Document:

snfc8ka08130810-2.htm

    
      

      

    

    

    

     

    

    

    REINSURANCE
AGREEMENT

    

    effective
as of September 1, 2008

    

    by
and among

    

    

    SECURITY
NATIONAL LIFE INSURANCE COMPANY,

    

    

    SOUTHERN
SECURITY LIFE INSURANCE COMPANY, INC.

    

    and

    

    THE
SHAREHOLDERS OF

    SOUTHERN
SECURITY LIFE INSURANCE COMPANY, INC.

     

     

     

     

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    TABLE OF CONTENTS

    

    

    ARTICLES

    

    
      	
              I.

            	
              GENERAL PROVISIONS

            	
               1

            
	 
      	 
      	 
      
	
              II.

            	
              DURATION OF RISK

            	
               3

            
	 
      	 
      	 
      
	
              III.

            	
              PREMIUMS AND CONSIDERATIONS

            	
               4

            
	 
      	 
      	 
      
	
              IV.

            	
              BENEFIT PAYMENTS

            	
               5

            
	 
      	 
      	 
      
	
              V.

            	
              ACCOUNTING AND SETTLEMENTS

            	
               5

            
	 
      	 
      	 
      
	
              VI.

            	
              ARBITRATION

            	
               6

            
	 
      	 
      	 
      
	
              VII.

            	
              INSOLVENCY

            	
               7

            
	 
      	 
      	 
      
	
              VIII.

            	
              DAC TAX PROVISION

            	
               8

            
	 
      	 
      	 
      
	
              IX.

            	
              SHAREHOLDER OBLIGATIONS

            	
               9

            
	 
      	 
      	 
      
	
              X.

            	
              MISCELLANEOUS PROVISIONS

            	
               9

            
	 
      	 
      	 
      
	
              XI.

            	
              EXECUTION AND EFFECTIVE DATE

            	
               9

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              SCHEDULES

            	 
      
	 
      	 
      	 
      
	
              A.

            	
              POLICIES AND RISKS REINSURED

            	 
      
	 
      	 
      	 
      
	
              B.

            	
              REINSURANCE PREMIUMS

            	 
      
	 
      	 
      	 
      
	
              C.

            	
              COMMISSION AND EXPENSE ALLOWANCE

            	 
      
	 
      	 
      	 
      
	
              D.

            	
              MONTHLY REPORT OF ACTIVITY AND SETTLEMENTS

            	 
      
	 
      	 
      	 
      
	 	 
	
              EXHIBITS

            	 
      
	 
      	 
      	 
      
	
              1.

            	
              CUSTODIAL AGREEMENT

            	 
      

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    REINSURANCE
AGREEMENT

    

    THIS
AGREEMENT (the "Agreement") is made and entered into, effective at 12:01 a.m.
on  the 1st day of
September, 2008 (the “Effective Date”), by and among SECURITY NATIONAL LIFE
INSURANCE COMPANY, a Utah domiciled insurance company (hereinafter referred to
as the “Reinsurer”), SOUTHERN SECURITY LIFE INSURANCE COMPANY, INC., a
Mississippi domiciled insurance company (hereinafter referred to as the
“Company”), and the SHAREHOLDERS OF SOUTHERN SECURITY LIFE INSURANCE COMPANY,
INC. that have executed this Agreement (hereinafter referred to as the
“Shareholders”).

    

    The
Company, the Reinsurer and the Shareholders agree to reinsure on the terms and
conditions stated herein.  This Agreement is an indemnity reinsurance
agreement among the Company, the Reinsurer, and the Shareholders and performance
of the obligations of each party under this Agreement shall be rendered solely
to the other parties.

    

    ARTICLE I

    

    GENERAL
PROVISIONS

    

    1.           Contracts and Risks
Reinsured.  The Reinsurer agrees to indemnify and the Company
agrees to transfer risk to the Reinsurer, according to the terms and conditions
hereof, the risks described in Schedule A hereto, which are in force on the
Effective Date of this Agreement; subject, however, to the same rights, offsets,
counterclaims, crossclaims and defenses as are available to the
Company.  No such offsets, counterclaims, crossclaims or defenses are
waived but the same are expressly preserved, and Reinsurer is and shall be fully
subrogated thereto, either in its own name or in the name of the Company, and
whether the name be now known to exist or may hereafter be
discovered.

    

    2.           Coverages and
Exclusions.   Only risks under the life insurance and
annuity policies referred to in Schedule A, are reinsured under this
Agreement.  It is the intention of the Reinsurer and the Company that
all of the Company’s business will be reinsured under the terms of this
Agreement.  New policies issued by the Company after the Effective
Date of this Agreement will also be reinsured under the terms of this
Agreement.

    

    3.           Plan of
Reinsurance.   This indemnity reinsurance shall be on the
coinsurance plan.  The Company and the Reinsurer shall establish,
maintain, and place all assets held in relation to the reserves in a custodial
account in accordance with the terms of a certain Custodial Agreement (the
“Custodial Agreement”), a copy of which is attached hereto as Exhibit 1 and by
this reference is made a part hereof.  The assets are to be accounted
for using statutory accounting principles of the state of domicile of the
Company. On the Effective Date of this Agreement, the book value of the assets
transferred to the Reinsurer pursuant to the Custodial Agreement shall be equal
to the amount of reserves transferred thereunto.

    

    4.           Reserves.   The
expression net reserves, prior to the application of this treaty, whenever used,
shall mean the statutory reserves, net of existing reinsurance ceded under all
treaties in effect excluding this treaty, which would have been or should have
been reported by the Company on its NAIC Convention Blank as of June 30, 2008,
with respect to the policies reinsured hereunder, as if this treaty were not in
effect.

    

    

    
      
        
          Return to Table of Contents

        

        
          1

          
            

          

        

        
           

        

      

    

    

     The
expression net due and deferred premiums, prior to the application of this
treaty, shall mean the due and deferred premiums, net of existing reinsurance
ceded under all treaties in effect excluding this treaty, which would have been
held by the Company on its NAIC Convention Blank as of June 30, 2008, with
respect to the policies reinsured hereunder as if this treaty were not in
effect.

    

     The
expression net policy loans, prior to the application of this treaty, shall mean
the policy loans, net of existing reinsurance ceded under all treaties in effect
excluding this treaty, which would have been reported by the Company on its NAIC
Convention Blank as of June 30, 2008, with respect to the policies reinsured
hereunder as if this treaty were not in effect.

    

     The
expression advance premiums, prior to the application of this treaty, shall mean
the advance premiums, net of existing reinsurance ceded under all treaties in
effect excluding this treaty, which would have been reported by the Company on
its NAIC Convention Blank as of June 30, 2008, with respect to the policies
reinsured hereunder as if this treaty were not in effect.

    

    5.           Commission and Expense
Allowance.    There is to be a commission and expense
allowance equal to actual premium taxes paid, actual sales commission paid and
other administrative expenses, in accordance with Schedule C.

    

    6.           Extracontractual
Damages.   In no event shall the Reinsurer indemnify nor
be liable for any extracontractual damages or liability of any kind whatsoever
resulting from, but not limited to, the Company’s negligent, reckless or
intentional wrongs, fraud, oppression, bad faith or strict
liability.  The Reinsurer shall indemnify the Company for any
extracontractual damages or liability of any kind whatsoever resulting from the
Reinsurer’s or its agents’ neglect, reckless or intentional wrong, fraud,
oppression, bad faith or strict liability.  The following liabilities
are examples of liabilities that would be considered
extracontractual:  compensatory damages, damages for emotional
distress, and punitive or exemplary damages.

    

    7.           Contract
Administration.   The Reinsurer shall administer the
contracts reinsured hereunder and shall perform all accounting, collection and
all other administrative functions at the expense of the
Reinsurer.  The Company shall make the use of its name available in
such administration and shall otherwise make available all records, files,
computer systems, and other materials including computer programs, processes,
knowledge, or otherwise needed in such administration.  In addition,
upon approval by the Mississippi Insurance Department of the Form A application
relating to the transactions contemplated by that certain Stock Purchase
Agreement dated August 13, 2008, among the Reinsurer, the Company and the
Shareholders, the Reinsurer shall have the right to transfer or move such
records, files, computer systems, and other materials to other offices or
locations where the Reinsurer transacts business.  Prior to approval
of the Form A application, the Reinsurer shall have the right to transfer or
move such records, files, computer systems, and other materials to other offices
or locations within the State of Mississippi where the Reinsurer transacts
business.  Under no circumstances, however, shall such records, files,
computer systems or other materials be moved outside the State of Mississippi
without the Mississippi Insurance Department approving the Form A
application.

    

    

    
      
        
          Return to Table of Contents

        

        
          2

          
            

          

        

        
           

        

      

    

    

    8.           Inspection.   At
any reasonable time, the Reinsurer may inspect, during normal business hours, at
the principal office of the Company or at such other place as determined by the
Reinsurer, the papers and any and all other books or documents of the Company
relating to reinsurance under this Agreement.  At any reasonable time,
the Company may inspect, during normal business hours, at the principal office
of the Reinsurer or at such other place as determined by the Reinsurer, the
papers and any and all other books or documents of the Reinsurer relating to
reinsurance under this Agreement.  Neither the Company nor the
Reinsurer will use any information obtained through any inspection pursuant to
this section for purposes not relating to reinsurance under this
Agreement.

    

    9.           Condition.   The
reinsurance hereunder is subject to the same limitations and conditions as the
contracts written by the Company that are reinsured hereunder, except as
otherwise provided in this Agreement.

    

    10.         Misunderstandings and
Oversights.   If any failure to pay amounts due or to
perform any other act required by this Agreement is unintentional and caused by
misunderstanding and oversight, the Company and the Reinsurer will adjust the
situation to what it would have been had the misunderstanding or oversight not
occurred.

    

    11.         Age
Adjustment.   If the Company’s liability under any of the
contracts reinsured under this Agreement is changed because of a misstatement of
age, the Reinsurer will share in the change proportionately to the amount
reinsured hereunder, and the Company and the Reinsurer will make any and all
proportional adjustments thereunto.

    

    12.         Reinstatements.   If
a contract reinsured hereunder that was reduced, terminated, or lapsed, and is
subsequently reinstated, the reinsurance for such contract under this Agreement
will be reinstated automatically to the amount that would be in force if the
contract had not been reduced, terminated, or lapsed.  The Company
will pay to the Reinsurer the Reinsurer’s proportionate share of all amounts
collected from, or charged to, the insured.

