Exhibit 10.1

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UNIT PURCHASE AGREEMENT
 
by and among
 
AMERICAN FUNERAL FINANCIAL, LLC,
 
THE MEMBER OF AMERICAN FUNERAL FINANCIAL, LLC,
 
SECURITY NATIONAL FINANCIAL CORPORATION
 
and
 
SNFC SUBSIDIARY, LLC
 
Dated Effective June 4, 2014
 

 

 

 
 

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TABLE OF CONTENTS
 
 

   Page
STATEMENT OF PURPOSE
1
ARTICLE I DEFINITIONS
1
ARTICLE II SALE AND PURCHASE OF UNITS
7
2.1 Sale and Purchse of Units
7
2.2 Hypershop Liability
7
2.3 Purchase Price
8
2.4 Receivable Payment; Additional Receivable Payments
9
2.5 Earn-Out Payments
10
2.6 Closing
13
2.7 Closing Deliveries
13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS
14
3.1 Organization and Qualification
14
3.2 Capitalization
15
3.3 Authority
15
3.4 No Conflicts
16
3.5 Financial Statements
16
3.6 Absence of Certain Changes
17
3.7 Title to Assets
18
3.8 Tangible Personal Property; Condition of Assets
18
3.9 Assignment Receivables
18
3.10 Real Property
18
3.11 Contracts
19
3.12 Intellectual Property
20
3.13  Tax
20
3.14  Legal Compliance
21
3.15  Litigation
21
3.16  Environmental Matters
21
3.17  Employees
22
3.18  Employee Benefits
22
3.19  Customers and Suppliers
23
3.20  Transactions with Related Persons
23
3.21  Insurance
23
3.22  No Brokers’ Fees
24
3.23  Sales Reports
24
3.24  Disclaimer of Representations and Warranties
24
ARTICLE IV  REPRESENTATIONS AND WARRANTIES REGARDING BUYER
25
4.1  Organization and Authority
24
4.2  No Conflicts
25
4.3  No Brokers’ Fees
25
4.4  Litigation
25
4.5  Financial Resources
25
4.6  Investment Intention
25
4.7  Condition of the Business
25
ARTICLE V  AGENT
26
ARTICLE VI  POST-CLOSING COVENANTS
26
6.1  Payment of Transfer Taxes
26
6.2  Retention of and Access to Books and Records
27
6.3  Employees
27
6.4  Tax Matters
27
ARTICLE VII  INDEMNIFICATION
29
7.1  Indemnification by Sellers
29
7.2  Indemnification by Buyer
29
7.3  Survival and Time Limitations
29
7.4  Limitations
30
7.5  Manner of Payment
31
7.6  Third-Party Claims
32
7.7  Direct Claims
33
7.8  Other Indemnification Matters
34
7.9  Exclusive Remedy
34
ARTICLE VIII  MISCELLANEOUS
34
8.1  Further Assurances
34
8.2  No Third-Party Beneficiaries
34
8.3  Entire Agreement
34
8.4  Successors and Assigns
34
8.5  Counterparts
34
8.6  Notices
35
8.7  Attorney Fees
36
8.8  Governing Law
36
8.9  Amendments and Waivers
36
8.10  Severability
36
8.11  Expenses
36
8.12  Interpretation
36
8.13  Specific Performance
37
8.14  Time Is of the Essence
37
8.15  Retention of Counsel
37

 
 

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UNIT PURCHASE AGREEMENT
 
This Unit Purchase Agreement (this “Agreement”) is entered into effective as of
June 4, 2014 (the “Closing Date”), by and among Security National Financial
Corporation, a Utah corporation (“Security National”), SNFC Subsidiary, LLC, a
Utah limited liability company and wholly owned subsidiary of Security
National (“Buyer”), American Funeral Financial, LLC, a South Carolina limited
liability company (the “Company”), and Hypershop, LLC, a North Carolina limited
liability company (“Seller”).
 
STATEMENT OF PURPOSE
 
A.           Seller owns all of the issued and outstanding units of membership
of the Company (the “Units”);
 
B.            Buyer desires to acquire from Seller, and Seller desires to sell
and transfer to Buyer, all of the Units on the terms and subject to the
conditions set forth in this Agreement.
 
NOW, THEREFORE, in consideration of these premises and the mutual and dependent
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
As used in this Agreement, the following terms have the following meanings (all
capitalized terms used in this Agreement that are not defined in this Article I
shall have the meanings set forth elsewhere in this Agreement):
 
 “Additional Receivable Payment” is defined in Section 2.4.
 
“Affiliate” means, with respect to a specified Person, any other Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with, the specified Person.
 
“Agreement” is defined in the opening paragraph.
 
“Assignment Agreements” means, collectively, all life insurance assignment
Contracts to which the Company or any of the Company Subsidiaries is a party as
of the Closing Date.
 
“Business” means the business of insurance assignment claims processing and
funding for the death care industry and cash out of beneficiary claims on life
insurance policies following death.
 
 
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“Business Day” means any day that is not a Saturday, Sunday or any other day on
which banks are required or authorized by law to be closed.
 
“Buyer” is defined in the opening paragraph.
 
“C & J Financial, LLC” is defined in Section 2.5(b).
 
“Calculation Period” means (a) the period beginning on the Closing Date and
ending on the date that is three years after the Closing Date and (b) each
calendar month thereafter during the Earn-out Period.
 
“Change in Control” means, with respect to any Person, (a) any consolidation,
merger or statutory share exchange involving such Person or to which such Person
is a constituent party, (b) any corporate reorganization, equity sale or other
transaction or series of transactions in which any other Person shall, after the
date hereof, become the legal or beneficial owner, directly or indirectly, of
voting securities or partnership or other equity interests representing 10% or
more of the voting power such Person (including, without limitation, any voting
securities or partnership or other equity interests that such other Person has
the right to acquire pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise, all of which shall be deemed
beneficially owned by such other Person for purposes hereof), or (c) any sale,
lease, exchange, transfer or other disposition, in a single transaction or
series of related transactions, of all or substantially all, or a substantial
portion, of the assets of such Person.
 
“Closing” is defined in Section 2.6.
 
“Closing Payment” is defined in Section 2.3.
 
“Closing Date” is defined in the opening paragraph.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Collection Period” is defined in Section 2.4(b).
 
“Company” is defined in the opening paragraph.
 
“Company Subsidiaries” means, collectively, FFC Acquisition Co., LLC, a South
Carolina limited liability company, Mortician’s Choice, LLC, a South Carolina
limited liability company, and Canadian Funeral Financial, LLC, a South Carolina
limited liability company.
 
“Consent” means any consent, approval, authorization, permission or waiver.
 
“Contract” means any contract, obligation, commitment, lease, license, purchase
order or other agreement, whether written or oral, together with all amendments
and other modifications thereto.
 
“Control”, or any derivation thereof, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies (whether through the ownership of securities or of partnership or other
ownership interests, by contract or otherwise), provided, however, that, in any
event, any Person that owns or holds, directly or indirectly, at least 10% of
the voting securities or at least 10% of the partnership or other equity
interests of any other Person (other than as a limited partner of such Person)
will be deemed to Control such other Person.
 
 
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“Customer” means any funeral home, cemetery or owner or operator of a similar
business in the death care industry for which the Company or any Company
Subsidiary has provided funding within the 12 month period prior to the Closing
Date, as set forth on Schedule 1 hereto.
 
“Direct Claim” is defined in Section 7.7.
 
“Earn-out Calculation” is defined in Section 2.5.
 
“Earn-out Calculation Objection Notice” is defined in Section 2.5.
 
“Earn-out Calculation Statement” is defined in Section 2.5.
 
“Earn-out Multiple” means 0.0042.
 
“Earn-out Payment” is defined in Section 2.5.
 
“Earn-out Period” means the period beginning on the Closing Date and ending on
the date that is three years after the Closing Date.
 
“Employee Benefit Plans” is defined in Section 3.18.
 
“Encumbrance” means any lien, mortgage, pledge, encumbrance, charge, security
interest, adverse or other claim, community property interest, condition,
equitable interest, option, warrant, right of first refusal, license, covenant
or other restriction of any kind or nature.
 
“Environmental Laws” means any foreign, federal, state or local statute,
regulation, ordinance, rule of common law or other legal requirement currently
in effect relating to the protection the environment or natural resources,
including the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the
Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. § 2601 et seq.), and the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. § 136 et seq.), as each has been or may be amended and the
regulations promulgated pursuant thereto.
 
“Environmental Permits” is defined in Section 3.16.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Escrow Account” is defined in Section 2.3.
 
 
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“Escrow Agent” is defined in Section 2.3.
 
“Escrow Agreement” is defined in Section 2.7.
 
“Escrow Amount” is defined in Section 2.3.
 
“Financial Statements” is defined in Section 3.5.
 
“Funded Production” is defined in Section 2.5.
 
“GAAP” means generally accepted accounting principles in the United States as
set forth in pronouncements of the Financial Accounting Standards Board (and its
predecessors) and the American Institute of Certified Public Accountants and,
unless otherwise specified, as in effect on the date hereof or, with respect to
any financial statements, the date such financial statements were prepared.
 
“Good Standing Period” is defined in Section 2.4.
 
“Good Standing Receivable Value” means the aggregate amount of assignment
receivables outstanding for less than 120 days as of the Closing Date pursuant
to the Assignment Agreements.
 
“Governmental Body” means any federal, state, local, foreign or other government
or quasi-governmental authority or any department, agency, subdivision, court or
other tribunal of any of the foregoing.
 
“Hypershop Liabilities” is defined in Section 2.2(a).
 
“Indebtedness” means as to any Person at any time: (a) obligations of such
Person for borrowed money; (b) obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments; and (c) capitalized lease
obligations of such Person.
 
“Indemnified Party” is defined in Section 7.3.
 
“Indemnifying Party” is defined in Section 7.3.
 
“Intellectual Property” means all intellectual property rights of every kind and
nature whatsoever.
 
“IRS” means the U.S. Internal Revenue Service.
 
“Knowledge of the Company”, “Company’s Knowledge” or similar phrases means the
present actual, conscious knowledge of facts, matters or circumstances of A.
Todd Justice and Charles B. Gallagher, Jr., and facts, matters or circumstances
of which they reasonably ought to know, without any investigation.
 
 
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“Law” means any federal, state, local, foreign or other law, statute, ordinance,
regulation, rule, regulatory or administrative guidance, Order, constitution,
treaty, principle of common law or other restriction of any Governmental Body.
 
“Lease” is defined in Section 3.10.
 
“Leased Real Property” is defined in Section 3.10.
 
“Liabilities” means any liability, obligation or commitment of any kind or
nature, whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due.
 
“License” is defined in Section 3.12.
 
“Losses” means any losses, liabilities, obligations, damages, demands, claims,
suits, actions, judgments or causes of action, assessments, penalties, fines,
Taxes, costs and expenses (including interest, penalties, reasonable attorneys’
fees and costs, any and all reasonable expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim), and any and all amounts paid in settlement of any claim or litigation.
 
“Material Adverse Change” and “Material Adverse Effect” means any change or
effect (i) that is materially adverse to the financial condition or results of
operations of the Company and the Company Subsidiaries (taken as a whole),
except for any change or effect that arises out of, results from or is
attributable to (A) any change in conditions in the United States, foreign or
global economy or capital or financial markets generally, including any change
in interest or exchange rates or commodity prices, (B) any change in conditions
(including any change in general legal, regulatory, political, economic or
business conditions or any change in GAAP) in or otherwise generally affecting
industries in which the Company and the Company Subsidiaries conduct the
Business, (C) the negotiation, execution, announcement or consummation of this
Agreement and the Transactions, including the impact thereof on relationships,
contractual or otherwise, with Customers, suppliers, distributors, partners or
employees, (D) any natural disaster, hostilities, act of terrorism or war
(whether or not threatened, pending or declared) or the escalation or material
worsening of any such natural disaster, hostilities, acts of terrorism or wars,
and (E) any matter of which Buyer is aware on the date hereof, or (ii) that
materially and adversely affects the ability of Seller to consummate the
Transactions.
 
