SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 29, 2006
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
Utah 0-9341 87-0345941
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5300 South 360 West, Salt Lake City, Utah 84123
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 264-1060
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Does Not Apply
(Former name or former address, if changed since last report)
ITEM 2.01. Sale of Southern Security Life Insurance Company.
On December 29, 2006, Security National Financial Corporation (the
"Company"), through its wholly owned subsidiary, Security National Life
Insurance Company ("Security National Life"), a Utah domiciled insurance
company, completed the sale of Southern Security Life Insurance Company
("Southern Security"), a Florida domiciled insurance company and wholly owned
subsidiary of Security National Life, to American Network Insurance Company
("American Network"), a Pennsylvania corporation and wholly owned subsidiary of
Penn Treaty America Corporation, a Pennsylvania corporation. Under the terms of
the transaction, the Company is to receive purchase consideration consisting of
$400,000 plus an amount equal to the capital and surplus of Southern Security as
of December 31, 2006, and American Network is to receive all of the outstanding
shares of Southern Security. The transaction is subject to and conditioned upon
the subsequent approval of the transaction by the Florida Office of Insurance
Regulation, the Florida Department of Financial Services, and the Pennsylvania
Department of Insurance. American Network is required to make all necessary
filings, including a Form A application with the Florida Office of Insurance
Regulation, and provide all information and documentations that may reasonably
be required by the regulatory authorities to obtain such approval.
At the closing of the transaction on December 29, 2006, Security National
Life delivered to the law firm of Mackey Price Thompson & Ostler ("Mackey
Price"), an escrow agent in the transaction, to be held and disposed of by such
escrow agent pursuant to the terms of an Escrow Agreement, (i) certificates
representing all 2,105,235 shares of Southern Security's outstanding common
stock; (ii) letters of resignation of the officers and directors of Southern
Security; (iii) a copy of the Stock Purchase Agreement among American Network,
Security National Life and Southern Security; (iv) cash in the amount of
$500,000 equal to the statutory deposits of Southern Security pertaining to the
states of Alabama, Michigan and South Carolina, which are statutorily required
to be in the form of bonds; (v) an original executed Assignment dated December
29, 2006, in which Southern Security distributes, assigns and transfers to
Security National Life all of Southern Security's capital and surplus accounts,
and any other real and personal property that it may have inadvertently failed
to previously distribute to Security National Life; and (vi) original executed
Articles of Dissolution dated December 29, 2006. In addition, American Network
placed in escrow, pursuant to an Escrow Agreement with Preferred Insurance
Capital Consultants, LLC as escrow agent, the approximate purchase price of
$4,209,132, consisting of $400,000 plus an amount equal to the capital and
surplus of Southern Security as of September 30, 2006.
Under the terms of the Escrow Agreement with Mackey Price acting as escrow
agent, upon receipt by Mackey Price of (a) a written notice from Security
National Life and Southern Security stating that all governmental approvals of
the transaction had been obtained by American Network and the approximate
purchase price had been distributed to Security National Life pursuant to the
Stock Purchase Agreement, and (b) a written notice from Security National Life
confirming receipt of payment from American Network of the difference between
the approximate purchase price and the actual purchase price (consisting of the
difference between the amount of the capital and surplus of Southern Security as
of September 30, 2006 as compared to the capital and surplus as of December 31,
2006), Mackey Price shall deliver to American Network the certificates
representing all of the shares of Southern Security, together with accompanying
stock powers, duly endorsed for transfer, and destroy the Assignment and
Articles of Dissolution by tearing such documents in half and delivering them to
Security National Life, along with the copy of the Stock Purchase Agreement. In
addition, under the terms of the Escrow Agreement with Preferred Insurance
Capital Consultants, LLC acting as escrow agent, the approximate purchase price
being held in escrow shall be wire transferred to Security National Life, with
all investment income and interest earned thereon in the escrow account being
wire transferred to American Network.
Furthermore, upon obtaining governmental approvals of the transaction,
American Network has agreed to immediately deposit its own bonds with the states
of Alabama, Michigan and South Carolina and to take necessary action to have
Security National Life's bonds released and returned to Security National Life.
Upon receipt of a written notice from American Network that it has deposited its
own bonds with the states of Alabama, Michigan and South Carolina and a written
notice from Security National Life that it has received the bonds that it had
deposited with such states, Mackey Price, acting as escrow agent, will disburse
to American Network the $500,000 in cash being held in escrow, which is an
amount equal to the statutory deposits of Southern Security pertaining to the
states of Alabama, Michigan and South Carolina.
In the event any of the regulatory authorities disapprove or fail to
approve the transaction on or before June 30, 2007, Preferred Insurance Capital
Consultants acting as escrow agent under the terms of the Escrow Agreement,
shall wire transfer to American Network the approximate purchase price and all
investment income and interest earned thereon being held in the escrow account.
In addition, Mackey Price, acting as escrow agent, shall return to Security
National Life the certificates representing all of the shares of Southern
Security, together with accompanying stock power, duly endorsed for transfer,
the $500,000 in cash delivered into escrow by Security National Life equal to
the statutory deposits of Southern Security pertaining to the states of Alabama,
Michigan and South Carolina, and the copy of the Stock Purchase Agreement.
Moreover, in the event the condition subsequent is not satisfied by virtue
of any of the regulatory authorities disapproving or not approving the
transaction and the sale of Southern Security is, as a result, rescinded, the
liquidation of Southern Security shall be deemed to be completed as of the
closing date on December 29, 2006 by virtue of Mackey Price, as escrow agent
under the terms of the Escrow Agreement, delivering to Security National Life
the Assignment dated December 29, 2006 and mailing the signed Articles of
Dissolution to the Amendment Section, Division of Corporations with the State of
Florida to complete the liquidation of Southern Security. The liquidation of
Southern Security would be in accordance with the terms of the Agreement and
Plan of Complete Liquidation of Southern Security Life Insurance into Security
National Life Insurance Company, which the Board of Directors of both the
Company and Security National Life approved on December 12, 2005. Under the
terms of this agreement, Southern Security would be liquidated into Security
National Life in essentially the same manner as the liquidation described in
Private Letter Ruling 9847027 in order to achieve the same tax treatment and
consequences under Section 332 of the Internal Revenue Code of 1986, as amended,
and other applicable provisions described in such Letter Ruling.
ITEM 9.01. Financial Statements and Exhibits
(c) Exhibits
10.1 Stock Purchase Agreement among Security National Life Insurance
Company, Southern Security Life Insurance Company and American Network
Insurance Company.
10.2 Escrow Agreement among Security National Life Insurance Company,
Southern Security Life Insurance Company, American Network Insurance
Company and Mackey Price Thompson & Ostler.
10.3 Escrow Agreement among American Network Insurance Company, Security
National Life Insurance Company, Southern Security Life Insurance
Company, and Preferred Insurance Capital Consultants, LLC.
10.4 Agreement and Plan of Complete Liquidation of Southern Security Life
Insurance Company into Security National Life Insurance Company.
10.5 Assignment between Southern Security Life Insurance Company and
Security National Life Insurance Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY NATIONAL FINANCIAL CORPORATION
(Registrant)
Date: January 11, 2007 By: /s/ Stephen M.
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Stephen M. Sill,
Vice President, Treasurer
and Chief Financial Officer