    

    13.         Amendments.   This
Agreement shall be amended only by written agreement of the parties, subject to
prior approval of Mississippi Insurance Department, which approval shall not be
unreasonably withheld.

    

    14.         Policies,
Contracts.   The words policy or policies, and contract or
contracts as used herein shall have the same meaning.  The Company
hereby warrants and represents that the contracts reinsured hereunder comply
with all applicable laws and regulations, including federal income tax
regulations, and have so complied since the date of issuance.

    

    15.         Policyholder
Information.   The Company shall not sell, distribute or
in any way use the policyholder information on contracts reinsured hereunder
without the prior written approval of the Reinsurer.

    
 

    
      
        
          Return to Table of Contents

        

        
          3

          
            

          

        

        
           

        

      

    

     

    16.         Reinsurance With Other
Companies.   Existing reinsurance with other insurance
companies on the policies specified in Schedule A shall be retained by the
Company, except as agreed upon in writing by Reinsurer and
Company.  Any amounts paid to other reinsurance companies shall be
fully reimbursed by the Reinsurer.  Any amounts received by the
Company from other insurance companies will be paid to the Reinsurer.

     

     

    ARTICLE II

    

    DURATION OF
RISK

    

    1.           Duration.   The
initial term of this Agreement shall be for a period of three (3) years from the
effective date of this Agreement.  Subsequent to the three (3) year
term, this Agreement shall be automatically renewed unless the Reinsurer
notifies the Company of its intention not to renew in writing, no less than one
hundred eighty (180) days prior to the expiration of the then current
agreement.  Each automatic renewal period of this Agreement shall be
for a term of three (3) years.  The Company has no right to terminate
this Agreement or any renewal term and has no right whatsoever to prevent any
renewal by the Reinsurer, except in the event that the Stock Purchase Agreement,
executed contemporaneously between the Parties is terminated according to its
terms, the Company has the right to prevent the renewal period of this Agreement
by providing ninety (90) days written notice to the Reinsurer of the Company’s
intent not to renew, subject to the repayment of the entire Ceding
Commission.

    

    2.           Reinsurer’s
Liability.   The liability of the Reinsurer with respect
to any contract reinsured hereunder will begin simultaneously with that of the
Company, but not prior to the Effective Date of this Agreement.  The
Reinsurer’s liability with respect to any contract reinsured hereunder will
terminate with that of the Company on the date the Company’s liability on such
contract is terminated.

    

    3.           Recapture.  Contracts
reinsured under this Agreement are not eligible for recapture.

    

    4.           Contract
Changes.   The Company will not make any contract changes
in any policies reinsured hereunder except as required by law or as mutually
agreed to by the Company and the Reinsurer.

    

    

    ARTICLE III

    

    PREMIUM AND
CONSIDERATIONS

    

    1.           Net
Reserves.   On the Effective Date of this Agreement, the
Company agrees to pay the Reinsurer pursuant to the terms of the Custodial
Agreement as a reserve transfer an amount equal to the adjusted net reserves, on
the Effective Date of this Agreement with respect to the liabilities reinsured
as of such date and described in Schedule A, less the amount of the Ceding
Allowance, as defined below, which the Company shall retain as its Ceding
Allowance.  Reinsurer shall have the sole right to determine which of
the Company’s assets shall be transferred to Reinsurer, subject to prior
approval of the Mississippi Insurance Department, which approval shall not be
unreasonably withheld.  Adjusted net reserves are calculated as net
reserves, prior to the application of this treaty, minus net due and deferred
premiums, prior to the application of this treaty, minus net policy loans, prior
to the application of this treaty, plus advance premiums, prior to the
application of this treaty.  The parties expressly agree that the
Company’s assets to be transferred to the Reinsurer pursuant to the terms of
this Agreement shall not include any mortgage loans or real estate without
Reinsurer’s prior approval or the Nowell Legacy Trust, which is listed as an
asset on the Company’s financial statements.

    

    

    
      
        
          Return to Table of Contents

        

        
          4

          
            

          

        

        
           

        

      

    

    

    2.           Ceding
Allowance.   On the Effective Date of this Agreement, the
Reinsurer agrees to pay the Company a ceding allowance equal to one million five
hundred thousand dollars ($1,500,000), which shall be paid to the Company by
means of the Company retaining said amount from the reserves transferred to
Reinsurer as set forth in Article III, paragraph 1.

    

    3.           Reinsurance
Premiums.   The Company agrees to pay the Reinsurer
reinsurance premiums in accordance with Schedule B.  For each
contract, the amount of reinsurance premium will be the amount which corresponds
to the portion of the contract reinsured.  The Company and its
Shareholders hereby make representations and warrants that they will make all
reasonable efforts to keep the reinsured business in force.

    

    4.           Control Over
Assets.  Upon payment to Reinsurer of the reserve transfer set
forth in Article III, paragraph 1, the Reinsurer shall have control over the
transferred assets, subject only to the terms of the Custodial Agreement and the
regulatory requirements and approvals contained therein.  The
Reinsurer shall be vested with full power and authority to direct the trustee of
the Custodial Agreement to sell, trade, liquidate, exchange, reinvest, and
otherwise dispose of and deal with the transferred assets, as it determines in
its sole discretion, subject to the insurance laws of the State of Mississippi
and the prior approval of the Mississippi Insurance Department, which approval
shall not be unreasonably withheld.  However, the Reinsurer shall not
be required to obtain such prior approval of the Mississippi Insurance
Department if such trade or exchange of any transferred assets is in connection
with a transaction to replace such assets with assets having approximate equal
value on the Reinsurer’s financial statements.

    

    

    ARTICLE IV

    

    BENEFIT
PAYMENTS

    

    1.           Notice.   The
Reinsurer will notify the Company promptly after receipt of any information as
to a claim on a policy to the extent reinsured hereunder.  The
reinsurance claim form and any copies of notifications, claim papers and proofs
will be furnished to the Company as soon as possible.

    

    2.           Liability and
Payment.   The Company will accept the decision of the
Reinsurer on payment of a claim or surrender on a policy reinsured
hereunder.  The Reinsurer agrees to utilize to the extent possible the
claims practices of the Company.  The Reinsurer will pay its
proportionate share of such claim based upon the form of claim settlement
determined.  These amounts shall be paid within 15 business days after
the end of each calendar month.  In no instance shall anyone other
than the Company or the Reinsurer have any rights under this Agreement, and the
Company shall be and remain solely liable to any insured, policyowner, or
beneficiary under any policy reinsured hereunder, unless said liability is
caused by the actions of the Reinsurer, and in that instance, Reinsurer will be
liable and defend any litigation at its own cost.

     

    

    
      
        
          Return to Table of Contents

        

        
          5

          
            

          

        

        
           

        

      

    

     

    3.           Contract
Claims.   The Company will not contest, compromise or
litigate a claim involving a policy reinsured hereunder without the prior
express written approval of the Reinsurer.  The Reinsurer will pay to
the Company any litigation and investigative expenses incurred on contested
claims. Any expenses will be paid on a monthly basis as described in Article
V.

    
 

    ARTICLE V

    

    ACCOUNTING AND
SETTLEMENT

    

    1.           Agreement Accounting
Period.   This Agreement shall be on a monthly accounting
period for all accounting settlements.

    

    2.           Monthly Accounting
Reports.   Accounting reports shall be submitted to the
Reinsurer by the Company and by the Reinsurer to the Company, not later than 15
business days after the end of each calendar month.  Such reports
shall include information on the amount of reinsurance premiums, policy loans
and policy loan interest, the commission and expense allowance, claims, and
reserves on the contracts reinsured for the preceding calendar
month.

    

    3.           Monthly Accounting
Period.   The monthly accounting shall be on a
calendar-month basis, except that the initial monthly accounting period shall
run from the Effective Date of this Agreement, after the initial accounting has
occurred, through the last day of the calendar month in which the Effective Date
of this Agreement falls.  The final monthly accounting period shall
run from the end of the preceding calendar month until the termination of this
Agreement, but prior to actual termination of this Agreement.

    

    4.           Monthly
Settlements.  Within 15 business days after the end of each
calendar month, the Company will pay the Reinsurer the sum of: (i) the
reinsurance premiums for the preceding month, determined in accordance with
Article III, plus (ii) the policy
loan repayments and policy loan interest paid in the preceding month, plus (iii) any
amounts received from other reinsurance companies. The Monthly Settlement Report
is attached as Schedule D.

    

    5.           Amounts Due
Monthly.  Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Company or the Reinsurer
under this Agreement on a monthly basis shall be determined on a net basis as of
the last day of each calendar month and shall be due and payable as of such
date.

    

    6.           Estimations.   If
the amounts, as defined in Paragraph 4 above, cannot be determined at such dates
as defined in Paragraph 5 above, on an exact basis, such payments will be paid
in accordance with a mutually agreeable formula which will approximate the
actual payments.

     

     

    
      
        Return to Table of Contents

      

      
        6

        
          

        

      

      
         

      

    

     

    7.           Delayed
Payments.   For purposes of Paragraph 5 above, if there is
a delayed settlement of a payment due, there will be an interest penalty at an
interest rate equal to one-half of one percent (.5%) per month, for the period
that the amount is overdue.  For purposes of this paragraph, a payment
shall be considered delayed 30 days after the date such payment is
due.

    

    8.           Offset of
Payments.   All monies due to either the Company or the
Reinsurer under this Agreement may be offset against each other, dollar for
dollar, in accordance with Mississippi law.

    

    9.           Accounting
Reports.   Annual reports shall be submitted to the
Company by the Reinsurer not later than 45 business days after the end of each
calendar year. Such reports shall include information for the analysis of
increase in reserves and the exhibit of life insurance of the NAIC Convention
Blank based on the contracts reinsured hereunder.  Quarterly
accounting reports shall be submitted to the Reinsurer by the Company not later
than 45 business days after the end of each calendar quarter and shall include
information for pages 2, 3, 4, and 5 of the NAIC Quarterly Blank.

     

    

    ARTICLE VI

    

    ARBITRATION

    

    1.           General.   All
disputes and differences between the Company and the Reinsurer on which an
agreement cannot be reached will be decided by arbitration.  The
arbitrators will regard this Agreement from the standpoint of practical business
and equitable principles rather than that of strict law.

