none of which individually or in the
aggregate has been materially adverse to the Company. Since
the date of the most recent balance sheet, the Company has not
been adversely affected in any manner as a result of any fire,
explosion, accident, flood, earthquake, strike, lock-out,
labor dispute, confiscation, condemnation, eminent domain
proceedings, or purchase of any property by governmental
authority, whether covered by insurance or not.
2.22 Intellectual Property. Schedule 2.22 and Exhibit C
---------------------
hereto disclose all known trade names and other intellectual
property rights in which the Company has an interest and the
nature of that interest and whether any interest is subject to
the rights of any other person. The Company and Greer
authorize SNFC with the right to continue to use the name of
Greer, Greer-Wilson or Greer-Wilson Funeral Home.
2.23 Employees. Schedule 2.23 contains the names and current
---------
annual compensation of each of the employees of the Company,
any bonus or other form of compensation of such employees
(whether paid, payable, or promised) for the immediately
preceding fiscal year and the current fiscal year of the
Company.
<PAGE>
2.24 Powers. The Company has no outstanding Powers of
------
Attorney which will not be revoked as of the Closing Date.
2.25 Agreements. The Company has provided SNFC with copies
----------
of all material agreements, arrangements and commitments
which, to the Company's knowledge, exist and to which the
Company is a party or by which it is in any way affected or
obligated (including a summary of material oral agreements).
All the agreements are valid by their terms and in full force
and effect and there is no existing default under them. All
the agreements can be performed within the time and in
accordance with the terms and conditions of those agreements.
The Company has not waived any material right, made any
compromise under any agreements nor is any party to the
agreements indicated that it intends to cancel or terminate or
to exercise or not exercise any options under any of the
agreements.
2.26 No Misrepresentations. Notwithstanding anything to the
---------------------
contrary in this Agreement, to the best of Greer's and the
Company's knowledge, (i) all the representations and
warranties under this Agreement and all exhibits and data
provided by the Company are true and correct and fully present
the matters set forth and none of them omit any material fact,
or matter necessary to make the data provided or to not make
the data misleading; and (ii) there is no matter known to
Greer not disclosed in this Agreement or the exhibits thereto
which would have a material adverse impact on the Company's
business or future prospects.
2.27 Compliance with Laws. To the best of Greer's and the
--------------------
Company's knowledge, the Company has complied with and is in
compliance with, in all material respects, all federal, state
and local laws and regulations and all foreign laws and
regulations applicable to them, their properties and their
business, the violation of which would have a material adverse
effect on their business, properties, operations or financial
condition.
2.28 Licenses and Registrations. To the best of Greer's and
--------------------------
the Company's knowledge, the Company has all permits,
governmental licenses, registrations, certifications and
approvals (collectively "Approvals") necessary to carry on its
business as required by law or the rules and regulations of
any federal, state, county or local association, corporation
or governmental agency, body, instrumentality or commission
having jurisdiction over it, except for such approvals, the
lack of which would not have a material adverse effect on the
financial condition or the business of the Company.
2.29 Amended and Revised Articles, Bylaws, Officers and
--------------------------------------------------
Directors, Minutes. The Company's Articles of Incorporation
- ------------------
and Bylaws are in full force and effect in the form delivered
to SNFC, and its current officers and directors are as set
forth in Schedule 2.29. The minutes of meetings of the Board
of Directors and shareholders of the Company as set forth in
the respective minute books of the Company, which have been
delivered to SNFC, accurately reflect the actions taken by
such bodies on behalf of such entities.
<PAGE>
ARTICLE III
COVENANTS OF THE COMPANY AND GREER
3.1 Miscellaneous. The Company and Greer covenant and agree
-------------
that from and after September 30, 1994, the ending date of the
Interim Statement, and until the Closing:
(a) SNFC, through its own accountants, agents, attorneys and
representatives, may make such investigation of the financial
condition, properties, assets and business of the Company as
it may deem advisable; such investigation shall not, however,
affect the representations and warranties made by the Company
and Greer herein. The Company will permit SNFC and its
representatives to have reasonable access to the premises and
to all the books and records of the Company, and the Company
will furnish to SNFC such financial and operating data and
other information with respect to the business and properties
of the Company as SNFC may from time to time reasonably
request;
(b) The Company will carry on its business diligently and
substantially in the same manner as heretofore;
(c) The Company will not declare, set aside, pay, or make any
dividend or other distribution in respect of its capital stock
or make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(d) The Company will not issue or agree to issue any shares
of its capital stock, except to SNFC as described herein;
(e) Except as disclosed in Article II of this Agreement,
including the Schedules thereto, the Company will not incur
any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset,
make any contract or agreement, or engage in any transaction,
except in the ordinary course of its business;
(f) The Company will not subject itself to any lien, claim,
charge, option or encumber any of its properties or assets
other than in the ordinary course of business;
(g) The Company will not amend its Articles of Incorporation
or its Bylaws other than as requested by SNFC; and
(h) The Company will use its best efforts to preserve its
business organization intact, to keep available its present
employees, and to its present relationships with contract
holders and others having business dealings with it.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNFC
4.1 Corporate Existence. SNFC is a corporation duly
-------------------
organized, validly existing and in good standing under the
laws of the State of Utah.