“Material Contract” is defined in Section 3.11.
 
“Most Recent Balance Sheet” is defined in Section 3.5.
 
“Operating Agreement” means that certain Second Amended and Restated Operating
Agreement of the Company dated as of November 20, 2012.
 
“Order” means any order, award, decision, injunction, judgment, ruling, decree,
charge, writ, subpoena or verdict entered, issued, made or rendered by any
Governmental Body or arbitrator.
 
 
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“Organizational Documents” means (a) the certificate or articles of
incorporation, formation or organization, (b) the bylaws, operating agreement or
limited liability company agreement, (c) any documents comparable to those
described in clauses (a) and (b) as may be applicable pursuant to any Law and
(d) any amendment or modification to any of the foregoing.
 
“Outstanding Receivables” means all assignment receivables outstanding as of the
Closing Date pursuant to the Assignment Agreements.
 
“Parties” means Buyer, Security National, Seller and the Company.
 
“Pension Plan” is defined in Section 3.18.
 
“Permit” means any permit, license or Consent issued by any Governmental Body or
pursuant to any Law.
 
“Permitted Encumbrances” means (a) Encumbrances for Taxes that are not yet due
and payable or that may hereafter be paid without material penalty or that are
being contested in good faith, (b) statutory Encumbrances of landlords and
workers’, carriers’, materialmen’s, suppliers’ and mechanics’ or other like
Encumbrances incurred in the ordinary course of business, (c) Encumbrances and
encroachments which do not materially interfere with the present use of the
properties they affect, (d) Encumbrances that will be released prior to or as of
the Closing, (e) Encumbrances created by or through Buyer, (f) Encumbrances in
respect of any obligations as lessee under capitalized leases, (g) Encumbrances
arising pursuant to the Operating Agreement; and (h) Encumbrances set forth on
Schedule 1.1.
 
 “Person” means any individual, corporation, limited liability company,
partnership, company, sole proprietorship, joint venture, trust, estate,
association, organization, labor union, Governmental Body or other entity.
 
“Purchase Price” is defined in Section 2.3.
 
“Proceeding” means any proceeding, charge, complaint, claim, demand, notice,
action, suit, litigation, hearing, audit, investigation, arbitration or
mediation (in each case, whether civil, criminal, administrative, investigative
or informal) commenced, conducted, heard or pending by or before any
Governmental Body, arbitrator or mediator.
 
“Receivables Payment” is defined in Section 2.4.
 
“Related Person” means (a) with respect to a specified individual, any member of
such individual’s Family and any Affiliate of any member of such individual’s
Family and (b) with respect to a specified Person other than an individual, any
Affiliate of such Person and any member of the Family of any such Affiliates
that are individuals.  The “Family” of a specified individual means the
individual, such individual’s spouse, any other individual who is related to the
specified individual or such individual’s spouse within the first degree.
 
 
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“Representative” means, with respect to a particular Person, any director,
officer, member, manager, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, accountants and
financial advisors.
 
“Review Period” is defined in Section 2.5.
 
“Security Finance” is defined in Section 2.3.
 
“Security National” is defined in the opening paragraph.
 
“Seller” is defined in the opening paragraph.
 
“Tax” means any federal, state, local, foreign or other income, gross receipts,
license, payroll, employment, excise, stamp, customs duties, franchise,
withholding, social security (or similar), unemployment, real property, personal
property, sales, use, transfer, value added, general service, alternative or
add-on minimum or other tax of any kind whatsoever, however denominated, and
will include any interest, penalty, or addition thereto, whether disputed or
not.
 
“Tax Return” is defined in Section 3.13.
 
“Third-Party Claim” is defined in Section 7.6.
 
“Transaction Documents” means this Agreement and all other agreements, documents
and certificates contemplated hereby or thereby or executed in connection
herewith or therewith.
 
“Transactions” means the transactions contemplated by the Transaction Documents.
 
“Uncollected Receivables” is defined in Section 2.4.
 
“Uncollected Receivables Notice” is defined in Section 2.4.
 
“Units” is defined in the recitals.
 
ARTICLE II
 
SALE AND PURCHASE OF UNITS
 
2.1 Sale and Purchase of Units.  Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall grant, sell, assign, transfer and
deliver to Buyer or its nominee, and Buyer or such nominee shall purchase and
acquire from Seller, all right, title and interest of Seller in and to all of
the Units owned by Seller as set forth opposite Seller’s name on Schedule 2.1,
free and clear of any Encumbrance.
 
2.2 Hypershop Liabilities.  At or prior to Closing, Seller agrees to provide the
Company with a release from Hypershop, LLC (“Hypershop”) with respect to all
pre-Closing Indebtedness and Liabilities owed by the Company or any Company
Subsidiary to Hypershop associated with loans made by Hypershop to the Company
and the Company Subsidiaries (the “Hypershop Liabilities”) the form of which is
attached as Exhibit B.  For avoidance of doubt, such release shall not impact
any of Hypershop’s claims and rights pursuant to this Agreement or any of the
other Transaction Documents.
 
 
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2.3 Purchase Price.
 
(a) The purchase price for the Units (the “Purchase Price”) shall be an amount
equal to the sum of (i) $3,000,000, plus (ii) the Good Standing Receivable
Value, plus (iii) the Additional Receivable Payments, if any, plus (iv) the
Earn-out Payments, if any.  The Purchase Price shall be subject to adjustment in
accordance with Section 2.4.
 
(b) The Purchase Price shall be paid as follows:
 
(i) At Closing, Buyer shall pay an amount equal to the sum of (A) $3,000,000,
plus (B) the Good Standing Receivable Value (such amount, the “Closing Payment”)
as follows:  (w) an amount equal to $175,000 of the Closing Payment (the “Escrow
Amount”) shall be paid to the escrow account (the “Escrow Account”) at South
Carolina Bank and Trust, N.A., as escrow agent (the “Escrow Agent”), by wire
transfer of immediately available funds to an account designated by the Escrow
Agent, to be held by the Escrow Agent for a period of twelve months after the
Closing Date pursuant to the terms and conditions of the Escrow Agreement; (x)
all amounts necessary to discharge all Indebtedness owed by the Company or any
Company Subsidiary to Security Finance Corporation of Spartanburg (“Security
Finance”) as of the Closing Date shall be paid to Security Finance by wire
transfer of immediately available funds to accounts designated by Security
Finance pursuant to the Payoff Letter, as defined in Section 2.7(a)(ix); (y) all
amounts necessary to pay and discharge all other Indebtedness and Liabilities
owed by the Company and the Company Subsidiaries, including but not limited to
FCC severance, Plum Card obligations, accrued salaries, commissions and
employment taxes, and accounts payable outstanding as of the Closing Date; and
(z) the balance of the Closing Payment remaining after the amounts paid pursuant
to subsections (w), (x) and (y) shall be paid to Seller by wire transfer of
immediately available funds to an account designated by Seller prior to Closing.
In the event there is insufficient cash held by the Company and the Company
Subsidiaries at Closing to pay off such outstanding Indebtedness and Liabilities
as of the Closing Date, Buyer shall be entitled to pay off or satisfy such
Indebtedness and Liabilities through reduction of the Escrow Account in
accordance with the terms of the Escrow Agreement, until the Escrow Amount has
been reduced to zero or fully discharged, and if the Escrow Amount is
insufficient therefor, then payment shall be made by offsetting or crediting the
amounts owed to Buyer from the Earn-out Payments owed to Seller until such
Indebtedness and Liabilities are fully paid and satisfied.  The parties agree
and acknowledge that if the Escrow amount and the offset or credit against the
Earn-Out-Payments is still insufficient to pay off or satisfy such outstanding
Indebtedness and Liabilities as of the Closing Date, then neither the Buyer nor
Security National shall have any further recourse against Seller and Seller
shall have no further obligation or Liability to Buyer or Security National.
 
(ii) Buyer shall make the Additional Receivable Payments to Seller at the times
and in the amounts determined in accordance with Section 2.4.
 
(iii) Buyer shall make the Earn-out Payments to Seller at the times and in the
amounts determined in accordance with Section 2.5.
 
 
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2.4 Receivable Payment; Additional Receivable Payments.
 
(a) Attached hereto as Schedule 2.4 is the Company’s calculation of the Good
Standing Receivable Value (the “Good Standing Receivable Value”), together with
a listing of all Assignment Agreements included in the calculation of the Good
Standing Receivable Value.
 
(b) During the period from the Closing Date until the date that is 270 days
after the Closing Date (the “Collection Period”), Buyer shall, and shall cause
the Company and each Company Subsidiary to, use commercially reasonable efforts
to collect all Outstanding Receivables and to act in good faith in connection
with its receipt and application of the Outstanding Receivables and all related
discussions with account debtors and other Persons.
 
(c) Within 15 Business Days after expiration of the 120 day period following the
Closing Date (the “Good Standing Period”), Buyer shall provide written notice to
Seller (the “Uncollected Receivables Notice”), with reasonable supporting
detail, of (i) the amount of any accounts receivable included in the Good
Standing Receivable Value that was not collected in full by Buyer or any of its
Affiliates (including for such purpose the Company and any Company Subsidiary)
during the Good Standing Period (collectively, the “Uncollected Receivables”)
and (ii) which of such Uncollected Receivables Buyer elects to receive payment
from Seller pursuant to this Section 2.4(c).  Buyer shall be entitled to payment
from Seller (the “Receivables Payment”) for the amount of any and all
Uncollected Receivables with respect to which Buyer elects in the Uncollected
Receivables Notice to receive such payment.  The Receivables Payment, if any,
shall be satisfied or paid within 15 days after Seller’s receipt of the
Uncollected Receivables Notice through reduction of the Escrow Amount in
accordance with the Escrow Agreement, until the Escrow Amount has been reduced
to zero or fully disbursed, and if the Escrow Amount is insufficient therefor,
then payment shall be made by offsetting or crediting at any time during the
Earn-out Period the amounts owed to Buyer from the Earn-out Payments owed to
Seller until Buyer has received full payment of an amount equal to the
Receivables Payment.  The parties agree and acknowledge that if the Escrow
Amount and the offset or credit against Earn-out Payments is still insufficient,
then neither Buyer nor Security National shall have any further recourse against
Seller, and Seller shall not have any further obligation or Liability to the
Buyer or Security National.  
 
(d) In the event that Buyer or any of its Affiliates (including for such purpose
the Company and any Company Subsidiary) collects any amount, whether during or
after the Collection Period, in respect of any Outstanding Receivable (i) which
is not included in the Good Standing Receivable Value, or (ii) with respect to
which Seller has made a Receivables Payment pursuant to Section 2.4(c), Buyer
shall, within ten Business Days after Buyer’s or any Affiliate’s receipt of such
amount, pay such amount to Seller (each, an “Additional Receivable Payment”) by
wire transfer of immediately available funds to an account designated by Seller.
 
(e) In the event that Buyer and its Affiliates (including for such purpose the
Company and the Company Subsidiaries) do not collect all Outstanding Receivables
in full during the Collection Period, Buyer shall, and shall cause its
Affiliates to, within five Business Days after expiration of the Collection
Period, assign, transfer and deliver to Seller or its nominee, by executing and
delivering to Seller or its nominee a bill of sale in form and substance
mutually agreeable to Buyer and Seller, all right, title and interest in and to
such Outstanding Receivables (other than those Uncollected Receivables that
Buyer in its sole discretion elects to keep rather than receive Receivable
Payments for such Uncollected Receivables pursuant to Section 2.4(c)) and all
Assignment Agreements relating thereto, without any representations, warranties
or guarantees (other than with respect to authority, ownership and no
encumbrances).  Buyer acknowledges and agrees that after such assignment Seller
or its nominee shall have the right to pursue collection of any such Outstanding
Receivables by such means as Seller or its nominee may determine in its sole
discretion.
 