    

    2.           Method.   Three
arbitrators will decide any differences.  They must be officers of
life insurance companies other than the two parties to this Agreement or any
Company owned by, or affiliated with, either party.  One of the
arbitrators is to be appointed by the Reinsurer, another by the Company, and
they shall select a third before arbitration begins. Should one of the two
parties decline to appoint an arbitrator or should the two arbitrators not be
able to agree upon the choice of a third arbitrator, the appointment(s) shall be
left to the President of the American Council of Life Insurance or its
successors.  The arbitrators are not bound by any rules of
evidence.  They shall decide by a majority of votes and their decision
will be final and binding.  The cost of arbitration, including the
fees of the arbitrators, shall be shared equally by the parties unless the
arbitrators decide otherwise.

     

     

    
      
        Return to Table of Contents

      

      
        7

        
          

        

      

      
         

      

    

     

    ARTICLE VII

    

    INSOLVENCY

    

    In the
event of the Company’s insolvency, liquidation, entry into rehabilitation or
bankruptcy, this Agreement will be deemed to convert to an assumption
reinsurance agreement as of the day prior to such insolvency, liquidation, entry
into rehabilitation, or bankruptcy, subject to any applicable state law and to
prior approval of the Mississippi Insurance Department, which approval shall not
be unreasonably withheld.  Following such conversion, the Reinsurer is
hereby empowered without any need of action on the part of the Company, to take
all other steps necessary for such conversion including the issuance of
assumption certificates.   Notwithstanding the forgoing, the
Reinsurer may elect not to have such automatic conversion occur.  In
the event the Reinsurer elects not to have such automatic conversion to
assumption reinsurance, then the Reinsurer’s contractual liability on contracts
reinsured hereunder shall continue to be determined by all the terms, conditions
and limitations under this Agreement, subject to the receivership laws of the
State of Mississippi, but the Reinsurer will make settlement (i) directly to the
Company’s liquidator, receiver or statutory successor, and (ii) without increase
or diminution because of the Company’s insolvency.

     

    

    ARTICLE VIII

    

    DAC TAX
PROVISION

    

    1.           The
Company and Reinsurer hereby agree to abide by Section 1.848-2(g)(8) of the
Income Tax Regulations under Section 848 of the Internal Revenue Code of 1986,
as amended. The terms used in this Article are defined by reference to
Regulation 1.848-2. The term “net consideration” will refer to either net
consideration as defined in Regulation Section 1.848-2(f) or gross amount of
premium and other considerations as defined in Regulation Section 1.848-3(b), as
appropriate.

    

    2.           Each
party shall attach a schedule to its federal income tax return that identifies
the relevant reinsurance agreements for which the joint election under the
Regulation has been made.

    

    3.           The
party with net positive consideration, as defined in the Regulation promulgated
under Code Section 848, for such Agreement for each taxable year, shall
capitalize specified policy acquisition expenses with respect to such Agreement
without regard to the general deductions limitation of Section 848
(c)(1).

    

    4.           Each
party agrees to exchange information pertaining to the amount of net
consideration under such Agreement each year to ensure consistency.

    

    5.           This
election shall be effective for the year that the Agreement was entered into and
for all subsequent years that such Agreement remains in effect.

    

    6.           The
Reinsurer will submit to the Company by May 1 of each year its calculation of
the net consideration for the preceding calendar year. This schedule of
calculations will be accompanied by a statement signed by an officer of the
Reinsurer stating that the Reinsurer will report such net consideration in its
tax return for the preceding calendar year.

     

    

    
      
        
          Return to Table of Contents

        

        
          8

          
            

          

        

        
           

        

      

    

     

    7.           The
Company may contest such calculation by providing an alternative calculation to
the Reinsurer in writing within 30 days of the Company’s receipt of the
Reinsurer’s calculation. If the Company does not so notify the Reinsurer, the
Reinsurer will report the net consideration as determined by the Reinsurer in
the Reinsurer’s tax return for the previous calendar year.

    

    8.           If
the Company contests the Reinsurer’s calculation of the net consideration, the
parties will act in good faith to reach an agreement as to the correct amount
within 30 days of the date the Company submits its alternative calculation. If
the Reinsurer and the Company reach agreement on the net amount of
consideration, each party shall report such amount in their respective tax
returns for the previous calendar year.

     

    

    ARTICLE IX

    

    SHAREHOLDER
OBLIGATIONS

    

    1.           Shareholder
Obligations.  Each of the Shareholders agrees as
follows:

    

     
(i)  not to induce or attempt to induce, or to cause or aid in any
manner whatsoever any other person to induce or attempt to induce, any
policyholder to terminate any policy issued by the Company;

    

     
(ii)  that all policyholder lists, applications for insurance,
policyholder information, knowledge of business operations and sales methods,
and all other materials of the Company, are the property of the Company only,
that Shareholders’ or Officers’ access to all such information and property has
been in a fiduciary capacity, and that all such information and property shall
not be used by any of the Shareholders without specific written authorization by
the Reinsurer;

    

     
(iii)  that the protection of such information and property is
necessary to provide the Reinsurer with the value of the benefits and rights
being purchased by it pursuant to this  Agreement; and

    

     
(iv)  provided, however, that nothing in this Agreement shall preclude
Russ Nowell from engaging in the insurance business, utilizing any lines of
authority and/or company affiliations to sell, solicit or negotiate new policies
on behalf of any competitor of the Company or the Reinsurer, including new
policies to existing policy holders provided no twisting or replacement of the
in-force policies occurs, so long as he does not solicit existing policyholders
regarding in-force policies or utilize information gained as an officer of the
Company to solicit existing policyholders regarding in-force
business.

    

    2.           Shareholders Liable for
Liquidated Damages.  Each of the Shareholders agrees that any
engagement in activities described in Article IX, paragraph 1 above will result
in irreparable injury to the Reinsurer, for which there is no adequate remedy at
law.  Thus, in the event of breach of  Article IX, paragraph
1 by any respective Shareholder, the Reinsurer may apply for and obtain
immediate and continuing injunctive relief prohibiting further or continued
breach of such obligations hereunder against such Shareholder committing the
said breach.  The said Shareholder(s) committing the breach further
agrees that he or she will be liable for liquidated damages in the amount of two
years’ annual premium for all policies that are terminated as a result of such
Shareholders’ activities.  The other Shareholders shall have no
liability or responsibility for liquidated damages arising out of the activities
or actions of such Shareholder(s) committing the breach.

     

    

    
      
        
          Return to Table of Contents

        

        
          9

          
            

          

        

        
           

        

      

    

    

    ARTICLE X

    

    MISCELLANEOUS
PROVISIONS

    

    1.           All
Schedules referred to in this Agreement are attached hereto and incorporated
herein by reference.

    

    2.           Neither
this Agreement nor any reinsurance under this Agreement shall be sold, assigned
or transferred by the Company without prior written consent of the Reinsurer and
the prior approval of the Mississippi Insurance Department, which approval shall
not be unreasonably withheld. The provisions of this section are not intended to
preclude the Reinsurer from retroceding the reinsurance on an indemnity
basis.

    

    3.           This
Agreement, including any of the schedules and amendments, constitutes the entire
agreement between the parties with respect to the business being reinsured
hereunder, and there are no understandings between the parties other than as
expressed in this Agreement. Any changes in this Agreement shall be null and
void unless such changes are made by written amendment to this Agreement, signed
by both parties and subject to the prior approval of the Mississippi Insurance
Department, which approval shall not be unreasonably withheld.

    

    4.           Any
notice or notification required under this Agreement requires written notice or
notification mailed or delivered to the Reinsurer at its administrative office
in Salt Lake City, Utah, or to the Company at its home office in Louisville,
Mississippi.

    

    5.           If
any provision of this Agreement is determined to be invalid or unenforceable,
such determination will not impair or affect the validity or the enforceability
of the remaining provisions of the Agreement.

     

    
      

      
        
          
            Return to Table of Contents

          

          
            10

            
              

            

          

          
             

          

        

      

       

    

    ARTICLE XI

    

    EXECUTION AND EFFECTIVE
DATE

    

    This
Agreement shall be effective on the Effective Date.  In the event of a
death or other occurrence giving rise to a claim under one of the policies,
which death or occurrence occurred prior to the Effective Date, regardless of
whether the death claim or occurrence is reported prior to or subsequent to the
Effective Date, the Company shall be solely liable for the payment of any claim
made on account of any such death or occurrence and Reinsurer shall pay to the
Company the amount of the reserve of the policy with respect to which the claim
is paid, to the extent that such reserve is reduced as a result of such
payment.

    

    

    

    [The rest
of this page is left blank intentionally]

     

     

     

    
      
        Return to Table of Contents

      

      
        11

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, this Agreement is executed effective as of the date first above
written.

    

    
      	 
      	
              “Company”

            
	 
      	 
      
	 
      	
              SOUTHERN
      SECURITY LIFE INSURANCE COMPANY, INC.

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:   /s/ Janet Nowell
      Massey

            
	 
      	
              Its:  Executive
      Vice President

            
	 
      	 
      
	 
      	
              “Reinsurer”

            
	 
      	 
      
	 
      	
              SECURITY
      NATIONAL LIFE INSURANCE COMPANY

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:
      /s/ Scott M.
      Quist

            
	 
      	
              Its: President

            
	 
      	 
      
	 
      	
              “Shareholders”

            
	 
      	 
      
	 
      	 
      
	 
      	
               /s/ Russell C.
      Nowell

            
	 
      	
              Russell
      C. Nowell

            
	 
      	 
      
	 
      	 
      
	 
      	
              /s/ Janet Nowell
      Massey

            
	 
      	
              Janet
      Nowell Massey

            
	 
      	 
      
	 
      	 
      
	 
      	
               /s/ Michael
      Pierce

            
	 
      	
              Michael
      Pierce, Temporary Administrator of

            
	 
      	
                  the
      Estate of Genece Nowell

            
	 
      	 
      
	 
      	 
      
	 
      	
               /s/ Harold B.
      Nowell, Sr.

            
	 
      	
              Harold
      B. Nowell, Sr.

            
	 
      	 
      
	 
      	 
      
	 
      	
               /s/ Harold
      Nowell, III

            
	 
      	
              Harold
      Nowell, III, Executor of the Estate

            
	 
      	
                  of
      H. Bernard Nowell, Jr.

            

    

    

    

    
      
        
          Return to Table of Contents

        

        
          12

          
            

          

        

        
           

        

      

    

    

    SCHEDULE A

    

    POLICIES AND RISKS
REINSURED

    

    The
business reinsured under this Agreement is 100% of the liabilities of the
policies identified on an attached compact disk entitled, “Southern Security
Reinsured Policies 9/1/08.”