4.2 Corporate Authority.
--------------------
SNFC has the corporate power and authority to carry out the
terms of the Agreement and have taken all requistie corporate
action to authorize the execution and delivery of all documents
that may be required to complete the Transaction. This Agreement
has been duly executed and delivered by SNFC in accordance with
its terms.
4.3 Compliance. The execution and delivery of this
----------
Agreement and completion of the Transaction do not (and will
not with notice or passage of time or both) violate the
provisions of (a) the Articles of Incorporation or Bylaws of
SNFC; (b) any contract that is material to the business of
SNFC; or (c) any regulation or court order applicable to SNFC
or any of its properties.
4.4 Consents and Authorizations. The execution and delivery
---------------------------
of this Agreement and completion of the Transaction do not
require SNFC (a) to obtain the consent or approval of any
party to any contract to which SNFC is a party or by which
SNFC or any of its properties is bound, or (b) to notify or
obtain any permit, authorization or approval of any federal,
state, local, or other governmental agency or body.
4.5 10-K, 10-Q and 8-K Reports Filed with Securities and
----------------------------------------------------
Exchange Commission. Attached hereto and incorporated herein
- -------------------
by this reference as Exhibits D, E and F, respectively, are
the Company's latest and most current 10-K, 10-Q and 8-K
Reports. SNFC warrants that the 10-K, 10-Q and 8-K Reports
are true and correct copies of the latest 10-K, 10-Q and 8-K
Reports of SNFC filed with the Securities and Exchange
Commission.
4.6 No Misrepresentations. SNFC warrants that all the
---------------------
representations and warranties under this Agreement and all
exhibits and data provided by SNFC are true and correct and
fully present the matters set forth and none of them omit any
material fact, or matter necessary to make the data provided
misleading.
4.7 Change in Condition. Except as set forth in Schedule
-------------------
4.7 and the 10-Q and 8-K Reports attached hereto as Exhibits
E and F, respectively, to the best of SNFC's knowledge, since
September 30, 1994, there has not been any material adverse
change in the financial condition, assets, liabilities,
business or operations of SNFC other than changes in the
ordinary course of its business, none of which has been
materially adverse to SNFC.
4.8 Long Term Ability of SNFC to Meet Obligations. To the
---------------------------------------------
best of SNFC's knowledge, there are no material liabilities of
SNFC contingent or otherwise, whether or not accrued or
accruable and whether or not determined or determinable, other
than liabilities which are reflected in the Company's most
recent balance sheet or for which an adequate reserve has been
provided and other liabilities incurred by SNFC in the
ordinary course of business which would materially affect the
ability of SNFC to guarantee to remit the payments due Greer
under the terms of the Consultation and Noncompetition
Agreement of even date herewith for the next ten (10) years.
<PAGE>
4.9 No Finder's Fee. SNFC has not employed any broker,
---------------
finder or agent or incurred any brokerage commission, finder's
fee or agency commission in connection with the Transaction
contemplated by this Agreement.
ARTICLE V
COVENANTS OF SNFC
5.1 Investigation of Financial Condition. The Company and
------------------------------------
Greer may, through their own accountants, agents, attorneys
and representatives, ask such investigation of the financial
condition, properties, assets and business of SNFC as they may
deem advisable; such investigation shall not, however, affect
the representations and warranties made by SNFC herein. SNFC
will permit the Company and Greer to have access to the
premises and to all the books and records of SNFC and it will
furnish to the Company and Greer such financial and operating
data and other information with respect to the business and
properties of SNFC as the Company or Greer may from time to
time reasonably request.
5.2 Cooperation with Respect to Filings. SNFC agrees it
-----------------------------------
will take all actions necessary and appropriate to acquire
any requisite governmental approvals for the Transaction.