 
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2.5 Earn-out Payments.
 
(a) Buyer shall pay to Seller with respect to each Calculation Period within the
Earn-out Period an amount (each, an  “Earn-out Payment”) equal to the product of
(i) the aggregate amount of life insurance assignments funded during such
Calculation Period by Buyer or any of its Affiliates (including for such purpose
the Company and the Company Subsidiaries)  from Customers who are Customers of
the Company or any Company Subsidiary as of the Closing Date (“Funded
Production”), multiplied by (ii) the Earn-out Multiple.  For example, if during
the first full calendar month after Closing Buyer or any of its Affiliates,
including the Company and the Company Subsidiaries, collectively fund an
aggregate amount equal to $12,000,000 from funeral homes which are Customers of
the Company or any Company Subsidiary as of the Closing Date, Buyer would owe to
Seller an Earn-out Payment in the amount of $50,400 with respect to such month.
 
(b) In the event any Customer of the Company or the Company Subsidiaries has
also been a customer of C&J Financial, LLC, an Alabama limited liability company
(“C & J Financial”), during the twelve month period prior to the Closing Date,
all of which (along with each Customer’s respective Assignment funding amounts
for such twelve month period) are set forth on Schedule 2.5(b), the Earn-out
Multiple shall be proportionately reduced for any Funded Production by Buyer for
such Customer following the Closing Date by the Funded Production for such
Customer by the Company and the Company Subsidiaries during the twelve month
period prior to the Closing Date as set forth on Schedule 2.5(b) as compared to
the Funded Production for such Customer by C & J Financial during such twelve
month period as set forth on Schedule 2.5(b).  For example, if during the twelve
month period prior to the Closing Date, the Company and the Company Subsidiaries
funded $100,000 in life insurance assignments for Customer A and C & J Financial
also funded $100,000 in life insurance assignments for Customer A, then Buyer
would owe Seller an Earn-out Payment for any funding it provided to Customer A
following the Closing Date based on an Earn-out Multiple of 0.0021 instead of an
Earn-out Multiple of 0.0042.
 
(c)  (i) On or before the date which is 15 days after the last day of each
Calculation Period, Buyer shall prepare and deliver to Seller a written
statement (in each case, an “Earn-out Calculation Statement”) setting forth in
reasonable detail its determination of Funded Production for the applicable
Calculation Period and its calculation of the resulting Earn-out Payment (in
each case, an “Earn-out Calculation”).  Each Earn-out Calculation Statement
shall include a listing by Customer of the amount of Funded Production from such
Customer during the applicable Calculation Period including, for each funding
the funding date, policy number, assignment number, Customer, insurance company,
assignment amount and such other information as may be reasonably requested by
Seller from time to time.
 
 
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(ii) Seller shall have 15 days after its receipt of the Earn-out Calculation
Statement for each Calculation Period (in each case, the “Review Period”) to
review the Earn-out Calculation Statement and the Earn-out Calculation set forth
therein.  During the Review Period and until such time as any disputes with
respect to such Earn-out Calculation have been resolved, Buyer shall provide to
Seller access to the appropriate personnel of Buyer, the Company and their
respective Affiliates and all supporting financial statements, work papers and
other documentation and information reasonably requested by Seller in connection
with such review.  Prior to the expiration of the Review Period, Seller may
object to the Earn-out Calculation set forth in the Earn-out Calculation
Statement for the applicable Calculation Period by delivering a written notice
of objection (an “Earn-out Calculation Objection Notice”) to Buyer.  Any
Earn-out Calculation Objection Notice shall specify the items in the applicable
Earn-out Calculation disputed by Seller and shall describe in reasonable detail
the basis for such objection, as well as the amount in dispute.  If Seller fails
to deliver an Earn-out Calculation Objection Notice to Buyer prior to the
expiration of the Review Period, then the Earn-out Calculation set forth in the
Earn-out Calculation Statement shall be final and binding on the Parties hereto.
If Seller timely delivers a Earn-out Calculation Objection Notice, Buyer and
Seller shall negotiate in good faith to attempt to resolve the disputed items
and agree upon the resulting amount of the Earn-out Payment for the applicable
Calculation Period.
 
(d) Buyer's obligation to pay each of the Earn-out Payments to Seller in
accordance with Section 2.5(a) is an independent obligation of Buyer and is not
otherwise conditioned or contingent upon the satisfaction of any conditions
precedent to any preceding or subsequent Earn-out Payment.

(e) Any Earn-out Payment that Buyer is required to pay pursuant to Section
2.5(a) hereof shall be paid in full no later than five Business Days following
the date upon which the determination of the Earn-out Payment for the applicable
Calculation Period becomes final and binding upon the parties as provided in
Section 2.5(b) (including any final resolution of any dispute raised by Seller
in an Earn-out Calculation Objection Notice).  Buyer shall pay to Seller the
applicable Earn-out Payment in cash by wire transfer of immediately available
funds to the bank account designated by Seller.

(f) Subject to Section 2.5(h), during the 120 day period (the “120 Day Period”)
immediately following the Closing, Buyer shall, and shall cause the Company and
each of the Company Subsidiaries to:

(i) With respect to the Company’s assignment receivables, and collection and
receivables processes and policies, operate the Business in substantially the
same manner, and at least as favorably to Seller, as operated by the Company and
the Company Subsidiaries as of the Closing Date, including without limitation
following the same collections policies and procedures for collecting assignment
receivables, and maintaining the same addresses, post office boxes and checking
accounts for collecting assignment receivables, as followed or maintained by the
Company and the Company Subsidiaries as of the Closing Date;

 
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(ii) continue to employ each of the employees of the Company and each Company
Subsidiary involved in the collection of assignment receivables as of the
Closing Date (provided that it shall not be a breach of this provision if any
such employee terminates his or her employment after Closing), and preserve the
role of each such employee in the collections process such that each such
employee provides substantially the same functions with respect to the Business
during the 120 Day Period;

(iii) maintain the Company and each Company Subsidiary as a separate stand-alone
limited liability company, wholly owned by Buyer (or, in the case of a Company
Subsidiary, wholly owned by the Company);

(iv) use commercially reasonable efforts to preserve the roles and
responsibilities of the Company’s and each Company Subsidiary’s key management
and employees in the operation of the Business and to preserve relationships of
the Company and the Company Subsidiaries with the Customers who are Customers of
the Company or any Company Subsidiary as of the Closing Date;

(v) maintain separate accounting books and records for the Company and the
Company Subsidiaries and permit the Seller to inspect such books and records,
upon reasonable advance notice;

(vi) not cease operation of the Business;

(vii) not compete, directly or indirectly, with the Business or divert any sales
or revenues from the Company or any Company Subsidiary to Buyer or any Affiliate
thereof;

(viii) not take any actions, the purpose of which are intended to or would
reasonably be expected to deprive the Seller of the benefits provided by this
Section 2.5 or avoid or reduce any of the Earn-out Payments; and

(ix) otherwise act in good faith with respect to, and use commercially
reasonable efforts to achieve and maximize, the Earn-out Payments.

(g) Subject to Section 2.5(h), during the period  beginning the day following
the 120 Day Period and for the remainder of the Earn-out Period, Buyer shall,
and shall cause the Company and each of the Company Subsidiaries to:

(i) operate the Business in a commercially reasonable manner as operated by the
Company and the Company Subsidiaries as of the Closing Date;

 
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(ii) use commercially reasonable efforts to preserve relationships of the
Company and the Company Subsidiaries with the Customers who are Customers of the
Company or any Company Subsidiary as of the Closing Date;

(iii) maintain separate books and records for the Company and permit the Seller
to inspect such books and records, upon reasonable advance notice;

(iv) not cease operation of the Business;  and

(v) otherwise act in good faith with respect to, and use commercially reasonable
efforts to achieve and maximize, the Earn-out Payments.

(h) During the Earn-out Period, in the event of any Change in Control with
respect to the Company or any Company Subsidiary, Buyer shall cause the
purchaser or acquiror in such Change in Control to assume in writing, in form
and substance satisfactory to Seller, all of Buyer’s obligations pursuant to
this Section 2.5.

2.6 Closing.  The closing of the Transactions (the “Closing”) will take place at
the offices of Nelson Mullins Riley & Scarborough LLP in Greenville, South
Carolina (or remotely by electronic exchange of documents and signatures).  The
Closing shall be deemed effective as of 12:01 a.m. local time on the Closing
Date.
 
2.7 Closing Deliveries.
 
At the Closing:
 
(a) Seller shall deliver, or cause to be delivered, to Buyer:
 
(i) an instrument of assignment, in substantially the form attached hereto as
Exhibit A, executed by Seller assigning to Buyer all of the Units;
 
(ii) Release Agreement with respect to the Hypershop Liabilities in
substantially the form attached hereto as Exhibit B, executed by the Company,
Hypershop, any applicable Company Subsidiary and Seller;
 
(iii) an Escrow Agreement, in substantially the form attached hereto as Exhibit
C (the “Escrow Agreement”), executed by Seller;
 
(iv) a Consulting Agreement between the Company and A. Todd Justice, in
substantially the form attached hereto as Exhibit D, executed by Mr. Justice;
 
(v) a Noncompete Agreement, in substantially the form attached hereto as Exhibit
E, executed by Seller;
 
(vi) a certificate of the President of the Company certifying, as complete and
accurate as of the Closing, attached copies of the Organizational Documents and
a Certificate of Existence thereof, certifying and attaching all requisite
resolutions or actions of the Company’s members and managers approving the
execution and delivery of each of the Transaction Documents and the consummation
of the Transactions and certifying to the incumbency of the officers of the
Company executing the Transaction Documents;
 
 
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(vii) a certificate of the President of each of the Company Subsidiaries
certifying, as complete and accurate as of the Closing, attached copies of the
Organizational Documents and a Certificate of Existence thereof;
 
(viii) written resignations of managers and officers of the Company and each of
the Company Subsidiaries other than the individuals set forth on Schedule
2.7(a)(viii); and
 
(ix) a payoff letter from Security Finance, the form of which is attached hereto
as Exhibit F (the “Payoff Letter”).
 
(b) Buyer shall deliver, or cause to be delivered:
 
(i) the Closing Payment;
 
(ii) the Escrow Agreement, executed by Buyer; and
 
(iii) a certificate of the Secretary of Buyer certifying, as complete and
accurate as of the Closing, attached copies of the Organizational Documents and
a Certificate of Good Standing thereof, certifying and attaching all requisite
resolutions or actions of Buyer’s members and managers approving the execution
and delivery of each of the Transaction Documents and the consummation of the
Transactions and certifying to the incumbency of the officers of Buyer executing
the Transaction Documents.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF SELLERS
 
Except as set forth in the Schedules to this Agreement, Seller hereby represents
and warrants to Buyer as follows as of the Closing Date:

3.1 Organization and Qualification.
 
(a) The Company and each of the Company Subsidiaries is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, with full corporate power and authority to
conduct its business as it is now being conducted.  The Company and each of the
Company Subsidiaries is duly qualified or registered to transact business under
the applicable Law of each jurisdiction where the character of its activities or
the location of the properties owned or leased by it requires such qualification
or registration other than in such jurisdictions where the failure to be so
qualified or registered under the applicable Law would not have a Material
Adverse Effect.
 
 
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(b) Seller is a limited liability company duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.
 