    

    
      
        
          Return to Table of Contents

        

        
          13

          
            

          

        

        
           

        

      

    

    

    SCHEDULE B

    

    REINSURANCE
PREMIUMS

    

    1.           Reinsurance
Premiums.  The Company shall pay the Reinsurer a reinsurance
premium on all policies in effect from time to time under this Agreement in an
amount equal to the gross premium earned by the Company corresponding to the
amount and policies reinsured hereunder.

    

    2.           Mode of
Payment.   The Premium paid to the Reinsurer by the
Company will be paid as collected by the Company.

    

    

    
      
        
          Return to Table of Contents

        

        
          14

          
            

          

        

        
           

        

      

    

    

    SCHEDULE C

    

    COMMISSIONS AND EXPENSE
ALLOWANCE

    

    1.  Commission Fee on Individual
Life Insurance as a Percentage of Collected Premiums

    

    Plan Description Commission
Fee

    

    

    

    

    Calculation of Commission
Fee

    

    
      	 
      	 
      	
              Premium

            	 
      	 
      	
              Reserve
      Amount

            	 
      
	
              Total
      Collected Premium

            	
               
      $

            	
               

            	 
      	
               
      $

            	
               

            	 
      
	 
      	 
      	 
      	 
      	
               
      

            	 
      	 
      
	
              Percentage
      Reinsure

            	
               
      $

            	
              100%

            	 
      	
               
      $

            	
              100%

            	 
      
	
              Reinsured
      Collected Premiums

            	
               
      $

            	
               

            	 
      	
               
      $

            	
               

            	 
      
	 
      	
               
      

            	 
      	 
      	
               
      

            	 
      	 
      
	
              Commission
      Fee Percentage

            	
               
      $

            	
              0%

            	 
      	
               
      $

            	
              0%

            	 
      
	 
      	 
      	 
      	 
      	
               
      

            	 
      	 
      
	
              Commission
      Fee

            	
               
      $

            	
               

            	 
      	
               
      $

            	
               

            	 
      

    

    

    

    2.           Monthly Commission and
Expense Allowance.

    

    A commission and expense allowance for
any period the Company performs contract administration functions in an amount
to be mutually agreed upon by the parties.

    

    3.           Premium Taxes, including all
other Licenses and Fees based on Premium.

    

               The
commission and expense allowance shall be equal to actual premium taxes and
actual sales commissions paid.

    

    4.           Other
Administrative Expenses.

    

      Other administrative expenses
shall be paid as mutually agreed upon by the parties.

    
 

    
      
        Return to Table of Contents

      

      
        15

        
          

        

      

      
         

      

    

     

    SCHEDULE D

    

    MONTHLY
SETTLEMENT

    

    FROM

    SECURITY
NATIONAL LIFE INSURANCE COMPANY

    TO
SOUTHERN SECURITY LIFE INSURANCE COMPANY, INC.

    AND
FROM

    SOUTHERN
SECURITY LIFE INSURANCE COMPANY, INC.

    TO

    SECURITY
NATIONAL LIFE INSURANCE COMPANY

    

    Reporting
Month:  ____________/ _________/ __________

    Date
Report Completed: ________________/ ____________/ ___________

    

    
      	
              1)

            	
              Direct
      Premiums

            	 
      	 
      	 
      
	 
      	
              Less
      Reinsurance Premiums Paid

            	 
      	 
      	 
      
	 
      	
              Net
      Premiums

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              2)

            	
              Policy
      Loans

            	 
      	 
      	 
      
	 
      	
                 Policy
      Loans Repaid

            	 
      	 
      	 
      
	 	 	 	 	 
	 
      	
                 Policy
      Loan Interest Paid in Cash

            	 
      	 
      	 
      
	 
      	
                 Total

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              3)

            	
              Benefits

            	 
      	 
      	 
      
	 
      	
                 Surrenders

            	 
      	 
      	 
      
	 
      	
                 Deaths

            	 
      	 
      	 
      
	 
      	
                 Other

            	 
      	 
      	 
      
	 
      	
                 Less
      Reinsurance Recoveries

            	 
      	 
      	 
      
	 
      	
                 Total

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              4)

            	
              Commissions
      and Expense Allowance (Schedule C)

            	 
      	 
      	 
      
	 
      	
              Less
      Allowances on Reinsured Ceded

            	 
      	 
      	 
      
	 
      	
              Net
      Commission and Expense Allowance

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              5)

            	
              New
      Policy Loans Paid Out in Cash

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Net
      Due Equals (1) + (2) – (3) – (4) – (5) =

            	 
      	 
      	 
      

    

    

    

    
      
        
          Return to Table of Contents

        

        
          16

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
D CONTINUED

    Supplemental
Information

    

    Direct

    
      	 
      	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	
              # of
      Policies

            	 
      	
              Policy
      Reserves

            	 
      	
              Face
      Amount

            
	
              Beg.
      of Period

            	 	 
      	 
      	 
      	 
      	 
      
	
              +Additions

            	 	 
      	 
      	 
      	 
      	 
      
	
              -Terminations

            	 	 
      	 
      	 
      	 
      	 
      
	
              End
      of Period

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Reinsurance
      Ceded

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	
              # of
      Policies

            	 
      	
              Policy
      Reserves

            	 
      	
              Face
      Amount

            
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Beg.
      of Period

            	 	 
      	 
      	 
      	 
      	 
      
	
              +Additions

            	 	 
      	 
      	 
      	 
      	 
      
	
              -Terminations

            	 	 
      	 
      	 
      	 
      	 
      
	
              End
      of Period

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Direct

            	 	 
      	 
      	
              Gross

            	 
      	
              Net

            
	
              Deferred
      Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Due
      Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Advance
      Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Reinsurance
      Ceded

            	 
      	 
      	 
      
	
              Deferred
      premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Due
      Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Advance
      Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Coinsurance Allowances
      on Reinsurance Ceded

            	 
      	 
      
	
              Deferred
      Premium

            	 	 
      	 
      	 
      	 
      	 
      
	
              Due
      Premium

            	 	 
      	 
      	 
      	 
      	 
      
	
              Advance
      Premium

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loan Interest Due:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loan Interest Accrued:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loan Interest Unearned:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loan Beginning of Period:

            	 	 
      	 
      	 
      	 
      	 
      
	
              +
      New Loans Paid in Cash:

            	 	 
      	 
      	 
      	 
      	 
      
	
              +
      New Loans to Cover Interest:

            	 	 
      	 
      	 
      	 
      	 
      
	
              +
      New Loans to Pay Premiums:

            	 	 
      	 
      	 
      	 
      	 
      
	
              -
      Loans Paid Off:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loans End of Period:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loans Interest Paid in Cash:

            	 	 
      	 
      	 
      	 
      	 
      
	
              Policy
      Loans Interest Added to Loan:

            	 	 
      	 
      	 
      	 
      	 
      
	 
      	 	 
      	 
      	 
      	 
      	 
      
	
              Total
      Policy Loan Interest:

            	 	 
      	 
      	 
      	 
      	 
      

    

    

    
      
        
          Return to Table of Contents

        

        
          17

          
            

          

        

        
           

        

      

    

    

    

    EXHIBIT 1

    

    CUSTODIAL AGREEMENT

    

    

    
      
        
          Return to Table of Contents

        

        
          18

          
            

          

        

        
           

        

      

    

    

       

      

      

      

       

      

      

      

      CUSTODIAL AGREEMENT

       

       

      effective
as of September 1, 2008, among

       

      SOUTHERN
SECURITY LIFE INSURANCE COMPANY, INC., as Grantor,

      

      SECURITY
NATIONAL LIFE INSURANCE COMPANY, as Beneficiary, and

      

      WACHOVIA
SECURITIES, LLC, as Custodian

       

       

      

      
        
          
            Return to Table of Contents

          

          
             

            
              

            

          

          
             

          

        

      

      

      TABLE OF CONTENTS

       

      Page
Parties And Recitals

      

      
        	
                Section 1.   Deposit of Assets to the Custodial
      Account

              	
                1

              
	 
      	 
      
	
                Section 2.   Withdrawal of Assets from the Custodial
      Account

              	
                3

              
	 
      	 
      
	
                Section 3.   Redemption, Investment and Substitution
      of Assets

              	
                4

              
	 
      	 
      
	
                Section 4.   The Income Account

              	
                4

              
	 
      	 
      
	
                Section 5.   Right to Vote Assets

              	
                5

              
	 
      	 
      
	
                Section 6.   Additional Rights and Duties of
      Custodian

              	
                5

              
	 
      	 
      
	
                Section 7.   Custodian's
      Compensation, Expenses and Indemnification

              	
                6

              
	 
      	 
      
	
                Section 8.   Resignation of
    Custodian

              	
                7

              
	 
      	 
      
	
                Section 9.   Termination of the Custodial
      Account

              	
                7

              
	 
      	 
      
	
                Section 10. Tax Returns

              	
                7

              
	 
      	 
      
	
                Section 11.  Definitions

              	
                8

              
	 
      	 
      
	
                Section 12. Governing Law

              	
                9

              
	 
      	 
      
	
                Section 13. Assignment

              	
                9

              
	 
      	 
      
	
                Section 14. Severability

              	
                9

              
	 
      	 
      
	
                Section 15. Entire Agreement

              	
                9

              
	 
      	 
      
	
                Section 16. Amendments

              	
                9

              
	 
      	 
      
	
                Section 17. Notices, Etc.

              	
                9

              
	 
      	 
      
	
                Section 18. Headings

              	
                10

              
	 
      	 
      
	
                Section 19. Counterparts

              	
                10

              
	 
      	 
      
	
                Exhibit A     Reinsurance
      Agreement

              	 
      
	 	 
	
                Exhibit B     List of Assets
      Deposited to the Custodial Account

              	 
      

      

      

      

      
        
          
            Return to Table of Contents

          

          
             

            
              

            

          

          
             

          

        

      

      

      

      CUSTODIAL
AGREEMENT

      

      THIS
CUSTODIAL AGREEMENT is made and entered into, effective at 12:01 a.m. on the
1st
day of September, 2008 (the "Agreement"),
by and among SOUTHERN SECURITY LIFE INSURANCE COMPANY, INC., a Mississippi
domiciled insurance company, together with any successor thereof, including,
without limitation, any liquidator, rehabilitator, receiver or conservator (the
"Grantor"),
SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah domiciled insurance company
(the "Beneficiary"), and WACHOVIA SECURITIES, LLC, a Delaware limited liability
company (the "Custodian")
(Grantor, Beneficiary and Custodian are each hereinafter sometimes referred to,
individually, as a "Party"and,
collectively, as the "Parties").