This action on the part of SNFC shall include cooperation with
the management and agents of the Company in obtaining any
requisite approvals.
ARTICLE VI
CONDITIONS OF THE CLOSING - THE COMPANY
The obligations of SNFC under this Agreement are subject to
the satisfaction at the Closing of each of the following
conditions:
6.1 Correct Representations. Each of the material
-----------------------
representations, warranties, covenants and agreements of the
Company set forth in this Agreement shall be substantially
true and correct at and as of the Closing as if it had been
made at and as of such time, and SNFC shall have received a
certificate to such effect.
6.2 Legal Opinion. SNFC shall have received the opinion of
-------------
Farley, Robinson & Larsen, counsel for the Company, dated the
same day as the Closing, to the effect that:
(a) The Company has 2,200 shares outstanding and has full
power and authority to issue the 97,800 Shares which will
represent 97.8% of all shares of common stock issued and
outstanding following the issuance of such Shares.
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Arizona and has full corporate power and authority to own all
its properties and to carry on its business as it is now being
conducted;
<PAGE>
(c) This Agreement has been duly authorized and validly
executed and delivered by the Company, constitutes its binding
agreement and is enforceable against the Company in accordance
with its terms (except as limited by the laws affecting
generally the rights of creditors);
(d) So far as is known to such counsel, all consents or
authorizations of any governmental authority or other person
required as a condition precedent to the consummation of the
Transaction contemplated hereby have been obtained;
(e) So far as is known to such counsel, and except as set
forth in Schedule 6.2, attached hereto, there are no actions,
suits, or proceedings pending or threatened against or
affecting the corporation, any of its properties or any aspect
of its business, and the Company is not charged with, or under
investigation with respect to, any violation of any provisions
of any federal, state or local law or administrative rule or
regulation.
6.3 Resignations. SNFC shall have received the resignations
------------
of such officers and directors of the Company as it may
request.
6.4 Consultation and Noncompetition Agreement. SNFC shall
-----------------------------------------
have received the signature called for on the Consultation and
Noncompetition Agreement (attached as Exhibit G).
ARTICLE VII
CONDITIONS OF THE CLOSING - SNFC
7.1 Correct Representations. Each of the material
-----------------------
representations, warranties, covenants and agreements of SNFC
contained in this Agreement shall be true and correct at and
as of the closing as if it had been made at such time.
7.2 Legal opinion. The Company shall have received the
-------------
opinion of Mackey Price and Williams, counsel for SNFC, dated
the same day as the Closing, to the effect that:
(a) SNFC is duly organized, validly existing and in good
standing under the laws of the State of Utah and has full
corporate power and authority to own all its properties and to
carry on its business as it is now being conducted;
(b) This Agreement has been duly authorized and validly
executed and delivered by SNFC, constitutes its binding
agreement and is enforceable against SNFC in accordance with
its terms (except as limited by the laws affecting generally
the rights of creditors);
(c) All proceedings required by law or by the provisions of
this Agreement to be taken by SNFC in connection with the
Transaction contemplated hereby have been duly and validly
taken;
(d) So far as is known to such counsel, all consents or
authorizations of any governmental authority or other person
required as a condition precedent to the
<PAGE>
consummation of the Transaction contemplated hereby have been
obtained;
(e) So far as is known to such counsel, there are no actions,
suits, or proceedings pending or threatened against or
affecting SNFC, are not charged with, or under investigation
with respect to, any violation of any provisions of any
federal, state or local law or administrative rule or
regulation that would have a material impact on the
performance of SNFC's obligations hereunder.
ARTICLE VIII
8.1 Consultation and Noncompetition Agreement. At the
-----------------------------------------
Closing, SNFC, the Company and Page E. Greer and Patricia R.
Greer will enter into a Consultation and Noncompetition
Agreement in the form attached hereto as Exhibit G.
ARTICLE IX
INVESTMENT REPRESENTATIONS AND WARRANTIES OF SNFC
SNFC represents and warrants to the Company and Greer as
follows:
9.1 Accredited Investor. SNFC is an "accredited investor"
-------------------
within the meaning of Rule 501 under the Securities Act of
1933, as amended (the "Securities Act") and was not organized
for the specific purpose of acquiring the Shares;
9.2 Investment Knowledge. SNFC has sufficient knowledge and
--------------------
experience in investing in companies similar to the Company in
terms of the Company's stage of development and type of
business so as to be able to evaluate the risks and merits of
its investment in the Company and it is able financially to
bear the risks thereof;
9.3 Knowledge of Business Affairs. SNFC has had an
-----------------------------
opportunity to discuss the Company's business, management and
financial affairs with the Company's management;
9.4 Investment Purpose. The Shares being purchased by it
------------------
are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection
with any distribution thereof; and
9.5 Restricted Shares. SNFC understands that (i) the Shares
-----------------
have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2)
thereof or Rule 505 or 506 promulgated under the Securities
Act, (ii) the Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the
Shares will bear a legend to such effect, and (iv) the Company
will make a notation on its transfer books to such effect.