3.2 Capitalization.
 
(a) The authorized capital of the Company consists, immediately prior to the
Closing, of 100 Units, of which 70 Units are issued and outstanding immediately
prior to the Closing.  All of the issued and outstanding Units have been duly
authorized and validly issued and are fully paid and nonassessable.  There are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements,
arrangements or understandings, orally or in writing, to purchase or acquire any
Units or any securities convertible into or exchangeable for any Units.  Other
than the Company Subsidiaries, the Company does not own or hold any capital
stock or other equity, partnership, membership or other ownership interest,
either of record, beneficially or equitably, in any other Person.
 
(b) Seller holds of record and owns beneficially all of the Units, free and
clear of all Encumbrances (other than Permitted Encumbrances).
 
(c) The Company owns 100% of all issued and outstanding membership interests in
each of the Company Subsidiaries.  All of the issued and outstanding membership
interests in each of the Company Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable.  There are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements, arrangements or
understandings, orally or in writing, to purchase or acquire any membership
interests in any of the Company Subsidiaries or any securities convertible into
or exchangeable for any membership interests in any of the Company
Subsidiaries.  None of the Company Subsidiaries owns or holds any capital stock
or other equity, partnership, membership or other ownership interest, either of
record, beneficially or equitably, in any other Person.
 
3.3 Authority.
 
(a) The Company has all requisite corporate or similar power and authority to
execute and deliver the Transaction Documents to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the
Transactions.  The execution and delivery by the Company of the Transaction
Documents to which it is a party and the consummation by the Company of the
Transactions have been duly authorized by all requisite corporate action of the
Company.  The Transaction Documents to which the Company is a party constitute
the valid and legally binding obligations of the Company, enforceable against
the Company in accordance with the terms of such Transaction Documents.
 
(b) Seller has all requisite corporate or similar power and authority to execute
and deliver the Transaction Documents to which Seller is a party, to perform its
obligations hereunder and thereunder and to consummate the Transactions.  The
execution and delivery by Seller of the Transaction Documents to which Seller is
a party and the consummation by Seller of the Transactions have been duly
authorized by all requisite corporate action of Seller.  The Transaction
Documents to which Seller is a party constitute the valid and legally binding
obligations of Seller, enforceable against Seller in accordance with the terms
of such Transaction Documents.
 
 
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3.4 No Conflicts.
 
(a) Except as set forth on Schedule 3.4, neither the execution and delivery of
the Transaction Documents to which the Company is a party nor the consummation
of the Transactions by the Company will, directly or indirectly, with or without
notice or lapse of time:  (a) violate in any material respect any Law or Order
to which the Company or any Company Subsidiary or the Business is subject; (b)
violate or result in a breach of any material Permit held by the Company or any
Company Subsidiary or give any Governmental Body the right to terminate, revoke,
suspend or modify any Permit held by the Company or any Company Subsidiary; (c)
result in a breach of any Organizational Document of the Company or any Company
Subsidiary; (d) result in a breach of, constitute a default under, result in the
acceleration of or give any Person the right to accelerate the maturity or
performance of, or to cancel, terminate, modify or exercise any remedy under,
any Material Contract to which the Company or any Company Subsidiary is a party
or by which the Company or any Company Subsidiary is bound; or (e) require the
Company or any Company Subsidiary to obtain any Consent of or review by, or make
any registration, declaration or filing with, or give any notice to, any
Governmental Body or other Person.
 
(b) Neither the execution and delivery of the Transaction Documents to which
Seller is a party nor the consummation of the Transactions by Seller will,
directly or indirectly, with or without notice or lapse of time:  (a) violate in
any material respect any Law or Order to which Seller is subject; (b) result in
a breach of any Organizational Document of Seller; (c) result in the imposition
of any Encumbrance upon any Unit held by Seller; or (d) require Seller to obtain
any Consent of or review by, or make any registration, declaration or filing
with, or give any notice to, any Governmental Body or other Person.
 
3.5 Financial Statements.  Attached to Schedule 3.5(a) are the following
financial statements (collectively, the “Financial Statements”):  (i) the
unaudited, consolidated balance sheet of the Company and the Company
Subsidiaries as of December 31, 2013, and the related statement of income for
the fiscal year then ended; and (ii) the unaudited, consolidated balance sheets
of the Company and the Company Subsidiaries as of February 28, 2014, March 31,
2014 and April 30, 2014 (the “Most Recent Balance Sheets”), and the related
statement of income for such periods then ended.  The Financial Statements (x)
have been prepared from and are in accordance with the books and records of the
Company and the Company Subsidiaries, (y) have been prepared in accordance with
accounting principles, approaches and methodologies applied on a consistent
basis throughout the periods covered thereby, and (z) present fairly, in all
material respects, the assets and liabilities of the Company and the Company
Subsidiaries as of their respective dates and the results of operations for the
respective periods covered thereby.  The Company has no Indebtedness, other than
the Hypershop Liabilities and Indebtedness to Security Finance being paid at
Closing.
 
 
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3.6 Absence of Certain Changes.  Except as set forth on Schedule 3.6, and except
as expressly contemplated by this Agreement, since February 28, 2014:
 
(a) neither the Company nor any Company Subsidiary has sold, leased, transferred
or assigned any asset, other than for fair consideration in the ordinary course
of business;
 
(b) neither the Company nor any Company Subsidiary has experienced any physical
damage, destruction or loss (whether or not covered by insurance) to its
property or assets in excess of $10,000;
 
(c) except for the Assignment Agreements, neither the Company nor any Company
Subsidiary has entered into any Contract (or series of related Contracts)
involving the payment or receipt of more than $10,000, and no Person has
accelerated, terminated, modified or canceled any Contract (or series of related
Contracts) involving more than $10,000 to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
of its assets are bound;
 
(d) except for the Assignment Agreements, neither the Company nor any Company
Subsidiary has entered into any Contract that cannot be terminated without
penalty on less than thirty (30) days’ notice;
 
(e) no Encumbrance (other than any Permitted Encumbrance) has been imposed upon
any asset of the Company or any Company Subsidiary;
 
(f) neither the Company nor any Company Subsidiary has made any capital
expenditure (or series of related capital expenditures) involving more than
$10,000 or made any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related capital
investments, loans or acquisitions) involving more than $10,000;
 
(g) except with respect to Security Finance, neither the Company nor any Company
Subsidiary has issued, created, incurred or assumed any Indebtedness (or series
of related Indebtedness) involving more than $10,000 in the aggregate, except in
the ordinary course of business consistent with past practices;
 
(h) neither the Company nor any Company Subsidiary has canceled, compromised,
waived or released any right or claim (or series of related rights or claims) or
any Indebtedness owed to it, in any case involving more than $5,000, except in
the ordinary course of business consistent with past practices;
 
(i) the Company and each Company Subsidiary has (i) conducted its Business in
the ordinary course of business consistent with past practices, (ii) not made
any loan to, or entered into any other transaction with, any of its members or
managers, (iii) not entered into any employment Contract or modified the terms
of any existing employment Contract, and (iv) not granted any increase in the
base compensation of any of its members, managers, officers or employees, other
than in the ordinary course of business consistent with past practice;
 
 
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(j) neither the Company nor any Company Subsidiary has made a material change in
its accounting methods;
 
(k) there has not been any Proceeding commenced or, to the Company’s Knowledge,
threatened against the Company or any Company Subsidiary, the Business or any
assets thereof;
 
(l) there has not been any Material Adverse Change; and
 
(m) neither the Company nor any Company Subsidiary has agreed or committed to
any of the foregoing.
 
3.7 Title to Assets.  Except as set forth on Schedule 3.7, the Company and each
Company Subsidiary has good and marketable title to, or a valid leasehold
interest in, all of the material assets used thereby in the conduct of the
Business, free and clear of any Encumbrances except Permitted Encumbrances.
 
3.8 Tangible Personal Property; Condition of Assets.  The tangible personal
property owned or leased by the Company or any Company Subsidiary is in good
operating condition and repair, reasonable wear and tear and normal depreciation
excepted.  Except as set forth on Schedule 3.8, all such tangible personal
property is located on the Leased Real Property.
 
3.9 Assignment Receivables.  Except as set forth in Schedule 3.9, all assignment
receivables that are included in the Good Standing Receivable Value represent
obligations from funds actually disbursed by the Company or a Company Subsidiary
in connection with the Business, and the Company or the applicable Company
Subsidiary has obtained life insurance assignment Contracts with respect to all
such  assignment receivables, all of which are included in the Assignment
Agreements.  Schedule 2.4 sets forth the aging of such assignment
receivables.  Except as set forth on Schedule 3.9, there is no contest, claim or
right to set-off under any such assignment receivables pursuant to an Assignment
Agreement that is included in the Good Standing Receivable Value relating to the
amount or validity thereof.
 
3.10 Real Property.
 
(a) Except for the leases set forth on Schedule 3.10(b), neither the Company nor
any Company Subsidiary has any right, title or interest in or to any real
property.
 
(b) Schedule 3.10(b) lists all of the real property and interests therein
leased, subleased or otherwise occupied or used by the Company and the Company
Subsidiaries (collectively, the “Leased Real Property”) and contains a street
address for each item of Leased Real Property.  For each item of Leased Real
Property, Schedule 3.10(b) also lists the lease, sublease, or other Contract
pursuant to which the Company or any Company Subsidiary holds a possessory
interest in the Leased Real Property (each, a “Lease”).  Neither the Company nor
any Company Subsidiary is a sublessor of, or has assigned any lease covering,
any item of Leased Real Property.  Leasing commissions or other brokerage fees
due from or payable by the Company or any Company Subsidiary with respect to any
Lease have been paid in full.
 
(c) Neither the Company nor any Company Subsidiary has received written notice
of any condemnation or eminent domain proceedings which relate to the Leased
Real Property.
 
 
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3.11 Contracts.
 
(a) Schedule 3.11 lists the following Contracts currently in effect to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound (collectively, the “Material Contracts”):
 
(i) each Assignment Agreement;
 
(ii) each Contract between the Company or any Company Subsidiary and any
Customer identified on Schedule 3.19, excluding any life insurance assignment
agreements that have been concluded;
 
(iii) each Contract that involves expenditures or receipts in excess of $25,000
over the remaining term of such Contract, except the Assignment Agreements;
 
(iv) each real property lease, license, rental or occupancy agreement, and each
personal property lease or installment or conditional sales agreement, except
personal property leases and installment or conditional sales agreements having
a value per item or remaining aggregate payments of less than $25,000;
 
(v) each collective bargaining agreement and other Contract with any labor union
or other employee representative of a group of employees;
 
(vi) each joint venture, partnership or other similar Contract involving a
sharing of profits, losses, costs or Liabilities with any other Person;
 
(vii) each Contract containing any covenant that purports to restrict the
business activity of the Company, any Company Subsidiary or any of their
respective employees;
 
(viii) each Contract for capital expenditures in excess of $25,000;
 
(ix) except for Contracts with Security Finance and the Hypershop Liabilities,
each Contract for Indebtedness that is outstanding as of the Closing Date;
 
(x) each employment Contract; and
 
(xi) each Contract to which any Seller or any Related Person of any Seller is a
party.
 
(b) The Company has made available to Buyer a correct and complete copy of each
written Material Contract.  Each Material Contract is in full force and
effect.  Neither the Company nor any Company Subsidiary is in default under or
in breach of, or in receipt of any written notice alleging any default of, or
breach under, any Material Contract which has not been resolved.  To the
Company’s Knowledge, the other party or parties to each Material Contract are
not in default of the terms of such Material Contract.
 
 
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3.12 Intellectual Property.
 