      

      WITNESSETH:

      

      WHEREAS,
Grantor and Beneficiary have entered into a certain reinsurance agreement,
effective as of September 1, 2008, a copy of which is attached hereto as Exhibit
"A", and by this reference made a part hereof (the "Reinsurance
Agreement") concerning certain life insurance and annuity policies (the
"Reinsured Policies"); and

      

      WHEREAS,
Grantor desires, pursuant to the terms of the Reinsurance Agreement, to transfer
to Custodian for deposit into a trust account (the "Custodial
Account") assets equal in amount to the statutory reserves subject to the
Reinsurance Agreement in order to secure payments to be made pursuant to the
terms of the Reinsurance Agreement; and

      

      WHEREAS,
Custodian has agreed to act as the trustee hereunder, and to hold such assets in
trust in the Custodial Account and the Income Account, as defined in Section 4
below, for the sole use and benefit of Beneficiary pursuant to the terms of the
Reinsurance Agreement;

      

      NOW,
THEREFORE, for and in consideration of the promises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Parties
hereby agree as follows:

      

      Section 1

      Deposit
of Assets to the Custodial Account

      

      (a)  Grantor
shall establish the Custodial Account and Custodian shall administer the
Custodial Account in its name as the Custodian for Beneficiary. The Custodial
Account shall be subject to withdrawal by Beneficiary as provided
herein.

      

      (b)  Grantor
shall transfer to Custodian, for deposit into the Custodial Account, the assets
listed in Exhibit "B" hereto and, subject to prior approval of the Mississippi
Insurance Department, which approval shall not be unreasonably withheld, may
transfer to Custodian, for deposit into the Custodial Account, such other assets
as may be required or as Beneficiary may from time to time desire pursuant to
the terms of the Reinsurance Agreement (all such assets actually received in the
Custodial Account are herein referred to as the "Assets"). The
Assets shall consist of cash and Eligible Securities as defined
below.  Subject to prior approval of the Mississippi Insurance
Department, which approval shall not be unreasonably withheld, Beneficiary shall
have the sole right to determine which of Grantor's assets shall be transferred
to Beneficiary.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
             

            
              

            

          

          
             

          

        

      

      

      (c)  The
amounts deposited by Grantor in the Custodial Account shall be in such amount
that the aggregate market value of the Custodial Account at the inception of
this Trust equals or exceeds the statutory reserves on the reinsurance ceded
under the Reinsurance Agreement as of the same date.  For purposes of
this Agreement, statutory reserves, whenever used, shall mean the gross
statutory reserves held by Grantor, or as should be held by Grantor, on its NAIC
Convention Blank with respect to the policies reinsured hereunder. Grantor
certifies, to the best of its knowledge and belief to Beneficiary, the actuarial
accuracy of the reserves based upon the appropriate mortality table, interest
assumptions, and method of calculation relating to each of the policies
reinsured hereunder, and the accuracy of the outstanding balances of the policy
loans, dividend deposits and coupon deposits, if any, applicable to each of the
policies reinsured hereunder; provided, however, that in the event of a breach
of these certificates or the discovery by Grantor or Beneficiary of an error in
calculation, any such breach or error may be cured by Grantor or Beneficiary
making a cash payment to the other, as the case may be, of the amount of any
such error in calculation or actuarial inaccuracy.

      

      (d)  Grantor
hereby represents and warrants (i) that any Assets transferred by Grantor to
Custodian for deposit into the Custodial Account shall be in such form that
Beneficiary may request and Custodian shall, upon direction by Beneficiary,
negotiate any such Assets without consent or signature from
Grantor  in accordance with the terms of this Agreement; and (ii) that
all Assets transferred by Grantor to Custodian for deposit into the Custodial
Account shall consist only of cash and Eligible Securities.

      

      (e)  Custodian
shall have no responsibility to determine whether the Assets in the Custodial
Account are sufficient to secure Grantor's liabilities under the Reinsurance
Agreement or whether such assets are equal to the Statutory
Reserves.

      

      (f)  This
Agreement is a security agreement under the Mississippi Uniform Commercial Code
("Mississippi
UCC"), as
enacted and in effect in the State of Mississippi, and creates a security
interest in the Assets in favor of Custodian, for the benefit of Beneficiary.
Upon Beneficiary's request, financing statements shall be executed by the
necessary party or parties and filed by Custodian in the manner required by law
to perfect such security interest. Compliance with Mississippi UCC requirements
shall not alter any rights under this Agreement or under any other laws of the
State of Mississippi, nor shall it relieve Custodian of any obligation.
Compliance with the Mississippi  UCC is solely to preserve the
priority of Beneficiary's security interest in the Assets.

      

      (g)  Grantor
shall deliver the Assets listed in Exhibit B hereto to Custodian with
appropriate assignments, bond powers, or powers of attorney that authorize
Custodian to transfer the Assets to its name and hold them for the benefit of
Beneficiary. In the event additional Assets are added to or are substituted for
the Assets already in the fund, appropriate assignments, bond powers or powers
of attorney authorizing Custodian to transfer the additional Assets to its name
shall also be delivered to Custodian.

      

      (h)
Grantor warrants that it will not create any other security interest in or
otherwise encumber the Assets. In the event any lien or claim is made against
any Assets, which asserts an interest superior to that of Beneficiary, Grantor
will promptly take steps satisfactory to Beneficiary to discharge the claim or
lien or shall, subject to prior approval of the Mississippi Insurance
Department, which approval shall not be unreasonably withheld, substitute other
assets for those encumbered.

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            2

            
              

            

          

          
             

          

        

      

      

      Section 2

      Withdrawal
of Assets from the Custodial Account

      

      (a)
Without notice to Grantor, but upon written notice to Custodian (the "Withdrawal
Notice"), Beneficiary shall have the right, at any time and from time to time,
to withdraw from the Custodial Account, such Assets as are specified in such
Withdrawal Notice for legitimate business purposes, as  set forth
below. The Withdrawal Notice may designate a third party (the "Designee") to
whom the Assets specified therein shall be delivered and may condition delivery
of such Assets to such Designee upon receipt, and deposit to the Custodial
Account, of other Assets specified in such Withdrawal
Notice.  Beneficiary need present no statement or document other than
a representation to be contained in the Withdrawal Notice that the Assets, using
statutory accounting principles as required or allowed by the domiciliary state
of Grantor, remaining in the Custodial Account are at least equal to the
Statutory Reserves as of the preceding quarterly statutory filing. At no time
shall Beneficiary submit a withdrawal notice to Custodian that would cause the
Assets in this Trust to be less than the Statutory Reserves, using statutory
accounting principles as required or allowed by the domiciliary state of
Grantor, on the Reinsured Policies as of the preceding quarterly statutory
filing.

      

      (b)  Beneficiary
shall have the right to withdraw Assets from the Custodial Account in accordance
with this Section 2 for the following purposes: (i) to make payment of any
obligation of Beneficiary under the Reinsurance Agreement; (ii) to fund
Beneficiary's share of non-forfeiture benefits returned to the owners of
policies reinsured under the Reinsurance Agreement on account of cancellations
of such policies; (iii) to fund Beneficiary's share of surrenders and benefits
or losses paid pursuant to the provisions of the policies reinsured under the
Reinsurance Agreement; (iv) to the extent the Assets in the Custodial Account,
using statutory accounting principles as required or allowed by the domiciliary
state of Grantor, exceed the statutory reserves for the policies covered by the
Reinsurance Agreement, such excess amount of Assets may be withdrawn by
Beneficiary in its sole discretion. Beneficiary shall have sole ownership of any
increases in the amount of the Assets in the Custodial Account, including,
without limitation, any income derived from such Assets.

      

      (c)  Upon
receipt of a Withdrawal Notice, Custodian shall immediately take any and all
steps necessary to transfer the Assets specified in such Withdrawal Notice and
shall deliver such Assets to or for the account of Beneficiary or such Designee
as specified in such Withdrawal Notice.

      

      (d)  Subject
to paragraph (a) of this Section 2 and to Section 4 of this Agreement, in the
absence of a Withdrawal Notice, Custodian shall allow no substitution or
withdrawal of any of the Assets from the Custodial Account.

      

      (e)  Custodian
shall have no responsibility whatsoever to determine the manner in which any
Assets withdrawn from the Custodial Account pursuant to this Section 2 will be
used and/or applied.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            3

            
              

            

          

          
             

          

        

      

      

      Section 3

      Redemption, Investment and
Substitution of
Assets

      

      (a)  Custodian
shall surrender for payment all maturing Assets and all Assets called for
redemption and deposit the principal amount of the proceeds of any such payment
to the Custodial Account.

      

      (b)  From
time to time, at the written order and direction of Beneficiary, Custodian shall
invest Assets in the Custodial Account in Eligible Securities, as authorized by
the insurance laws of Mississippi.  Custodian is specifically
authorized to invest any cash balances in one or more money market vehicles
utilized by Custodian for fiduciary accounts without receiving prior written
direction or any further confirmation from Beneficiary. Custodian is further
permitted to utilize any such fund invested in its own bank's
deposits.

      

      (c)  Subject
to prior approval of the Mississippi Insurance Department, which approval shall
not be unreasonably withheld, Beneficiary may direct Custodian from time to time
in writing to substitute Eligible Securities for other Eligible Securities held
in the Custodial Account at such time. Custodian shall have no responsibility
whatsoever to determine the value of such substituted securities or whether such
substituted securities constitute Eligible Securities. On an annual basis,
Beneficiary shall send a written statement to Custodian, certifying that all the
securities in the Custodial Account constitute Eligible Securities.

      

      (d)  Custodian
shall have no responsibility whatsoever to determine that any Assets in the
Custodial Account are or continue to be Eligible Securities. Custodian shall
execute instructions or orders concerning such investments or substitutions of
securities (the "Investment Orders") and settle securities transactions by
itself or by means of an agent or broker. Custodian shall not be responsible for
any act or omission, or for the solvency, of any such agent or broker unless
said act or omission is the result, in whole or in part, of Custodian's
negligence or willful misconduct.

      

      (e)  Any
loss incurred from any investment pursuant to the terms of this Section 3 shall
be borne exclusively by Beneficiary. Custodian shall not be liable for any loss
due to changes in market rates or penalties for early redemption.