<PAGE>
ARTICLE X
STOCK PLEDGE IN EVENT OF DEFAULT BY SNFC
10.1 Pledge. SNFC hereby pledges 97,800 Shares, or 97.8% of
------
the issued and outstanding shares of Common Stock of the
Company after the issuance of such Shares, represented by
Certificate No. 2, duly endorsed and transferred on the books
of the Company, as a security interest to secure the
performance and payment of all obligations of the Company to
the Consultant, however and whenever incurred. The Shares
pledged thereunder shall be released in proportion to the
payments received under the Consultation and Noncompetition
Agreement in the same ratio that such payments received bear
to the total payments to be made thereunder.
10.2 Voting Rights. Provided the Company is not in default
-------------
in the performance of any terms of the Consultation and
Noncompetition Agreement, SNFC shall retain all voting rights
of the pledged shares. The Consultant may only vote the stock
in the event of a default and only during such period of
default.
10.3 Dividends. All amounts received by SNFC as dividends on
---------
the pledged shares shall be retained by SNFC unless the
Company shall be in default in the performance of any terms of
the Consultation and Noncompetition Agreement. In the event
of such default and only during such period of default, all
dividends on the pledged shares shall be applied toward the
payment of the obligations of the Company to the Consultant
under the Consultant and Noncompetition Agreement.
10.4 Default. The Company shall be in default under this
-------
Agreement upon failure by it to either perform or render
payment as set forth in this Agreement and in the event of:
(i) dissolution, termination of existence, insolvency,
business failure, appointment of receiver of any part of the
property of the Company, assignment for the benefit of
creditors, or the commencement of any proceedings under any
bankruptcy or insolvency laws by or against the Company; (ii)
a sale, assignment, transfer, pledge or other disposition of
the shares pledged herein by SNFC without the prior written
consent of the Consultant first having been obtained, which
consent shall not be unreasonably withheld.
10.5 Rights and Remedies. All rights and remedies of the
-------------------
Consultant hereunder are cumulative. Upon the happening of
any default, the Consultant's rights and remedies with respect
to the stock shall be those of a secured party under the
Arizona Uniform Commercial Code and under any other applicable
law as the same may from time to time be in effect, in
addition to those rights granted herein and in any other
agreement now or hereafter in effect between the Company, SNFC
and the Consultant with respect to the subject matter hereof.
The Company and SNFC agree to pay all reasonable costs and
expenses incurred by the Consultant in enforcing this
Agreement and in realizing upon the stock, including
reasonable attorney's fees.
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 Right to Proceed. Anything in this Agreement to the
----------------
contrary notwithstanding, if any one or more of the conditions
specified in Article VI hereof have not been satisfied, SNFC
shall have the right, in addition to any other right which may
be available, nevertheless to proceed with the Transaction;
and if the conditions specified in Article VII hereof have not
been satisfied, the Company shall have the right, in addition
to any other right which may be available to it, nevertheless
to proceed with the Transaction.
11.2 Survival of Representations. The Company, SNFC and
---------------------------
Greer agree that the representations, warranties and
agreements herein contained shall survive the consummation of
the Transaction contemplated hereby.
11.3 Indemnification by Greer and the Company. Subject to
----------------------------------------
Articles IV and IX hereof with respect to representations and
warranties, the Company and Greer hereby agree to indemnify
SNFC and to hold it harmless for a period of one year from the
date of Closing against and in respect of any and all claims,
liabilities, losses, damages, costs and expenses resulting
from any misrepresentation, breach of warranty, or non-
fulfillment of any obligation on the part of Greer and the
Company under this Agreement or from any misrepresentation in
or omission from any certificate.
11.4 Attorneys' Fees. If any party to this Agreement
---------------
breaches any of its provisions, that party shall pay all
costs, including reasonable attorney's fees and court costs,
which may be required to enforce the terms, conditions, and
covenants of this Agreement or which may be caused to be
incurred by the breach of this Agreement, whether or not legal
action is commenced.
11.5 Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of Arizona.