(a) Schedule 3.12 identifies: (i) each trade name, trademark, service mark,
trade dress, corporate name, internet domain name and copyright owned by the
Company or any Company Subsidiary, and (ii) all Intellectual Property owned by a
third party and licensed to the Company or any Company Subsidiary, including all
licensed trademarks, service marks, trade names and copyrights (excluding
computer software and “off the shelf”, “shrink wrap” and “click wrap”
licenses).  Neither the Company nor any Company Subsidiary owns any registered
Intellectual Property.  The Company and each Company Subsidiary owns, or is
validly licensed or otherwise possesses valid rights to use or otherwise
exploit, all Intellectual Property used by it in connection with the Business.
 
(b) With respect to each item of Intellectual Property owned by the Company or
any Company Subsidiary, including the Intellectual Property listed as “owned” on
Schedule 3.12, the Company or such Company Subsidiary possesses all right, title
and interest in and to the item, free and clear of any Encumbrance (other than
Permitted Encumbrances).
 
(c) With respect to each item of Intellectual Property that any third party owns
and that the Company or any Company Subsidiary uses pursuant to license,
sublicense, agreement or permission (each such license, sublicense, agreement or
permission, a “License”), including the Intellectual Property listed as
“licensed” on Schedule 3.12:  (i) the License covering the item is in full force
and effect; (ii) neither the Company nor any Company Subsidiary is in default
under or in breach of, or in receipt of any written notice alleging any default
of, or breach under, such License which has not been resolved; and (iii) to the
Company’s Knowledge, the other party or parties to such License are not in
default of the terms of such License.
 
(d) To the Company’s Knowledge, there is no actual unauthorized use or
infringement by any Person of any Intellectual Property rights of the Company or
any Company Subsidiary.  Neither the Company nor any Company Subsidiary has
infringed upon any Intellectual Property rights of any third parties.
 
3.13 Tax.
 
Except as set forth on Schedule 3.13:
 
(a) The Company has made available to Buyer true, correct and complete copies of
all federal, state and local Tax Returns filed by the Company and each Company
Subsidiary for all taxable periods ending on or after December 31, 2010.
 
(b) All material returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
“Tax Returns”) required to be filed by the Company or any Company Subsidiary
have been filed (giving effect to extensions granted with respect thereto), and
all such Tax Returns are true, correct and complete in all material
respects.  The Company and each Company Subsidiary has timely paid all material
Taxes due or claimed to be due from it by any Governmental Body and no material
deficiency for any Taxes has been proposed, asserted or assessed against the
Company or any Company Subsidiary that has not been resolved and paid in
full.  There are no Encumbrances (other than Permitted Encumbrances) for Taxes
upon any of the assets of the Company or any Company Subsidiary.
 
 
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(c) No audit or other proceeding by any Governmental Body is presently pending
with respect to any Taxes or Tax Return of the Company or any Company Subsidiary
and neither the Company nor any Company Subsidiary has received written notice
of any pending audits or proceedings.
 
(d) Neither the Company nor any Company Subsidiary is a party to or is bound by
or has any obligation under any Tax sharing allocation or indemnity agreement or
similar contract or arrangement.
 
(e) The Company and each Company Subsidiary has complied in all material
respects with all applicable Laws, rules and regulations relating to the payment
and withholding of Taxes.
 
3.14 Legal Compliance.  Except as set forth on Schedule 3.14, the Company and
each Company Subsidiary is, and since January 1, 2012, has been, in compliance
in all material respects with all applicable Laws.  No Proceeding is pending
against the Company or any Company Subsidiary alleging any failure to comply
with any applicable Law.  Neither the Company nor any Company Subsidiary has
received written notice from any Person regarding any material violation by the
Company or any Company Subsidiary of any applicable Law.  The Company and each
Company Subsidiary has all material Permits necessary to allow the Company and
such Company Subsidiary to conduct and operate the Business as currently
conducted and operated.  The Company and each Company Subsidiary is in
compliance, in all material respects, with the terms and conditions of such
Permits.
 
3.15 Litigation.  Except as set forth on Schedule 3.15, there are no Proceedings
pending or, to the Knowledge of the Company, threatened against the Company or
any Company Subsidiary, or to which the Company or any of the Company
Subsidiaries is otherwise a party.  Except as set forth on Schedule 3.15, there
is no outstanding Order to which the Company, any Company Subsidiary or any of
their respective material assets are subject.
 
3.16 Environmental Matters.
 
Except as otherwise disclosed in Schedule 3.16:
 
(a) The Company and each Company Subsidiary is in material compliance with all
Environmental Laws, which compliance includes possessing and complying with all
material Permits required by Environmental Laws for their operations
(collectively, “Environmental Permits”).
 
 
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(b) There are no Proceedings pending or, to the Knowledge of the Company,
threatened against the Company or any Company Subsidiary alleging the violation
of or liability under Environmental Laws which would reasonably be expected to
result in the Company or any Company Subsidiary incurring material Liability
under Environmental Laws.
 
(c) To the Knowledge of the Company, there are no investigations of the
Business, or currently or previously owned, operated or leased real property of
the Company or any Company Subsidiary, pending or threatened which would
reasonably be expected to result in the Company or any Company Subsidiary
incurring any material Liability pursuant to any Environmental Law.
 
3.17 Employees.
 
(a) Schedule 3.17 contains a complete and accurate list of the following
information for each employee and independent contractor of the Company and each
Company Subsidiary, including each employee on leave of absence or layoff
status:  name, job title; date of hiring or engagement; and current compensation
paid or payable. Except as set forth on Schedule 3.17, each employee of the
Company is an at will employee.
 
(b) The Company and each Company Subsidiary has complied in all material
respects with all applicable Laws relating to employment practices, terms and
conditions of employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining and occupational
safety and health.
 
(c) Neither the Company nor any Company Subsidiary is a party to or bound by any
collective bargaining agreement.  Neither the Company nor any Company Subsidiary
has experienced any strike, slowdown, picketing, work stoppage or other
collective bargaining dispute.  There is no lockout of any employees by the
Company or any Company Subsidiary.
 
3.18 Employee Benefits.
 
(a) Schedule 3.18 lists each “employee benefit plan” (as defined in Section 3(3)
of ERISA) and any other material employee plan or agreement maintained by the
Company or any Company Subsidiary (each, a “Employee Benefit Plan”).  The
Company has made available to Buyer correct and complete copies of (i) each
Employee Benefit Plan (or, in the case of any such Employee Benefit Plan that is
unwritten, descriptions thereof), (ii) the most recent annual reports on Form
5500 required to be filed with the IRS with respect to each Employee Benefit
Plan (if any such report was required), (iii) the most recent summary plan
description for each Employee Benefit Plan for which such summary plan
description is required and (iv) each trust agreement and insurance or group
annuity contract relating to any Employee Benefit Plan.  Each Employee Benefit
Plan maintained, contributed to or required to be contributed to by the Company
or any Company Subsidiary has been administered in all material respects in
accordance with its terms.  All the Employee Benefit Plans are all in material
compliance with the applicable provisions of ERISA, the Code and all other
applicable Laws.
 
 
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(b) To the Knowledge of the Company, (i) all Employee Benefit Plans that are
“employee pension benefit plans” (as defined in Section 3(2) of ERISA) that are
intended to be tax qualified under Section 401(a) of the Code (each, a “Pension
Plan”) that are maintained, contributed to or required to be contributed to by
the Company or any Company Subsidiary are so qualified and (ii) no event has
occurred since the date of the most recent determination letter or application
therefor relating to any such Pension Plan that would adversely affect the
qualification of such Pension Plan.  The Company  has made available to Buyer a
correct and complete copy of the most recent determination letter received with
respect to each Pension Plan maintained, contributed to or required to be
contributed to by the Company or any Company Subsidiary, as well as a correct
and complete copy of each pending application for a determination letter, if
any.
 
(c) All contributions, premiums and benefit payments under or in connection with
the Employee Benefit Plans that are required to have been made as of the date
hereof in accordance with the terms of the Employee Benefit Plans have been
timely made or have been reflected on the Most Recent Balance Sheet.  No Pension
Plan has an “accumulated funding deficiency” (as such term is defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived.
 
3.19 Customers and Suppliers.  With respect to the fiscal year most recently
completed prior to the date hereof and the four month period ending April 30,
2014, Schedule 3.19 lists the ten largest (by dollar volume) Customers with
which the Company and the Company Subsidiaries, collectively, have conducted
business during each such period (showing the volume in dollars).  Since
December 31, 2012, no Customer listed on Schedule 3.19 has notified the Company
or any Company Subsidiary of a likely decrease in the volume of life insurance
assignments to or business with the Company or any Company Subsidiary, or any
decrease in the interest payable to the Company or any Company Subsidiary in
connection with life insurance assignments, or of the bankruptcy or liquidation
of any such Customer, or of a likely material change in the relationship between
the Company or any Company Subsidiary and any such Customer.  Since February 28,
2014, there has not been any loss of any Customer listed on Schedule 3.19 or any
material change in the relationship between the Company or any Company
Subsidiary and any such Customer.
 
3.20 Transactions with Related Persons.  Except as set forth in Schedule 3.20,
neither any member, manager, officer or employee of the Company or any Company
Subsidiary nor any Related Person of any of the foregoing is a party to any
Contract with the Company or any Company Subsidiary.
 
3.21 Insurance.  All material insurance policies pertaining to the Company or
any Company Subsidiary are in full force and effect on the date
hereof.  Excluding insurance policies that have expired and been replaced in the
ordinary course of business, no material insurance policy has been cancelled
within the last two (2) years and, to the Knowledge of the Company, no threat
has been made to cancel any insurance policy of the Company or any Company
Subsidiary during such period.
 
 
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3.22 No Brokers’ Fees.  No Person has acted, directly or indirectly, as a
broker, finder, agent, representative or similar intermediary for the Company or
Seller in connection with this Agreement and the Transactions contemplated by
this Agreement and no other Person is entitled to any fee or commission or like
payment in respect thereof.
 
3.23 Sale Reports.  Attached to Schedule 3.23 includes the sales report
for  Company and the Company Subsidiaries furnished to Buyer.  Such sales report
is true and correct in all material respects.
 
3.24 Disclaimer of Representations and Warranties.  EXCEPT AS EXPRESSLY SET
FORTH IN THIS ARTICLE III, NEITHER SELLER, COMPANY NOR ANY OTHER PERSON MAKES
(AND BUYER AND SECURITY NATIONAL ARE NOT RELYING ON) ANY REPRESENTATION OR
WARRANTY, EITHER EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, TO THE ACCURACY OR
COMPLETENESS OF ANY OF THE INFORMATION PROVIDED OR MADE AVAILABLE TO BUYER,
SECURITY  NATIONAL, OR THEIR RESPECTIVE AFFILIATES, REPRESENTATIVES OR ANY OTHER
PERSON FOR THEIR BENEFIT.  EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III,
THERE ARE NO (AND NEITHER BUYER NOR SECURITY NATIONAL IS RELYING ON ANY)
REPRESENTATIONS OR WARRANTIES BY SELLER, COMPANY OR ANY OTHER PERSON OF ANY
KIND, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING WITH RESPECT TO SELLER,
THE COMPANY, THE COMPANY SUBSIDIARIES, THE BUSINESS, THE UNITS OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND ANY OTHER REPRESENTATIONS AND
WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTABILITY, SUITABILITY, FITNESS FOR PARTICULAR PURPOSE,
QUALITY, TITLE OR NON-INFRINGEMENT.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
ARTICLE III, SELLER AND COMPANY HEREBY DISCLAIM ALL LIABILITY AND RESPONSIBILITY
FOR, OR ANY USE BY BUYER, SECURITY NATIONAL OR THEIR RESPECTIVE AFFILIATES OR
REPRESENTATIVES OF (AND NEITHER BUYER NOR SECURITY NATIONAL IS RELYING ON), ANY
REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR OTHER INFORMATION
MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR SECURITY
NATIONAL OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES (INCLUDING ANY
OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HERETOFORE HAVE BEEN OR MAY
HEREAFTER BE MADE AVAILABLE TO SECURITY NATIONAL, THE BUYER OR THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES, WHETHER IN ANY “DATA ROOM”, “MANAGEMENT
PRESENTATION”, “BREAKOUT SESSION” OR OTHERWISE, IN RESPONSE TO QUESTIONS
SUBMITTED BY OR ON BEHALF OF BUYER OR SECURITY NATIONAL OR OTHERWISE BY ANY
DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR REPRESENTATIVE OF SELLER, THE
COMPANY OR THEIR RESPECTIVE AFFILIATES).
 