      

      Section 4

      The
Income Account

      

      All
payments of interest and dividends received from or relating to the Assets in
the Custodial Account shall be deposited by Custodian into a separate income
account that shall be administered by Custodian (the "Income Account") for the
benefit of Beneficiary. Custodian's compensation and expenses shall be deducted
from the Income Account, as provided in Section 7 of this
Agreement.  At no time shall Beneficiary direct such payments be made
if they would cause the assets in the Custodial Account to be less than the
statutory reserves required under the insurance laws of the State of
Mississippi.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            4

            
              

            

          

          
             

          

        

      

      

      Section 5

      Right
to Vote Assets

      

      Custodian
shall forward all annual and interim stockholder reports and all proxies and
proxy materials relating to the Assets in the Custodial Account to Beneficiary.
Beneficiary shall have the full and unqualified right, where applicable, to vote
any proxies relating to the Assets in the Custodial Account at all annual and
interim stockholder meetings.

      

      Section 6

      Additional
Rights and Duties of Custodian

      

      (a)  Beneficiary shall have
the right to direct the Custodian at any time in writing to sell, trade,
liquidate, exchange, reinvest, and otherwise dispose of and deal with the Assets
as Beneficiary determines in its sole discretion, subject to prior approval of
the Mississippi Insurance Department, which approval shall not be unreasonably
withheld.

      

      (b)  Custodian
shall notify Grantor and Beneficiary in writing within thirty (30) days
following each deposit to, or withdrawal from, the Custodial
Account.

      

      (c)  Custodian
may deposit any Assets in the Custodial Account in a book-entry account
maintained at a federally chartered bank or in depositories such as the
Depository Trust Company. Assets may be held in the name of a nominee maintained
by Custodian or by any such depository.

      

      (d)
Custodian shall accept and open all mail directed to Grantor or Beneficiary in
care of Custodian.

      

      (e)  Custodian
shall furnish Grantor and Beneficiary with a written statement of all the Assets
in the Custodial Account upon the inception of the Custodial Account and at the
end of each calendar quarter thereafter.

      

      (f)  Upon
the request of Grantor, Beneficiary or the Mississippi Insurance Department,
Custodian shall promptly permit the Grantor,  Beneficiary or the
Mississippi Insurance Department, their respective agents, employees or
independent auditors to examine, audit, excerpt, transcribe and copy, during
Custodian's normal
business hours, any books, documents, papers and records relating to the
Custodial Account or the Assets.  Any reasonable costs associated with
such inspection shall be borne by Grantor and/or Beneficiary.

      

      (g)  Custodian
is authorized to follow and rely upon instructions consistent with the
provisions of this Agreement that may be given by officers named in incumbency
certificates furnished to Custodian from time to time by Beneficiary and by
attorneys-in-fact acting under written authority furnished to Custodian by
Beneficiary, including, without limitation, instructions given by letter,
facsimile transmission, telegram, teletype, cablegram or electronic media, if
Custodian believes such instructions to be genuine and to have been signed, sent
or presented by the proper party or parties. Custodian shall not incur any
liability to anyone resulting from actions taken by Custodian in reliance in
good faith on such instructions. Custodian shall not incur any liability in
executing instructions (i) from an attorney-in ­fact prior to receipt by it
of notice of the revocation of the written authority of the attorney-in-fact or
(ii) from any officer of Beneficiary named in an incumbency certificate
delivered hereunder prior to receipt by it of a more current
certificate.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            5

            
              

            

          

          
             

          

        

      

      

      (h)  The
duties and obligations of Custodian shall only be such as are specifically set
forth in this Agreement, as it may from time to time be amended, and no implied
duties or obligations shall be read into this Agreement against Custodian.
Custodian shall only be liable for its own negligence or willful
misconduct.

      

      (i)  No
provision of this Agreement shall require Custodian to take any action which, in
Custodian's reasonable judgment, would result in any violation of this Agreement
or any provision of law.

      

      (j)  Custodian
may confer with counsel of its own choice in relation to matters arising under
this Agreement and shall have full and complete authorization from the other
Parties hereunder for any action taken or suffered by it under this Agreement or
under any transaction contemplated hereby in good faith and in accordance with
the opinion of such counsel.

      

      Section 7

      Custodian's
Compensation, Expenses and Indemnification

      

      (a)  Custodian
shall be paid its reasonable compensation and expenses from the Income Account,
as set forth in Paragraph 4, for its services as Custodian under this Agreement,
based upon a fee schedule that will be mutually agreed upon by Custodian and
Beneficiary. Beneficiary shall have the right to review at any time the amount
of compensation and expenses paid to Custodian for serving as a Custodian
hereunder and, if necessary, to dispute any such amounts that may be incorrectly
or improperly determined. All of Custodian's
expenses and disbursements in connection with its duties under this Agreement
(including reasonable attorney's fees and expenses) will be paid from the Income
Account, except any such expense or disbursement as may arise from
Custodian's
negligence or willful misconduct. Custodian shall be entitled to deduct its
compensation and expenses from payments of dividends, interest and other income
in respect of the Assets held in the Custodial Account prior to the deposit
thereof to the Income Account as provided in Section 4 of this Agreement, upon
written notification to Beneficiary. Beneficiary and Grantor also hereby
indemnify Custodian for, and hold it harmless against, any loss, liability,
costs or expenses (including reasonable attorney's fees and expenses) incurred
or made without negligence or willful misconduct on the part of Custodian,
arising out of or in connection with the performance of its obligations in
accordance with the provisions of this Agreement, including any loss, liability,
costs or expenses arising out of or in connection with the status of Custodian
and its nominee as the holder of record of the Assets. Grantor hereby
acknowledges that the foregoing indemnities shall survive the resignation of
Custodian or the termination of this Agreement and hereby grants the Custodian a
lien, right of set-off and security interest in the funds in the Custodial
Account for the payment of any claim for compensation, reimbursement or
indemnity hereunder.

      

      (b) No
Assets, other than as related to income, shall be withdrawn from the Custodial
Account or used in any manner for paying compensation to, or reimbursement or
indemnification of, Custodian.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            6

            
              

            

          

          
             

          

        

      

      

      Section 8

      Resignation
of Custodian

      

      (a)  Custodian
may resign at any time by giving not less than thirty (30) days' written
notice thereof to Beneficiary and to Grantor, such resignation to become
effective on the acceptance of appointment by a successor Custodian and the
transfer to such successor Custodian of all Assets in the Custodial Account in
accordance with paragraph (b) of this Section 8.

      

      (b)  Upon
receipt of Custodian's notice
of resignation, Beneficiary shall appoint a successor Custodian. Any successor
Custodian shall be a bank that is a member of Federal Reserve System and shall
not be a Parent, a Subsidiary or an Affiliate of Grantor or Beneficiary. Upon
the acceptance of the appointment as Custodian hereunder by a successor
Custodian and the transfer to such successor Custodian of all Assets in the
Custodial Account, the resignation of Custodian shall become effective.
Thereupon, such successor trustee shall succeed to and become vested with all
the rights, powers, privileges and duties of Custodian, and Custodian shall be
discharged from any future duties and obligations under this Agreement, but
Custodian shall continue after its resignation to be entitled to the benefits of
the indemnities provided herein for Custodian.

      

      Section 9

      Termination
of the Custodial Account

      

      (a)  The
Custodial Account and this Agreement, except for the indemnities provided
herein, shall be terminated at any time by Beneficiary after Beneficiary has
given Custodian written notice of its intention to terminate the Custodial
Account in accordance with the terms thereof. Insolvency of Beneficiary shall
also be considered to cause the termination of this Custodial
Account.  Such notice shall specify the date (the "Termination
Date") on
which Beneficiary intends the Custodial Account to terminate, which date shall
be at least thirty (30) days subsequent to the date that the termination notice
is given.  No termination of the Trust Agreement shall be effective
absent prior approval of the Mississippi Insurance Department, which approval
shall not be unreasonably withheld.

      

      (b)  On
the Termination Date, upon receipt of written approval of Beneficiary and the
Mississippi Insurance Department, Custodian shall transfer to Beneficiary all
amounts remaining in the Custodial Account.

      

      (c)  If
the Reinsurance Agreement is converted to an assumption agreement as a result of
Grantor's
insolvency as set forth in Article VII of the Reinsurance Agreement, the
Custodial Account shall terminate and all Assets in the Custodial Account shall
be distributed to Beneficiary, subject to prior approval of the Mississippi
Insurance Department, which approval shall not be unreasonably withheld and
subject further to the receivership laws of the State of
Mississippi.

      

      Section 10

      Tax
Returns

      

      Beneficiary
shall be responsible for causing to be prepared and filed in a timely fashion
all tax returns, if any, of the Custodial Account relating to the transactions
contemplated by this Agreement or otherwise contemplated hereby, and it shall
send a copy of each such tax return to Custodian and Beneficiary. Custodian,
upon request, shall furnish Grantor with all such information as it has in its
possession and as may be reasonably required in connection with the preparation
of such tax returns and shall, upon the request of Beneficiary, execute such
returns if required to do so by the applicable taxing authority. Custodian shall
not be liable for any tax due and payable in connection with this Custodial
Agreement.

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            7

            
              

            

          

          
             

          

        

      

      

      Section 11

      Definitions

      

      Except as
the context shall otherwise require, the following terms shall have the
following meanings for all purposes of this Agreement (the definitions to be
applicable to both the singular and the plural forms of each term defined if
both such forms of such term are used in this Agreement):

      

      The term
"Affiliate" with respect to any corporation shall mean a corporation which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such corporation. The term
"control" (including the related terms "controlled
by" and "under
common control with") shall mean the ownership, directly or indirectly of more
than ten percent (10%) of the voting stock of a corporation.

      

      The term
"Business
Day" shall mean any day on which the offices of Custodian is open for
business.

      

      The term
"Eligible
Securities" shall mean and include certificates of deposit issued by a United
States bank and payable in United States legal tender and obligations issued,
assumed or guaranteed by the United States, any state, territory or possession
thereof, or the District of Columbia or any money market vehicles utilized by
Custodian for fiduciary accounts, to include those invested in its own bank's
deposits, any other investment authorized under the relevant statutes and rules
of Grantor's domiciliary state; provided, however, that no such securities shall
have been issued by a Parent, a Subsidiary or an Affiliate of either Grantor or
Beneficiary.  Any investment of Assets in the Custodial Account is
subject to the insurance laws of the State of Mississippi which govern the
investment of assets of insurance companies.

      

      The term
"obligations"
shall mean, with respect to the Reinsurance Agreement, (a) losses, to include
policyholder benefits, and allocated loss expenses paid or payable by
Beneficiary, but not recovered from Grantor, (b) reserves for losses reported
and outstanding, (c) reserves for losses incurred but not reported, (d) reserves
for allocated loss expenses and (e) reserves for unearned premiums.

      

      The term
"person"
shall mean and include an individual, a corporation, a partnership, an
association, a trust, an unincorporated organization or a government or
political subdivision thereof.