11.6 Severability. In the event any term, condition or
------------
provision of this Agreement is determined to be illegal,
invalid or unlawful by any governmental agency or Court having
jurisdiction hereof, any such illegal, invalid or unlawful
term, condition or provision shall not affect the remaining
terms, conditions and provisions of this Agreement, and the
remaining terms, conditions, and provisions of this Agreement
shall remain in full force and effect.
11.7 Notices. Any notice required or permitted to be given
-------
hereunder shall be deemed duly given if sent by registered
mail, postage prepaid, addressed as follows:
(a) If to the Company or Greer to:
Page E. Greer
APD0 321
San Carlos, Sonora Mexico 85506
<PAGE>
With a copy to:
Gregory A. Robinson, Esq.
Farley, Robinson & Larsen
100 West Clarendon, Suite 200
Phoenix, Arizona 85013
(b) If to SNFC to:
Security National Financial Corporation
5300 South 360 West, Suite 310
Salt Lake City, Utah 84123
Attn: Scott M. Quist, First Vice
President, General Counsel and Treasurer
With a copy to:
Randall A. Mackey, Esq.
Mackey Price & Williams
170 South Main, Suite 900
Salt Lake City, Utah 84101
or at such other address as may be furnished in writing by any
such person.
11.8 Agreement for the Benefit of the Parties
----------------------------------------
This Agreement is intended to be solely for the benefit of the
parties thereto and shall not be deemed to confer any rights
upon or obligate any of the parties to any third persons.
11.9 Knowledge of Party. Any representation or warranty
------------------
herein contained made by or on behalf of a party to the
knowledge of such party shall be deemed to mean and include
the knowledge, actual or constructive, after making reasonable
inquiry into the matter.
11.10 Headings. The descriptive headings of the several
--------
Articles, Sections and Paragraphs of this Agreement are
inserted for convenience only and do not constitute a part of
the Agreement.
11.11 Amendments. Any and all amendments to this Agreement
----------
must be in writing and executed by all of the parties hereto.
11.12 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall constitute one and the same
Agreement.
11.13 Binding Agreement. This Agreement shall be binding upon
-----------------
and shall inure to the benefit of the Company and SNFC and
their successors in interest.
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it as of the day and year first above written.
SECURITY NATIONAL FINANCIAL
CORPORATION,
a Utah corporation
By:
Title:
GREER-WILSON FUNERAL
HOME, INC.,
an Arizona corporation
By:
Title:
Page E. Greer
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
<TABLE>
<CAPTION>
ARTICLE I - THE TRANSACTIONS
<C> <S> <C>
1.1 Issuance of Shares. . . . . . . . . . . . . . . . . . . . 1
1.2 Agreement to Consummate transactions. . . . . . . . . . . 1
1.3 Board of Director Approval. . . . . . . . . . . . . . . . 1
1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Contribution of Capital . . . . . . . . . . . . . . . . . 2
1.6 Issuance of Shares. . . . . . . . . . . . . . . . . . . . 2
1.7 Condition Precedent to SNFC's Obligations . . . . . . . . 2
1.8 Conditions Precedent to the Company's
Obligations. . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Consummation of Transactions. . . . . . . . . . . . . . . 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Corporate Existence . . . . . . . . . . . . . . . . . . . 2
2.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Capital Stock of Greer-Wilson Funeral Home. . . . . . . . 2
2.4 Financial Statements by the Company . . . . . . . . . . . .2
2.5 Timely Tax Filing . . . . . . . . . . . . . . . . . . . . 3
2.6 Assets Free of Encumbrances . . . . . . . . . . . . . . . 3
2.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Corporate transactions. . . . . . . . . . . . . . . . . . 3
2.9 No Contingent Liabilities . . . . . . . . . . . . . . . . 4
2.10 Financial Condition . . . . . . . . . . . . . . . . . . . 4
2.11 No Finders Fee. . . . . . . . . . . . . . . . . . . . . . 5
2.12 Authority . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 List of Contracts . . . . . . . . . . . . . . . . . . . . 5
2.14 Collective Bargaining Agreements. . . . . . . . . . . . . 5
2.15 Overtime, Back Wage, Vacation and
Discrimination Claims . . . . . . . . . . . . . . . . . 5
2.16 Profit Share Arrangements, Bonuses. . . . . . . . . . . . 6
2.17 Pension and Other Deferred Compensation . . . . . . . . . 6