 
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ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
 
Buyer and Security National, jointly and severally, hereby represent and warrant
to Seller as follows as of the Closing Date:
 
4.1 Organization and Authority.  Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.  Security National is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.  Each of Buyer and Security National has all
requisite corporate power and authority to execute and deliver the Transaction
Documents to which it is a party and to perform its obligations hereunder and
thereunder and to consummate the Transactions.  The execution and delivery by
Buyer and Security National of each Transaction Document to which it is a party
and the consummation by Buyer and Security National of the Transactions have
been duly approved by all requisite corporate action of Buyer and Security
National.  Each Transaction Document to which Buyer or Security National is a
party constitutes the valid and legally binding obligation of Buyer or Security
National, respectively, enforceable against Buyer or Security National, as
applicable, in accordance with the terms of such Transaction Document.
 
4.2 No Conflicts.  Neither the execution and delivery of the Transaction
Documents nor the consummation of the Transactions will, directly or indirectly,
with or without notice or lapse of time:  (a) violate in any material respect
any Law or Order to which Buyer or Security National is subject; (b) result in a
breach of any Organizational Document of Buyer or Security National; (c) require
Buyer, Security National or any of their respective Affiliates to obtain any
Consent of or review by, or make any registration, declaration or filing with,
or give any notice to, any Governmental Body or other Person; or (d) result in a
breach of, constitute a default under, result in the acceleration of or give any
Person the right to accelerate the maturity or performance of, or to cancel,
terminate, modify or exercise any remedy under, any material Contract to which
Buyer or Security National is a party or by which Buyer or Security National is
bound.
 
4.3 No Brokers’ Fees.  No Person has acted, directly or indirectly, as a broker,
finder, agent, representative or similar intermediary for Buyer or Security
National in connection with this Agreement and the Transactions contemplated by
this Agreement and no other Person is entitled to any fee or commission or like
payment in respect thereof.
 
4.4 Litigation.  There are no Proceedings pending or, to the knowledge of Buyer,
threatened that are reasonably likely to prohibit or restrain the ability of
Buyer or Security National to enter into this Agreement or consummate the
Transactions.
 
4.5 Financial Resources.  Buyer (i) has, and at the Closing will have,
sufficient funds  available to pay the Purchase Price and any expenses incurred
by Buyer in connection with the transactions contemplated by this Agreement,
(ii) has, and at the Closing will have, the resources and capabilities
(financial or otherwise) to perform its obligations hereunder and (iii) has not
incurred any obligation, commitment, restriction or Liability of any kind, which
would impair or adversely affect such resources and capabilities.
 
 
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4.6 Investment Intention.  Buyer is acquiring the Units for its own account, for
investment purposes only and not with a view to the distribution (as such term
is used in Section 2(11) of the Securities Act of 1933, as amended (the
“Securities Act”)) thereof.  Buyer understands that the Units have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
 
4.7 Condition of the Business. Each of Security National and Buyer acknowledges
that it has completed to its satisfaction its own due diligence investigation
with respect to Seller, the Company, the Company Subsidiaries, the Units and the
Business.  Each of Security National and Buyer acknowledges and agrees that,
except for the representations and warranties of Seller contained in Article III
(which are the only representations and warranties that Buyer and Security
National are relying on), it is entering into the Transactions on an AS IS/WHERE
IS basis.  Each of Security National and Buyer further acknowledges and agrees
that upon consummation of the Transactions, neither Buyer nor Security National
will have any further recourse against Seller except for claims for
indemnification made pursuant to and in accordance with Article VII.  In
connection with Buyer’s and Security National’s investigation of the Business,
each of Security National and Buyer has received from or on behalf of the
Company or the Company Subsidiaries certain projections, including projected
statements of operating revenues and income from operations thereof and certain
business plan information.  Each of Security National and Buyer acknowledges
that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that each of Security National and
Buyer is familiar with such uncertainties, that each of Security National and
Buyer is making its own evaluation of the adequacy and accuracy of all
estimates, projections and other forecasts and plans so furnished to it, and
that neither Security National nor Buyer shall have any claim against Seller or
any other Person with respect thereto.  Accordingly, neither Seller nor any
other Person makes (and neither Security National nor Buyer is relying upon) any
representations or warranties whatsoever with respect to such estimates,
projections and other forecasts and plans (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts).
 
ARTICLE V
 
[INTENTIONALLY NOT USED]
 
ARTICLE VI
 
POST-CLOSING COVENANTS
 
The Parties agree as follows with respect to the period following the Closing:
 
6.1 Payment of Transfer Taxes.  Seller shall be responsible for, and pay, all
sales, use, transfer, filing, conveyance, recording, and other similar Taxes and
fees, including without limitation, all applicable transfer Taxes, that are
imposed on Seller as a result of the Transactions.  Buyer shall be responsible
for, and pay, all sales, use, transfer, filing, conveyance, recording, and other
similar Taxes and fees, including without limitation, all applicable transfer
Taxes, that are imposed on Buyer as a result of the Transactions.
 
 
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6.2 Retention of and Access to Books and Records.  Buyer will, and will cause
the Company and each Company Subsidiary to, retain for a period consistent with
Buyer’s record-retention policies and practices (but in no event less than five
years), all books and records held by them relating to the Company or any
Company Subsidiary.  Buyer will provide to Seller or any Representatives of
Seller reasonable access thereto, during normal business hours and on at least
three Business Days’ prior written notice, for any reasonable business purpose
specified by Seller in such notice.
 
6.3 Intentionally Omitted.
 
6.4 Tax Matters.
 
(a) The Seller shall prepare or cause to be prepared and the Company and the
Company Subsidiaries shall file or cause to be filed all Tax Returns of the
Company and the Company Subsidiaries for all taxable periods ending on or prior
to the Closing Date (“Pre-Closing Periods”) that are filed after the Closing
Date.  Except as required by Law, without the prior written consent of the
Seller (which consent shall not be unreasonably withheld), neither Buyer nor any
Affiliate thereof (including for such purpose the Company and the Company
Subsidiaries) shall file any amended Tax Return with respect to any such
period.  To the extent permitted by applicable Law, neither the Company nor the
Company Subsidiaries shall carry back any Tax attribute to any such period.  For
the avoidance of doubt, the Company and the Company Subsidiaries shall carry
back any net operating loss arising in the final Pre-Closing Period or the
Straddle Period, as applicable, to the maximum extent permitted by Law.  The
Seller shall have the right to handle, defend, conduct and control any Tax Claim
relating to any Tax refund arising by operation of the preceding sentence.  The
Seller shall also have the right to compromise or settle any such Tax Claim that
it has the authority to control pursuant to the preceding sentence.
 
(b) Buyer shall prepare (or cause to be prepared) and file (or cause to be
filed) when due (taking into account all extensions properly obtained) all Tax
Returns required to be filed by or with respect to the Company and the Company
Subsidiaries relating to taxable periods that begin before and end after the
Closing Date (“Straddle Periods”).  Buyer shall deliver to the Seller copies of
each such Tax Return relating to Straddle Periods, along with a statement (a
“Tax Statement”) showing the pre-Closing portion of any Tax Liability required
to be paid with such Tax Return (computed in accordance with Section 6.4(d)), at
least twenty (20) days prior to the due date for filing such Tax Return, and
shall permit the Seller to review and comment on such Tax Return and Tax
Statement prior to filing.  Buyer shall not file any such Tax Return relating to
Straddle Periods without the prior written consent of the Seller (which shall
not be unreasonably withheld or delayed); provided that the failure of the
Seller to deliver written consent to Buyer prior to the due date for filing such
Tax Return shall be deemed to constitute consent.  If the parties have not
resolved any dispute relating to any such Tax Return prior to the due date for
filing such Tax Return, then Buyer shall file such Tax Return as prepared, but
such filing shall not prejudice the rights of any party to pursue such dispute.
 
 
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(c) Not later than two days prior to the due date for the payment of Taxes on
any Tax Returns relating to Pre-Closing Periods or Straddle Periods, the Seller
shall pay to Buyer the amount of cash Taxes payable shown on the Tax Return (in
the case of a Pre-Closing Period) or the Tax Statement (in the case of a
Straddle Period).
 
(d) The Company and each of the Company Subsidiaries will, unless prohibited by
applicable Law, close the taxable year of the Company and each Company
Subsidiary as of the close of business on the Closing Date.  If applicable Law
does not permit the Company or any Company Subsidiary to close its taxable year
on the Closing Date, the Taxes, if any, attributable to such Straddle Period
shall be allocated (i) to the Seller for the period up to and including the
close of business on the Closing Date, and (ii) to Buyer for the period
subsequent to the Closing Date, pursuant to the following methodology: (x)
Taxes, other than those referred to in clause (y) below, shall be allocated by
means of a closing of the books and records of the Company as of the close of
the Closing Date, provided that exemptions, allowances or deductions that are
calculated on an annual basis (including, but not limited to, depreciation and
amortization deductions) shall be allocated between the period ending on the
Closing Date and the period after the Closing Date in proportion to the number
of days in each such period, and (y) property Taxes and ad valorem Taxes shall
be allocated between the period ending on the Closing Date and the period after
the Closing Date in proportion to the number of days in each such period.
 
(e) Notwithstanding any other provisions hereof, if an audit or other Proceeding
is commenced, an adjustment is proposed or any other claim is made by any taxing
authority with respect to a Tax liability of the Company or any of the Company
Subsidiaries for a Pre-Closing Period or Straddle Period (a “Tax Claim”), Buyer
shall promptly notify the Seller of such audit or other proceeding, proposed
adjustment or claim.  The Seller shall have the right to handle, defend, conduct
and control any Tax Claim relating to a Pre-Closing Period.  The Seller shall
also have the right to compromise or settle any such Tax Claim that it has the
authority to control pursuant to the preceding sentence.  Where a Tax Claim
relates to a Straddle Period, both the Seller and Buyer shall equally represent
the Company or the Company Subsidiary, as applicable, and shall jointly consent
to any compromise or settlement, which consents shall not be unreasonably
withheld.  To the extent that the Seller requires a power of attorney to
represent the Company or any of the Company Subsidiaries before a taxing
authority, Buyer, the Company or any of their Affiliates (as appropriate),
promptly upon written request by the Seller, shall execute such powers or
specific authorizations of representative capacity, including acknowledgment on
such power or authorization of the Seller’s settlement authority described in
this Section.  In the event of a conflict between the provisions of this
Section, on the one hand, and the provisions of Section 7.6, on the other, the
provisions of this Section shall control.
 
(f) Any refunds (and any interest received thereon) of any Tax imposed on the
Company or any of the Company Subsidiaries for any Pre-Closing Period or the
pre-Closing portion of any Straddle Period (determined in accordance with
Section 6.4(d)) shall be payable to Seller.
 