      

      The term
"Parent"shall
mean an institution that, directly or indirectly, controls another
institution.

      

      The term
"Subsidiary"
shall mean an institution controlled, directly or indirectly, by another
institution.

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            8

            
              

            

          

          
             

          

        

      

      

      Section 12

      Governing
Law

      

      This
Agreement shall be subject to and governed by the laws of the state of
Mississippi.

      

      Section 13

      Assignment

      

      No party
may assign this Agreement or any of its rights or obligations hereunder at any
time without the written consent of Grantor and the prior approval of the
Mississippi Insurance Department, which approval shall not be unreasonably
withheld.

      

      Section 14

      Severability

      

      In the
event that any provision of this Agreement shall be declared invalid or
unenforceable by any regulatory body or court having jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remaining portions of this Agreement.

      

      Section 15

      Entire
Agreement

      

      This
Agreement constitutes the entire agreement among the Parties, and there are no
understandings or agreements, conditions or qualifications relative to this
Agreement which are not fully expressed in this Agreement.

      

      Section 16

      Amendments

      

      This
Agreement may be modified or otherwise amended, and the observance of any term
of this Agreement may be waived, if such modification, amendment or waiver is in
writing and signed by all of the Parties.  Any modification or
amendment to this Agreement is subject to prior approval of the Mississippi
Insurance Department, which approval shall not be unreasonably
withheld.

      

      Section 17

      Notices

      

      Unless
otherwise provided in this Agreement, all notices, directions, requests,
demands, acknowledgments and other communications required or permitted to be
given or made under the terms hereof shall be in writing and shall be deemed to
have been duly given or made (a) (i) when delivered personally, (ii) when made
or given by prepaid telex, telegraph or telecopier, or (iii) in the case of mail
delivery, upon the expiration of three days after any such notice, direction,
request, demand, acknowledgment or other communication shall have been deposited
in the United States mail for transmission by first class mail, postage prepaid,
or upon receipt thereof, whichever shall first occur and (b) when addressed as
follows:

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            9

            
              

            

          

          
             

          

        

      

      

      If to Grantor:

      

      Southern Security Life Insurance
Company, Inc.

      211 Ball Drive

      P.O. Box 924

      Louisville, Mississippi
39339

      Attn:  Russell C. Nowell,
President

      

      If to Beneficiary:

      

      Security National Life Insurance
Company

      5300 South 360 West, Suite
250

      Salt Lake City, Utah 84123

      Attn: Stephen Sill, Vice
President

      

      If to Custodian:

      Wachovia Securities, LLC

      265 North Lamar Blvd., Suite
K

      Oxford, Mississippi 38655

      Attn:  D. Lindsay Reid, First
Vice President

      

      Each
Party may from time to time designate a different address for notices,
directions, requests, demands, acknowledgments and other communications by
giving written notice of such change to the other Parties. All notices,
directions, requests, demands, acknowledgments and other communications relating
to the termination of the Custodial Account shall be in writing and may not be
made or given by prepaid telex, telegraph or telecopier.

      

      Section 18

      Headings

      

      The
headings of the Sections and the Table of Contents have been inserted for
convenience of reference only, and shall not be deemed to constitute a part of
this Agreement.

      

      Section 19

      Counterparts

      

      This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall constitute an original, but such counterparts
together shall constitute one and the same Agreement.

       

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            10

            
              

            

          

          
             

          

        

      

      

      

      IN WITNESS WHEREOF, the Parties hereto
have caused this Agreement to be executed and delivered by their respective
officers thereunto duly authorized as of the date first above
written.

      

      
        	 
      	
                SOUTHERN
      SECURITY LIFE INSURANCE COMPANY, INC.,

              
	 
      	
                     as
      Grantor

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                By:
      /s/ Janet Nowell
      Massey

              
	 
      	
                Title:  Executive
      Vice President

              
	 
      	 
      
	 
      	 
      
	 
      	
                SECURITY
      NATIONAL LIFE INSURANCE COMPANY,

              
	 
      	
                      as
      Beneficiary

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                By:
      /s/ Scott M.
      Quist

              
	 
      	
                Title:
      President

              
	 
      	 
      
	 
      	 
      
	 
      	
                WACHOVIA
      SECURITIES, LLC, as Custodian

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                By:
      /s/ John
      West

              
	 
      	
                Title:
      Senior Vice President

              

      

      

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            11

            
              

            

          

          
             

          

        

      

       

      EXHIBIT A

      

      Reinsurance Agreement between SOUTHERN
SECURITY LIFE INSURANCE COMPANY, INC., a Mississippi domiciled insurance
company, SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah domiciled insurance
company, and the shareholders of Southern Security Life Insurance Company, Inc.,
effective as of September 1, 2008.

       

       

      

      
        
          
            Return to Custodial Agreement Table of
Contents

          

          
            
            

            
              

            

          

          
             

          

        

      

       

      EXHIBIT B

      

      Assets Equal to Reserves as of the Date
of the Reinsurance Agreement.

       

       

      Return to Custodial Agreement Table of
ContentsExhibit 10.1

 

Employment
Contract

 

TGC
INDUSTRIES, INC.

 

(as Amended
and Restated

effective September 11,
2008)

 

This Contract is entered into between TGC Industries, Inc., a Texas
corporation (hereafter called “Company”),
and Wayne A. Whitener (hereafter called
“Employee”).

 

Company and Employee previously entered into
an Employment Contract dated to be effective August 1, 2005, which was
subsequently amended by Amendment No. 1 thereto dated to be effective July 15,
2006, and Amendment No. 2 thereto dated to be effective May 1,
2007.  The purpose of this Contract is to
completely replace and supersede that earlier Employment Contract (as amended).

 

Company is engaged in the business of
providing seismic data acquisition services primarily to onshore oil and
natural gas exploration and production companies.  Company desires to retain the services of
Employee as one of its key executives, and Employee is willing and able to
perform in that capacity.

 

Accordingly, in consideration of the mutual
covenants herein contained, the parties to this Contract agree as follows:

 

1.             Employment.  Company hereby
continues the employment of Employee, and Employee hereby accepts such
employment from Company, pursuant to those provisions herein contained.

 

2.             Term of Employment.  Subject
to the provisions for termination hereafter provided, this Contract shall be
for a term ending on July 31, 2010.  By a subsequent agreement in writing signed
by both parties, this Contract may be extended for one or more additional terms
as agreed upon by the parties hereto.

 

3.             Duties of Employee.  Employee
is employed as President and Chief Executive Officer of Company.  Employee shall devote substantially all of
his time, attention, best efforts, and energy to the business of Company, and
may not, during the term of this Contract, be engaged in any other material
business activities which interfere with his ability to carry out his
obligations hereunder.  However, such
restriction shall not be construed as preventing Employee from making investments
in (non-competitive) business enterprises so long as Employee will not be
required to render personal services to any such business enterprises during
Employee’s normal business hours with Company.

 

 

4.             Compensation.  To the extent
Employee continues to comply with all of the provisions of this Contract
(including the covenants referenced in paragraph 9 below and contained in Exhibits “B” and “C” attached hereto):

 

a.             Base Salary.  Company shall
pay to Employee a minimum base salary at the rate of: (i) $225,000 per year through July 31,
2008, payable in equal payments of $8,653.85
(or in accordance with such other sequence of payments as determined by
Company’s then existing payroll policies); and (ii) $250,000
per year for the remaining term of this Contract payable in equal payments of $9,615.38 (or in accordance with such other sequence of
payments as determined by Company’s then existing payroll policies).  There shall be deducted from such minimum
base salary payments federal withholding and social security taxes; and

 

b.             Performance Bonus.  At the end of
each calendar year, Company’s Board of Directors will make a determination as
to whether the results of Company’s operations for such preceding calendar year
warrant the payment to Employee of a special performance bonus.  If so, Employee shall be entitled to receive,
in addition to the base salary referred above, a special performance bonus in
such amount as is determined by the Board of Directors in the exercise of their
sole discretion (up to a maximum of the minimum base salary then in effect);
and

 

c.             Increases.  The Board of
Directors of Company may, at any time, elect to increase Employee’s Base Salary
above the amount referred to in subparagraph “a.” above (in which event the
ceiling on Employee’s Performance Bonus under subparagraph “b.” above shall be
similarly increased).

 

5.             Fringe Benefits.  During the
period that Employee continues to comply with all of the provisions of this
Contract, Employee shall receive the following fringe benefits:

 

a.             Medical Benefits.  Employee
and his dependent family members shall be covered under the same group
hospitalization, accident, and major medical plans as Company shall provide
from time to time for other officers; provided, however, that Employee shall
pay the same portion of the cost thereof as may be required from Company’s
officers generally;

 

b.             Paid Vacation.  Each calendar
year (or portion thereof), Employee may take a vacation of four (4) weeks
during which time his compensation shall be paid in full;

 

c.             Automobile.  Company shall
provide an automobile for Employee’s use in connection with the services to be
rendered by Employee to Company.  Company
shall pay or reimburse Employee for maintenance and repair expenses of the
automobile upon submission of vouchers or itemized lists of such 

 

2

 

expenses prepared in compliance with
Company’s policy.  For so long as Company
owns (or leases) the automobile, Company shall insure the automobile with adequate
automobile insurance company coverage. 
Company agrees that Employee shall be designated as an additional
insured on any Company provided policy providing liability insurance coverage.  In the event the automobile is damaged or
destroyed by reason of accident, theft, vandalism, or otherwise, Employee will
not have any liability to Company for any such loss or damage (including
out-of-pocket deductibles); and

 

d.             Other Benefits.  No provision of
this Contract shall preclude Employee from participating in any fringe benefit
plan now in effect or hereafter adopted by Company, but Company shall be under
no obligation to provide for his participation in, or to institute, any such
plan or to make any contribution under any such plan, unless such opportunities
are provided to all Company employees as a group, or to all of Company’s senior
officers as a group.

 

6.             Business Expenses.  Employee
may incur reasonable expenses in connection with the promotion of Company’s
business including expenses for entertainment, travel, and similar items.  Company agrees to reimburse Employee for all
such reasonable expenses upon the presentation by Employee, from time to time
as required by Company, of an itemized account of such expenditures; provided,
however, Employee shall not expend any sums in excess of those amounts
permitted by the Internal Revenue Code of 1986, as amended, without prior
written approval from Company’s Board of Directors.