2.18 Benefit Claims. . . . . . . . . . . . . . . . . . . . . . 6
2.19 No Discrimination . . . . . . . . . . . . . . . . . . . . 6
2.20 Hazardous Waste in Environmental Matters. . . . . . . . . 6
2.21 Change in Condition . . . . . . . . . . . . . . . . . . . 6
2.22 Intellectual Property . . . . . . . . . . . . . . . . . . 7
2.23 Employees . . . . . . . . . . . . . . . . . . . . . . . . 7
2.24 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 Agreements. . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 No Misrepresentations . . . . . . . . . . . . . . . . . . 7
2.27 Compliance with Laws. . . . . . . . . . . . . . . . . . . 7
2.28 Licenses and Registrations. . . . . . . . . . . . . . . . 8
2.29 Amended and Revised Articles, Bylaws, Officers
and Directors, Minutes. . . . . . . . . . . . . . . . . 8
ARTICLE III - COVENANTS OF THE COMPANY AND GREER
3.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SNFC
4.1 Corporate Existence . . . . . . . . . . . . . . . . . . . 9
4.2 Corporate Authority . . . . . . . . . . . . . . . . . . . 9
4.3 Compliance. . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Consents and Authorizations . . . . . . . . . . . . . . . 9
4.5 10-K, 10-Q and 8-K Reports Filed with
Securities and Exchange Commission . . . . . . . . . . 9
4.6 No Misrepresentations . . . . . . . . . . . . . . . . . . 10
4.7 Change in Condition . . . . . . . . . . . . . . . . . . . 10
4.8 Long Term Ability of SNFC to Meet Obligations . . . . . . 10
4.9 No Finder's Fee . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V - COVENANTS OF SNFC
5.1 Investigation of Financial Condition. . . . . . . . . . . 10
5.2 Cooperation with Respect to Filings . . . . . . . . . . . 10
ARTICLE VI - CONDITIONS OF THE CLOSING - COMPANY
6.1 Correct Representations . . . . . . . . . . . . . . . . . 11
6.2 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Resignations. . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Consultation and Noncompetition Agreement . . . . . . . . 11
ARTICLE VII - CONDITIONS OF THE CLOSING - SNFC
7.1 Correct Representations . . . . . . . . . . . . . . . . . 12
7.2 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII
8.1 Consultation and Noncompetition Agreement . . . . . . . . 12
ARTICLE IX - INVESTMENT REPRESENTATIONS AND WARRANTIES OF
SNFC
9.1 Accredited Investor . . . . . . . . . . . . . . . . . . . 13
9.2 Investment Knowledge. . . . . . . . . . . . . . . . . . . 13
9.3 Knowledge of Business Affairs . . . . . . . . . . . . . . 13
9.4 Investment Purpose. . . . . . . . . . . . . . . . . . . . 13
9.5 Restricted Shares . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X - STOCK PLEDGE IN EVENT OF DEFAULT BY COMPANY
10.1 Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Voting Rights . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Dividends . . . . . . . . . . . . . . . . . . . . . . . . 14
10.4 Default . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.5 Rights and Remedies . . . . . . . . . . . . . . . . . . . 14
ARTICLE X - MISCELLANEOUS
11.1 Right to Proceed. . . . . . . . . . . . . . . . . . . . . 14
11.2 Survival of Representations . . . . . . . . . . . . . . . 14
11.3 Indemnification by Greer and the Company. . . . . . . . . 15
11.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 15
11.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . 15
11.6 Severability. . . . . . . . . . . . . . . . . . . . . . . 15
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.8 Agreement for the Benefit of the Parties. . . . . . . . . 16
<PAGE>
11.9 Knowledge of Party. . . . . . . . . . . . . . . . . . . . 16
11.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 16
11.11 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 16
11.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 16
11.13 Binding Agreement . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE>
94.10-JJ
Promissory Note with Page E. and Patricia R. Greer
<PAGE>
PROMISSORY NOTE
$200,000 Phoenix, Arizona
March 8, 1995
FOR VALUE RECEIVED, the undersigned, PAGE E. GREER and
PATRICIA R. GREER, husband and wife, (hereinafter referred to
as "Makers") promise to pay to the order of SECURITY NATIONAL
FINANCIAL CORPORATION, a Utah corporation (hereinafter
referred to as "Holder"), or order to 5300 South 360 West,
Suite 310, Salt Lake City, Utah 84123, the principal sum of
Two Hundred Thousand Dollars $200,000.00) due in full ten (10)
years from the date hereof together with interest on the face
amount of this note at the rate of seven percent (7%) per
annum.