 
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(g) Following the Closing, the Parties shall provide each other with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative Proceedings relating to Liability
for Taxes of the Company and the Company Subsidiaries.  The party requesting
assistance hereunder shall reimburse the other for reasonable out-of-pocket
expenses incurred in providing such assistance.  The Parties shall preserve and
cause to be preserved all information, returns, books, records and documents
relating to any Liabilities for Taxes of the Company and the Company
Subsidiaries with respect to a taxable period until the later of 60 days after
the expiration of all applicable statutes of limitations and extensions thereof,
or the conclusion of all litigation with respect to Taxes for such period.
 
ARTICLE VII
 
INDEMNIFICATION
 
7.1 Indemnification by Seller.  Subject to the terms, conditions and limitations
of this Article VII, Seller shall indemnify and hold harmless Buyer, its
successors and assigns (each, a “Buyer Indemnified Party”) from and against any
and all Losses, whether or not pursuant to a third party claim (collectively,
“Buyer Losses”), resulting from or arising out of or in connection with:
 
(a) any breach or inaccuracy of any representation or warranty made by Seller in
this Agreement;
 
(b) any breach of, or failure of Seller to perform, any covenant or obligation
of Seller in this Agreement:
 
(c) the Hypershop Liabilities; and
 
(d) all Liabilities of the Company and the Company Subsidiaries outstanding as
of the Closing Date, including, but not limited to, FFC severance, FFC Plum Card
obligations, accrued salaries, commissions and employment taxes, and accounts
payable.
 
7.2 Indemnification by Buyer.  Subject to the terms, conditions and limitations
of this Article VII, Buyer and Security National, jointly and severally, shall
indemnify and hold harmless Seller, its successors and assigns from and against
any and all Losses, whether or not pursuant to a third party claim
(collectively, “Seller Losses”), resulting from or arising out of or in
connection with:
 
(a) any breach or inaccuracy of any representation or warranty made by Buyer and
Security National in this Agreement; and
 
(b) any breach of, or failure of Buyer or Security National to perform, any
covenant or obligation of Buyer or Security National in this Agreement.
 
7.3 Survival and Time Limitations.  All representations and warranties contained
in this Agreement shall survive the Closing for a period of 24 months after the
Closing Date, whereupon all such representations and warranties shall expire and
terminate and shall be of no further force or effect, except that the
representations and warranties set out in Sections 3.1, 3.2, 3.3, 3.13, 3.18,
3.22, 4.1, 4.3 and 4.6 (collectively, the “Fundamental Representations”) shall
survive until the date that is 30 days after expiration of the applicable
statute of limitations.  All covenants and agreements set out in this Agreement
shall survive the Closing until the date set forth for expiration of such
covenant (if an expiration date is specifically so stated) or otherwise until
the date that is five years after the Closing Date.  The indemnification
obligations pursuant to this Article VII for Losses arising from a breach of a
representation, warranty or covenant shall terminate at the expiration of the
relevant survival period set forth in this Section 7.3, unless the party seeking
indemnification (the “Indemnified Party”) delivers written notice to the party
from whom indemnification is sought (the “Indemnifying Party”) in accordance
with the applicable provisions of this Article VII.
 
 
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7.4 Limitations.  Notwithstanding anything in this Article VII to the contrary:
 
(a) The Buyer Indemnified Parties shall only have the right to indemnification
pursuant to Section 7.1(a) if the Buyer Indemnified Parties shall have incurred,
as to all matters giving rise to indemnification under Section 7.1(a), an
aggregate amount of Buyer Losses in excess of an amount equal to $40,000 (the
“Deductible”), whereupon, provided the other requirements of this Article VII
have been complied with and subject to the other limitations of this Article
VII, Seller shall be liable to indemnify Buyer Indemnified Parties only for
Losses in excess of the Deductible; provided, however, that the foregoing
limitation shall not apply to any Buyer Losses arising out of any claims
resulting from (i) fraud (as determined by final Order of a court of competent
jurisdiction), or (ii) breaches of any of the Fundamental Representations made
by Seller.
 
(b) (i)  The maximum aggregate liability of Seller for all Buyer Losses pursuant
to Section 7.1(a) shall be the Escrow Amount plus an amount equal to the
aggregate amounts actually due to Seller for Earn-out Payments, less the greater
of (x) fifteen percent (15%) of the aggregate amounts actually due to Seller for
Earn-out Payments or (y) an amount sufficient to enable Seller to discharge any
Federal, state and local tax liability (excluding penalties) arising as a result
of the payment by Buyer of the aggregate amount of the Earn-out Payments,
determined by assuming the applicability to Seller of the highest combined
effective marginal Federal, state and local income tax rates for Seller actually
obligated to report on any tax returns income derived from the payment of the
Earn-out Payments (the “Cap”); provided, however, that the foregoing limitation
shall not apply to any Losses arising out of claims resulting from fraud (as
determined by final Order of a court of competent jurisdiction).
 
(ii)  The maximum aggregate liability of Buyer for all Seller Losses pursuant to
Section 7.2(a) shall be an amount equal to the Cap; provided, however, that the
foregoing limitation shall not apply to any Losses arising out of claims (A)
resulting from fraud (as determined by final Order of a court of competent
jurisdiction), or (B) resulting from breaches of any of the Fundamental
Representations made by Buyer.
 
(c) Each Indemnified Party shall take all reasonable steps to mitigate any Loss
upon becoming aware of any event which would reasonably be expected to, or does,
give rise thereto, including incurring costs only to the minimum extent
necessary to remedy the breach which gives rise to the Loss.
 
 
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(d) The amount of any Losses incurred by any Indemnified Party shall be reduced
by the net amount that such Indemnified Party actually recovers (after deducting
all reasonable attorneys’ fees, out-of-pocket expenses, deductibles and other
costs of recovery) from any insurer or third party liable for such Losses.  If
an Indemnified Party receives any amounts under applicable insurance policies,
or from any other Person alleged to be responsible for any Losses, subsequent to
an indemnification payment by the Indemnifying Party, then such Indemnified
Party shall promptly reimburse the Indemnifying Party for any payment made or
expense incurred by such Indemnifying Party in connection with providing such
indemnification payment up to the amount received by the Indemnified Party, net
of reasonable attorneys’ fees, out-of-pocket expenses, deductibles and other
costs of recovery.
 
(e) The amount of any Losses incurred by any Indemnified Party shall be reduced
by an amount equal to any income Tax benefit actually realized by such
Indemnified Party resulting from the incurrence or payment of such Losses,
determined after taking into account any income Tax detriment of any
indemnification payments made or to be made in connection with such Losses, but
only to the extent that any such reduction does not prevent Indemnified Party
from recovering the full amount of Losses determined on an after Tax basis.
 
(f) Notwithstanding anything in this Article VII, no Indemnified Party or its
successors or assigns shall have any right or entitlement to indemnification
from an Indemnifying Party for any Losses to the extent that such Indemnified
Party or its successors and assigns had already recovered such Losses with
respect to the same matter pursuant to any other provision of this Agreement,
and such Indemnified Party shall be deemed to have waived and released any
claims for such Losses to the extent already recovered hereunder by such
Indemnified Party and shall not be entitled to assert any such claim for
indemnification for such Losses.
 
(g) Except with respect to any breach by Buyer of the provisions of Section 2.5,
in no event shall any Person be entitled to recover or make a claim for any
amounts in respect of, and in no event shall “Losses” be deemed to include
indirect, expectation, incidental, special or consequential damages, lost
profits or revenues, business interruption, exemplary or punitive damages or
diminution in value and, in particular and without limiting the generality of
the foregoing, no “multiple of earnings” or “multiple of cash flow” or similar
valuation methodology shall be used in calculating the amount of any Losses.
 
(h) In the event Buyer proceeds with the Closing notwithstanding Buyer’s
knowledge at or prior to the Closing of any breach by any Seller of any
representation, warranty, agreement or covenant contained in this Agreement, no
Buyer Indemnified Party shall have any claim or recourse against Seller with
respect to such breach under this Article VII or otherwise.
 
7.5 Manner of Payment.  Any Losses for which any Seller is obligated to
indemnify any Buyer Indemnified Party first shall be satisfied or paid through
reduction of the Escrow Amount in accordance with the Escrow Agreement, until
the Escrow Amount has been reduced to zero or fully disbursed. If the Escrow
Amount has been reduced to zero or fully disbursed, then such Losses for which
any Seller is obligated to indemnify any Buyer Indemnified Party shall be
satisfied or paid by offsetting or crediting the amount of such Losses from the
Earn-out Payments due to Seller at any time during the Earn-out Period. The
parties agree and acknowledge that if the Escrow Amount and the offset or credit
against Earn-out Payments is still insufficient, then neither Buyer or Security
National nor any other Buyer Indemnified Party shall have any further recourse
against any Seller, and Seller shall not have any further obligation or
Liability to the Buyer or Security National or any other Buyer Indemnified
Party.
 
 
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7.6 Third-Party Claims.
 
(a) If a third party makes, initiates or commences any claim, lawsuit or
arbitration (a “Third-Party Claim”) against an Indemnified Party with respect to
any matter that the Indemnified Party might make a claim for indemnification
against any Indemnifying Party under this Article VII, then the Indemnified
Party must notify the Indemnifying Party thereof in writing of the existence of
such Third-Party Claim and must deliver copies of any documents provided or
delivered to, or served on the Indemnified Party with respect to the Third-Party
Claim; provided, however, that any failure to notify the Indemnifying Party or
deliver copies will not relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
materially prejudiced by such failure.
 
(b) The Indemnifying Party shall have the right, at its sole option and expense,
to be represented by counsel of its choice and to defend against, negotiate,
settle or otherwise deal with any Third-Party Claim which relates to any Losses
indemnified against hereunder.  If the Indemnifying Party elects to defend
against, negotiate, settle or otherwise deal with any Third-Party Claim which
relates to any Losses indemnified against hereunder, it shall within thirty (30)
days (or sooner, if the nature of the Third-Party Claim so requires) notify the
Indemnifying Party of its intent to do so.  If the Indemnifying Party elects not
to defend against, negotiate, settle or otherwise deal with any Third-Party
Claim which relates to any Losses indemnified against hereunder, the Indemnified
Party may defend against, negotiate, settle or otherwise deal with such
Third-Party Claim.  If the Indemnifying Party shall assume the defense of any
Third-Party Claim, the Indemnified Party may participate, at its own expense, in
the defense of such Third-Party Claim; provided, however, that such Indemnified
Party shall be entitled to participate in any such defense with separate counsel
at the expense of the Indemnifying Party only if (i) so requested by the
Indemnifying Party to participate or (ii) in the reasonable written opinion of
counsel to the Indemnified Party, a conflict or potential conflict exists
between the Indemnified Party and the Indemnifying Party that would make such
separate representation advisable; and provided, further, that the Indemnifying
Party shall not be required to pay for more than one such counsel for all
Indemnified Parties in connection with any Third-Party Claim.  The Parties
hereto agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Third-Party Claim.
 
(c) Notwithstanding anything in this Section 7.6 to the contrary, neither the
Indemnifying Party nor the Indemnified Party shall, without the written consent
of the other party, settle or compromise any Third-Party Claim or permit a
default or consent to entry of any judgment unless the claimant and such party
provide to such other party an unqualified release from all liability in respect
of the Third-Party Claim.  Notwithstanding the foregoing, if a settlement offer
solely for money damages is made by the applicable third party claimant, and the
Indemnifying Party notifies the Indemnified Party in writing of the Indemnifying
Party’s willingness to accept the settlement offer and, subject to the
applicable limitations of this Article VII, pay the amount called for by such
offer, and the Indemnified Party declines to accept such offer, the Indemnified
Party may continue to contest such Third-Party Claim, free of any participation
by the Indemnifying Party, and the amount of any ultimate liability with respect
to such Third-Party Claim that the Indemnifying Party has an obligation to pay
hereunder shall be limited to the lesser of (A) the amount of the settlement
offer that the Indemnified Party declined to accept plus the Losses of the
Indemnified Party relating to such Third-Party Claim through the date of its
rejection of the settlement offer or (B) the aggregate Losses of the Indemnified
Party with respect to such Third-Party Claim.  If the Indemnifying Party makes
any payment on any Third-Party Claim, the Indemnifying Party shall be
subrogated, to the extent of such payment, to all rights and remedies of the
Indemnified Party to any insurance benefits or other claims of the Indemnified
Party with respect to such Third-Party Claim.
 