Default shall occur if proper payment is not received by
Holder within fifteen (15) days of the due date of any
obligation contained herein. Default shall also occur in the
event of assignment for the benefit of creditors or
application for the involuntary petition in bankruptcy by or
against Makers. Upon occurrence of any of the foregoing,
Holder or any holder hereof, may declare this Note immediately
due and payable and the then unpaid principal balance plus
interest thereon as set forth above at default, shall be due
and payable in full.
This note may be prepaid in full or in part without penalty at
any time and is secured by a pledge of Maker's 2,200 shares of
common stock of GREER-WILSON FUNERAL HOME, INC., an Arizona
corporation, as evidenced by Stock Certificate No. 1. The
principal and interest are payable in lawful money of the
United States of America. This note is a non-recourse note.
All exemption rights and laws affecting the full collection of
this Note are hereby waived. It is expressly agreed that
failure of Holder or any holder hereof to exercise any right
or option hereunder shall not constitute a waiver of the right
or the later exercise thereof.
The makers, guarantors and endorsers hereof severally waiver
diligence, demand, presentment for payment and protest, and
consent to the extension of time for payment of this note
without notice.
Page E. Greer Patricia R. Greer
<PAGE>
PLEDGE AGREEMENT
PAGE E. GREER, and PATRICIA R. GREER, husband and wife
("Debtor") in consideration for the loan of Two Hundred
Thousand Dollars ($200,000) by Promissory Note of from
SECURITY NATIONAL FINANCIAL CORPORATION, a Utah corporation
("Secured Property") pursuant to that certain Stock Insurance
Agreement dated March 8, 1995, Debtor does hereby pledge to
Secured Party, to be held in Trust by Gregory A. Robinson,
Esq. (hereinafter the "Escrow Agent"), located at 100 West
Clarendon, Suite 200, Phoenix, Arizona 85013, the following
shares of Debtor, or any successor.
WITNESSETH:
----------
WHEREAS, Share Certificate No. 1, representing 2,200 shares of
common stock (the "Stock") of the issued and outstanding
shares of the no par value common stock of Greer-Wilson
Funeral Home, Inc. (the "Corporation") together with all
rights thereof, all additions thereto, all proceeds from the
sale or other disposition thereof, and all substitutions
therefor, except for cash dividends or cash distributions with
respect to the Stock, as security for the payment of all
indebtedness owed to Secured Party by Debtor for the loan,
including but not limited to any promissory note (the
"Promissory Note") given as evidence of said obligation. The
pledged stock, Share Certificate No. 1, shall be held in trust
by Escrow Agent until the Promissory Note has been paid in
full according to the terms thereof.
<PAGE>
NOW, THEREFORE, for good and valuable consideration had and
received, the parties agree as follows:
1. Pledge. Debtor hereby assigns and delivers to Escrow
------
Agent, 2,200 common shares of the Corporation represented by
Certificate No. 1, duly endorsed and transferred on the books
of the Corporation. The Debtor grants to the Secured Party a
Security interest in the above-named collateral to secure the
performance and payment of all obligations and indebtedness of
the Debtor to Secured Party however and whenever incurred.
2. Promissory Note. The Debtor shall pay to the Secured
---------------
Party the sum or sums evidenced by a promissory note duly
executed to evidence the obligations and indebtedness incurred
pursuant to this Agreement in accordance with the terms of
said promissory note and this Agreement.
3. Representations. The Debtor warrants and represents that
---------------
there are no restrictions upon the transfer of any of the
pledged shares other than may appear on the face of the
certificates, and that the Debtor may transfer such shares
without the consent of the other shareholders of the
Corporation.
4. Voting Rights. Provided that the Debtor is not in default
-------------
in the performance of any terms of this Agreement, he shall
retain all voting rights of the pledged shares. Debtor has
executed a proxy in favor of the Secured Party to be held by
Escrow Agent during the pendency of this Agreement, which may
only be used by Secured Party in the event of a default during
such period.
5. Dividends. All amounts received by the Debtor as
---------
dividends on pledged shares shall be applied towards the
payment of the principal and interest on the loan.
6. Payments. Upon payment of all principal and interest on
--------
the loan and Escrow Agent's receipt from Secured party of
notice of such payment, Escrow Agent shall deliver to Debtor
a certificate for the total amount of shares of stock of the
Corporation. If Secured Party refuses to deliver notice of
payment, Debtor may show proof of payment of the contract
price together with any adjustments or offsets and Escrow
Agent shall deliver the endorsed certificate to Debtor.
7. Default. Debtor shall be in default under this Agreement
-------
upon wrongful failure by it to either perform or render
payment as set forth in the promissory note between Debtor and
Secured Party, of even date herewith, this Agreement or the
principal or interest of the loan. Further, Debtor shall be
in default under this Agreement:
<PAGE>
A. Upon dissolution, termination of existence,
insolvency, business failure, appointment of receiver of any
part of the property of Debtor, assignment for the benefit of
creditors, or the commencement of any proceedings under any
bankruptcy or insolvency laws by or against Debtor;
B. If Debtor, during the term of the escrow hereunder,
sells, assigns, transfers, pledges or otherwise disposes of
the shares acquired herein without the prior written consent
of Secured Party first had and obtained, which consent shall
not be unreasonably withheld.
8. Remedies on Default. Secured Party agrees to give
-------------------
reasonable notice to Debtor of acceleration, assignment of
promissory note, sale, disposition, or other intended action
hereunder or in connection herewith. Any such notice shall
constitute a reasonable notice to Debtor if such notice is
mailed to Debtor by certified mail, postage prepaid, at least
thirty (30) days prior to the date of such action at the
address to which notices hereunder shall be given to Debtor.
Notice given by mail as set out above shall be deemed
delivered at the time and on the date the same is mailed. All
rights and remedies of Secured Party hereunder are cumulative.
No modification, rescission, waiver or release, or amendment
of any provision of this Agreement shall be made except by a
written agreement subscribed by Debtor and Secured Party.
This Agreement and the transaction evidenced hereby shall be
construed under the laws of the State of Arizona. Time is of
the essence hereof. The entire indebtedness secured hereby
shall, at the option of Secured Party, become immediately due
and payable after giving notice as hereinafter provided, and,
upon the happening of any event of default, Secured Party's
rights and remedies with respect to the Stock shall be those
of a Secured Party under the Arizona Uniform Commercial Code
and under any other applicable law as the same may from time
to time be in effect, in addition to those rights granted
herein and in any other agreement now or hereafter in effect
between Debtor and Secured Party respecting the subject matter
hereof. The provisions hereof shall apply to any property
which may be given as additional security. Debtor agrees to
pay all reasonable costs and expenses incurred by Secured
Party in enforcing this Agreement and in realizing upon the
Stock, including reasonable attorney's fees.
9. Waiver. No provision of this Agreement shall be deemed to
------
be waived by Secured Party unless such waiver is in writing
and signed by Secured Party. All of the terms and provisions
hereof apply to and bind the heirs, personal representatives,
successors, and assigns of the respective parties hereto.
10. Notices. All notices required or permitted to be given
-------
pursuant to this Agreement shall be personally delivered or
sent by United States certified mail, postage prepaid, return
receipt requested, addressed to the parties at the following
addresses or at such other addresses as either party may
advise the other from time to time in writing:
<PAGE>
DEBTOR: PAGE E. GREER & PATRICIA R. GREER
APDO 321
SAN CARLOS, SONORA MEXICO
85506
SECURED PARTY: Security National Financial Corporation
5300 South 360 West,
Suite 310
Salt Lake City, Utah 84123
11. Termination of Agreement. This Agreement shall terminate
------------------------
upon the full payment of the loan.
DATED this 8th day of March, 1995, at Phoenix, Arizona.
"DEBTOR" "SECURED PARTY"
SECURITY NATIONAL FINANCIAL CORPORATION, a Utah
corporation
Page E. Greer By: Scott M. Quist
Its: First Vice President
Patricia R. Greer
<PAGE>
94.11
Statement Re: Computation of Per-share Earnings
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
SECURITY NATIONAL FINANCIAL CORPORATION
Computation of Per-Share Earnings
Year Ended December 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Primary:
Average shares
outstanding 3,322 3,131 2,998
Net effect of dilutive
stock options - based
the treasury stock
method using average
market price 28 -- --
-------- ------- --------
Total 3,350 3,131 2,998
======== ======= =======
Net income $ 1,040 $ 1,084 $ 975
======== ======= =======
Per-share amount $ .31 $ .35 $ .33
======== ======= =======
Fully Diluted
Average shares
outstanding 3,322 3,131 2,998
Net effect of dilutive
stock options - based
on the treasury stock
method using the year-
end market price, if
higher than average
market price 37 -- --
------- ------- -------
Total 3,359 3,131 2,998
======= ======= =======
Net income $ 1,040 $ 1,084 $ 975
======= ======= =======
Per-share amount $ .31 $ .35 $ .33
======= ======= =======
</TABLE>
See accompanying notes to parent company only financial statements.