 
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(d) After any final decision, judgment or award shall have been rendered by a
Governmental Body of competent jurisdiction and the expiration of the time in
which to appeal therefrom, or a settlement shall have been consummated, or the
Indemnified Party and the Indemnifying Party shall have arrived at a mutually
binding agreement with respect to a Third-Party Claim hereunder, the Indemnified
Party shall forward to the Indemnifying Party notice of any sums due and owing
by the Indemnifying Party pursuant to this Agreement with respect to such
matter.
 
7.7 Direct Claims.  Any claim by an Indemnified Party on account of a Loss which
does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party prompt written notice
thereof; provided, however, that any failure to notify the Indemnifying Party
will not relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party is materially prejudiced
by such failure.  Such notice by the Indemnified Party shall describe the Direct
Claim in reasonable detail, shall include copies of all written evidence thereof
and shall indicate the estimated amount, if reasonably practicable, of the Loss
that has been sustained by the Indemnified Party.  The Indemnifying Party shall
have thirty (30) days after its receipt of such notice to respond in writing to
such Direct Claim.  During such thirty (30)day period, the Indemnified Party
shall allow the Indemnifying Party and its Representatives to investigate the
matter or circumstance alleged to give rise to the Direct Claim, and whether and
to what extent any amount is payable in respect of the Direct Claim and the
Indemnified Party shall assist the Indemnifying Party’s investigation by giving
such information and assistance (including access to Buyer’s premises and
personnel and the right to examine and copy any accounts, documents or records)
as the Indemnifying Party or any of its Representatives may reasonably
request.  If the Indemnifying Party does not so respond within such thirty
(30)-day period, the Indemnifying Party shall be deemed to have rejected such
claim, in which case the Indemnified Party shall be free to pursue such remedies
as may be available to the Indemnified Party on the terms and subject to the
provisions of this Agreement.
 
 
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7.8 Other Indemnification Matters.  All indemnification payments under this
Article VII will be deemed adjustments to the Purchase Price.
 
7.9 Exclusive Remedy.  From and after the Closing, indemnification pursuant to
the provisions of this Article VII shall be the sole and exclusive remedy for
any breach of this Agreement or otherwise relating to the subject matter of this
Agreement and the Transactions.  Without limiting the generality of the
preceding sentence, from and after the Closing, Buyer, for itself and the other
Buyer Indemnified Parties, (a) agrees that no legal action sounding in
contribution, tort, or strict liability or any other legal theory may be
maintained by any Party hereto, any Buyer Indemnified Party or any other Person
for any breach of this Agreement or otherwise with respect to the subject matter
of this Agreement and the Transactions, and (b) hereby waives any and all
statutory rights of contribution or indemnification that any of them might
otherwise be entitled to under any Law or any similar rules of law embodied in
the common law.  The limitations in this Section 7.9 shall not apply with
respect to any fraud (as determined by final Order of a court of competent
jurisdiction) committed by a party hereto in connection with this Agreement or
the Transactions contemplated hereby or to rights of specific performance set
forth in Section 8.13.
 
ARTICLE VIII
 
MISCELLANEOUS
 
8.1 Further Assurances.  Each Party agrees to furnish upon request to any other
Party such further information, to execute and deliver to any other Party such
other documents, and to do such other acts and things (including the execution
and delivery of such further instruments or documents as may be reasonably
necessary or convenient to transfer and convey any Units to Buyer), all as any
other Party may reasonably request for the purpose of carrying out the intent of
the Transaction Documents.
 
8.2 No Third-Party Beneficiaries.  This Agreement does not confer any rights or
remedies upon any Person other than the Parties, their respective successors and
permitted assigns and, as expressly set forth in this Agreement, any Indemnified
Party.
 
8.3 Entire Agreement.  The Transaction Documents constitute the entire agreement
among the Parties with respect to the subject matter of the Transaction
Documents and supersede all prior agreements (whether written or oral and
whether express or implied) among any Parties to the extent related to the
subject matter of the Transaction Documents (including any letter of intent or
confidentiality agreement).
 
8.4 Successors and Assigns.  This Agreement will be binding upon and inure to
the benefit of the Parties and their respective successors and permitted
assigns.  No Party may assign, delegate or otherwise transfer (whether by
operation of law or otherwise) any of its rights, interests or obligations in
this Agreement without the prior written approval of the other Party.
 
8.5 Counterparts.  This Agreement may be executed in two or more counterparts
(by original, facsimile or electronic “PDF” signatures), each of which will be
deemed an original but all of which together will constitute one and the same
agreement.
 
 
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8.6 Notices.  Any notice pursuant to this Agreement must be in writing and will
be deemed effectively given to another Party on the earliest of the date (a) one
Business Day after delivery of such notice into the custody and control of an
overnight courier service for next day delivery, (b) one Business Day after
delivery of such notice in person and (c) the date such notice is received by
that Party; in each case to the appropriate address below (or to such other
address as a Party may designate by notice to the other Parties):

If to Security National:

Security National Financial Corporation
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
Attn:  S. Andrew Quist

If to Buyer:

SNFC Subsidiary LLC
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
Attn:  S. Andrew Quist

with a copy to:

Mackey Price & Mecham
350 American Plaza II
57 West 200 South
Salt Lake City, Utah 84101-3663
Attn:  Randall A. Mackey, Esq.

If to Seller:

Hypershop, LLC
419 The Parkway, Suite 216
Greer, South Carolina 28650
Attn:  Scott Coffman

with a copy (which shall not constitute notice) to:

Nelson Mullins Riley & Scarborough, LLP
104 South Main Street, 9th Floor
Greenville, South Carolina  29601
Attn:  Bo Russell, Esq.
 
 
 
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8.7 Attorney Fees.  In the event any party hereto institutes litigation to
enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party’s reasonable attorney fees and costs incurred in
connection with such litigation.  The foregoing shall include reasonable
attorney fees and costs incurred at trial, on any appeal and in any proceeding
in bankruptcy.

8.8 Governing Law.  This Agreement and all other Transaction Documents (unless
otherwise stated therein) will be governed by the laws of the State of Delaware
without giving effect to any choice or conflict of law principles of any
jurisdiction.
 
8.9 Amendments and Waivers.  No amendment of any provision of this Agreement
will be valid unless the amendment is in writing and signed by the Parties.  No
waiver of any provision of this Agreement will be valid unless the waiver is in
writing and signed by the waiving Party.  The failure of a Party at any time to
require performance of any provision of this Agreement will not affect such
Party’s rights at a later time to enforce such provision.  No waiver by any
Party of any breach of this Agreement will be deemed to extend to any other
breach hereunder or affect in any way any rights arising by virtue of any other
breach.
 
8.10 Severability.  Any provision of this Agreement that is determined by any
court of competent jurisdiction to be invalid or unenforceable will not affect
the validity or enforceability of any other provision hereof or the invalid or
unenforceable provision in any other situation or in any other jurisdiction. Any
provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
 
8.11 Expenses.  Seller will bear all expenses incurred by Seller or any of its
Representatives in connection with the Transactions contemplated to be performed
before or on the Closing Date, including all broker, finder or agent commissions
and fees and all attorneys’ fees and costs.  Buyer will bear all expenses
incurred by Buyer or any of its Representatives in connection with the
Transactions contemplated to be performed before or on the Closing Date,
including all broker, finder or agent commissions and fees and all attorneys’
fees and costs.
 
8.12 Interpretation.  The article and section headings in this Agreement are
inserted for convenience only and are not intended to affect the interpretation
of this Agreement.  Any reference in this Agreement to any Article or Section
refers to the corresponding Article or Section of this Agreement.  Any reference
in this Agreement to any Schedule or exhibit refers to the corresponding
Schedule or exhibit attached to this Agreement and all such Schedules and
exhibits are incorporated herein by reference.  The word “including” in this
Agreement means “including without limitation.”  This Agreement will be
construed as if drafted jointly by the Parties and no presumption or burden of
proof will arise favoring or disfavoring any Party by virtue of the authorship
of any provision in this Agreement.  Unless the context requires otherwise, any
reference to any Law will be deemed also to refer to all amendments and
successor provisions thereto and all rules and regulations promulgated
thereunder, in each case as in effect as of the Closing Date.  All accounting
terms not specifically defined in this Agreement will be construed in accordance
with GAAP applied on a consistent basis.  The word “or” in this Agreement is
disjunctive but not necessarily exclusive.  All words in this Agreement will be
construed to be of such gender or number as the circumstances
require.  References in this Agreement to time periods in terms of a certain
number of days mean calendar days unless expressly stated herein to be Business
Days.  In interpreting and enforcing this Agreement, each representation and
warranty will be given independent significance of fact and will not be deemed
superseded or modified by any other such representation or warranty.
 
 
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8.13 Specific Performance.  Each Party acknowledges that the other Parties would
be damaged irreparably and would have no adequate remedy of law if any covenant
in this Agreement is not performed in accordance with its specific terms or
otherwise is breached.  Accordingly, each Party agrees that the other Parties
will be entitled to an injunction to prevent any breach of any covenant in this
Agreement and to enforce specifically any covenant in this Agreement, in
addition to any other remedy to which they may be entitled and without having to
prove the inadequacy of any other remedy they may have at law or in equity and
without being required to post bond or other security.
 
8.14 Time Is of the Essence.  Time is of the essence with respect to all time
periods and dates set forth herein.
 
8.15 Retention of Counsel.  In any dispute or proceeding arising under or in
connection with this Agreement following the Closing, Seller shall have the
right, at its election, to retain Nelson Mullins Riley & Scarborough LLP with
respect to representation in such matter, and the Buyer and Security National,
for themselves, the surviving Company and Company Subsidiaries and their
respective successors and assigns, hereby irrevocably waive and consent to any
such representation in any such matter and the communication by such counsel to
Seller in connection with any such representation of any fact known to such
counsel arising by reason of such counsel’s prior representation of the Company
or the Company Subsidiaries. Buyer and Security National,  for themselves and
the surviving Company and Company Subsidiaries and such respective Persons’
Affiliates, successors and assigns, irrevocably acknowledge and agree that all
communications between the surviving Company and Company Subsidiaries and
counsel made in connection with the negotiation, preparation, execution,
delivery and Closing under, or any dispute or proceeding arising under or in
connection with this Agreement that, immediately prior to the Closing, would be
deemed to be privileged communications of the surviving Company or the Company
Subsidiaries and its counsel and would not be subject to disclosure to the Buyer
or Security National.
 
The Parties have executed and delivered this Unit Purchase Agreement as of the
date first written above.

 

 

 

 

 

 
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  SECURITY NATIONAL:      
SECURITY NATIONAL FINANCIAL CORPORATION
     
By:    /s/ S. Andrew Quist     
   Name: S. Andrew Quist    Title: Vice-President       BUYER:        SNFC
SUBSIDIARY, LLC         By:   /s/ S. Andrew Quist         Name: S. Andrew Quist
   Title: Vice President       COMPANY:       AMERICAN FUNERAL FINANCIAL, LLC  
 
     
By:   /s/ A. Todd Justice      
  Name: A. Todd Justice   Title: President      
SELLER:
     
HYPERSHOP, LLC
     
By:    /s/ Scott Coffman     
  Name: Scott Coffman   Title: President

 
 
 
 
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