 

7.             Key-Man Insurance.  The
parties agree that Company shall continue to own (and pay for) life insurance
on Employee’s life in the amount of one million dollars ($1,000,000).  Employee agrees that he shall, at Company’s
request, submit to such medical examinations, supply such information, and execute
such documents as may be requested by the insuring company or companies.  It is agreed and understood that if Employee
dies during the term of this Contract, the full amount of the proceeds payable
under any such policy will be receivable solely by Company.

 

8.             Termination of Employment.

 

a.             By Company.

 

(1)           Date of Termination.  Company may at
any time terminate this Contract, in which event Employee shall leave the
premises on such date (the “Date of
Termination”) as is specified by Company in the notice of
termination (which date can be as early as the date of such notice).

 

(2)           For Cause.  If such termination is “for cause,” Company will have no
obligation to pay to Employee any compensation or fringe 

 

3

 

benefits following the Date of Termination (unless otherwise required
under applicable law).  For purposes of
the preceding sentence, the phrase “for
cause” will be deemed to mean:

 

(a)           absence from Company’s offices, physical or mental
illness, or any other reason, for any successive period of forty-five (45)
days, or for a total period of ninety (90) days in any one of Company’s fiscal
years (except that any vacation periods, travel on Company business, or leaves
of absence specifically granted by Company’s Board of Directors shall not be
considered as periods of absence from employment).  Provided, however, notwithstanding what has
just been stated, in no event may any such absence constitute “for cause” if this would conflict with any state or federal
law in effect at the time;

 

(b)           Employee’s commission of an act of gross negligence
in the performance of his duties or obligations hereunder;

 

(c)           Employee’s commission of any act of fraud,
malfeasance, disloyalty, or breach of trust against the Company, or Employee
fails to observe any covenant referenced in paragraph 9 below or contained
in Exhibits “B” or “C” hereto;

 

(d)           Employee’s refusal, or substantial inability, to
perform the duties assigned in good faith to him pursuant to paragraph 3
hereof;

 

(e)           Employee dies or gives affirmative indication, in
the opinion of a majority of Company’s Board of Directors, that he no longer
intends to abide by the terms of this Contract; or

 

(f)            Employee is guilty of acts of moral turpitude or
dishonesty in Company’s affairs, gross insubordination or the equivalent, or
Employee violates, or fails to comply with, any of the provisions of this
Contract.

 

(3)           Not For Cause.  If such
termination is based on any reason other than “for
cause,” Company shall be obligated to pay to Employee his base
salary during the remainder of the term of this Contract (on a monthly basis at
the same rate as payable immediately before the Date of Termination).  In addition, no later than March 15
following the calendar year during which occurred the event triggering such Date
of Termination, Company shall pay to Employee his Proportionate Share of the
special 

 

4

 

performance bonus referred to in paragraph 4.b. above.  For this purpose, Employee’s “Proportionate Share” will be a fraction
the numerator of which is the number of days in such calendar year ending with
such Date of Termination and the denominator of which is the total number of
days in such calendar year.

 

(a)           Included within the definition of a termination of
Employee other than “for cause”
will be a “Change in Control of Company.”  For purposes of this Contract, the term “Change in Ownership or Control of Company”
is defined in Exhibit “A”
attached hereto.

 

(b)           If, at the time of termination, Company was
providing an automobile to Employee under paragraph 5.c. above, then, for a
consideration of Ten Dollars ($10.00) cash paid by Employee to Company, the
following shall apply:  (i) if
Company owned the automobile, Company shall transfer the title (free and clear
of any liens or other encumbrances) to Employee (along with any insurance
coverage [if assignable]); and (ii) if Company was leasing such
automobile, Company shall assign to employee all of its right, title, and
interest in and to such lease.  Such
transfer or assignment shall be completed by the Company not later than two and
one-half (2 1⁄2) months after the end of the calendar year in which the Date of
Termination occurs.  EMPLOYEE
ACKNOWLEDGES THAT THE DIFFERENCE IN THE FAIR MARKET VALUE OF THE AUTOMOBILE ON THE
DATE OF TRANSFER OVER THE CONSIDERATION PAID BY THE EMPLOYEE SHALL BE TAXABLE
TO EMPLOYEE AS COMPENSATION INCOME AND BE SUBJECT TO EMPLOYMENT TAX WITHHOLDING
REQUIREMENTS.

 

(c)           Sec. 416(i) of the Code defines “key employee”
as meaning an employee who, at any time during the year, is: (i) an
officer having an annual compensation greater than $130,000 (as, from time to
time, indexed); (ii) a five percent owner of the employer; or (iii) a
one percent owner of the employer having an annual compensation from the
employer of more than $150,000.  Sec.
409A of the Code provides that deferred compensation benefits payable as a
result of termination of employment cannot be made to “key employees” of
publicly-traded corporations or their subsidiaries prior to the date that is
six (6) months after the employee’s separation from service.  Accordingly, notwithstanding what is
otherwise stated in this subparagraph (3), in the event any of such payments
are to be made as a result of Employee’s 

 

5

 

termination of employment at a time when Employee is a “key employee”
(as defined above) of Company, then the amount so owing shall accrue but shall
not be physically paid until at least six (6) months following Employee’s
separation from service (but only to the extent required under Sec. 409A of the
Code and authoritative guidance thereunder).

 

(d)           Notwithstanding what is stated in this subparagraph
(3), in the event that any of such payments under this subparagraph (3) are
subject to Sec. 409A of the Code, the payment of such amounts will be modified
in order to be exempt from Sec. 409A (to the extent possible).  The parties understand and agree that this
Contract will be amended as needed in order to specify the particular payment’s
requirements and limitations as modified. 
For example, in the event that, at the time of Employee’s termination of
employment, he is deemed to be a “key employee” (see subparagraph “(3)(c)”
above), then the full amount of deferred compensation which could not be paid
during the first six (6) months following the Date of Termination shall be
paid in the seventh (7th) month following the Date of
Termination.  However, in the event of
any such modification and/or amendment which has the effect of reducing the
economic benefit receivable by Employee under this Contract, Company shall pay
to Employee a reimbursement amount which will have the effect of offsetting (on
an after-tax basis) the amount of such economic benefit lost.

 

(e)           Employee shall not be required to mitigate the
amount of any payment provided for in this subparagraph (3) by
seeking other employment or otherwise, nor shall the amount of any payment
provided for in this subparagraph (3) be reduced by any compensation
earned by Employee as the result of self-employment or employment by another
employer.

 

b.             By Employee.  If such
termination is caused by Employee for any reason, Company will have no
obligation to pay to Employee any compensation or fringe benefits following the
Date of Termination (unless otherwise required under applicable law).

 

9.             Disclosure of Confidential Information; Covenant Not To
Compete. Company possesses secret and confidential
equipment, techniques, processes, procedures, technical data and information,
and customer lists used or intended for utilization in its operations of which
Employee has obtained or may obtain knowledge, and Company would suffer serious
harm if this confidential information were disclosed or if Employee used this
information to compete against Company. 
Further, Employee in the 

 

6

 

performance of services hereunder may develop
or conceive new and additional inventions and improvements with respect to such
matters.  Accordingly, Employee hereby
agrees that simultaneously with the execution of this Contract he shall execute
and deliver to Company, and thereafter abide by, the terms of a “Confidentiality Agreement and Covenant Not to Compete”
and “Disclosure and Invention Agreement,”
copies of each of which are attached hereto as Exhibits “B” and “C” and incorporated herein by reference.

 

10.          Remedies.  Employee agrees
that in the event of his breach of his covenants and agreements contained or
referenced in this Contract, Company shall be entitled to obtain injunctive or
similar relief from a court of competent jurisdiction.  The covenants contained in Exhibits “B” and “C” hereof shall be
construed as agreements independent of any other agreements between Company and
Employee, and the existence of any claim or cause of action of Employee against
Company, whether predicated on this Contract or otherwise, shall not constitute
a defense to the enforcement by Company of those covenants and agreements.  Company shall be entitled to reasonable
attorneys’ fees and related legal costs in the event of a breach, or attempted
breach, of such covenants by Employee. 
The remedies of Company and Employee under this Contract are cumulative
and will not exclude any other remedies to which any party may be entitled
hereunder, including a right of offset, whether at law or in equity.

 

11.          Notices.  All notices
allowed or required to be given hereunder must be in writing and dispatched by
United States certified mail, return receipt requested, to the address of the
party entitled to such notice shown at the end of this Contract.  Either party hereto may change the address to
which any such notice is to be addressed by giving notice in writing to the
other party of such change.  Any time
limitation provided for in this Contract shall commence with the date that the
party actually receives such written notice, and the date or postmark of any
return receipt indicating the date of delivery of such notice to the addressee
shall be conclusive evidence of such receipt. 
In addition to the parties hereto, copies of all notices should be sent
to:

 

Mr. William J. Barrett

c/o Barrett-Gardner Associates, Inc.

636 River Road

P. O. Box 6199

Fair
Haven, New Jersey  07704

 

Haynes
and Boone, LLP

201
Main Street, Suite 2200

Fort
Worth, Texas  76102

Attn:  Rice M. Tilley, Jr., Esq.

 

12.          Assignment.  Neither
Employee nor anyone claiming under him may commute, encumber, or dispose of the
right to receive benefits hereunder. 
Such right to 

 

7

 

receive benefits hereunder is expressly declared to be non-assignable
and non-transferable by Employee, and in the event of any attempted assignment
or transfer, Company shall have no further liability hereunder; provided,
however, the foregoing shall not apply to assignments by operation of law, such
as to a guardian or to an executor of Employee’s estate.

 

13.          Waiver.  The waiver by
Company of Employee’s breach of any provision hereof shall not operate or be
construed as a waiver of any subsequent breach by Employee.

 

14.          Binding Effect.  This Contract
shall be binding upon the parties hereto and their heirs, successors,
executors, administrators, personal representatives, and (except as provided in
paragraph 12) assigns.

 

15.          Survival of Provisions.  All
provisions of this Contract, including all representations, warranties,
covenants, and agreements contained or referenced herein, will survive the
execution and delivery hereof and any investigation of the parties with respect
thereto.  The provisions of
paragraphs 9 and 10, and Exhibits “B”
and “C” will survive the termination or amendment of this Contract.

 

16.          Validity.  If any
provision of this Contract is held by a court of law to be illegal or
unenforceable, the remaining provisions of the Contract will remain in full
force and effect.  In lieu of such
illegal or unenforceable provision, there shall be added automatically as a
part of this Contract a provision as similar in terms to such illegal or
unenforceable provision as may be possible and be legal and enforceable.

 

17.          Amendments.  This Contract
may be amended at any time and from time to time in whole or in part by an
instrument in writing setting forth the particulars of such amendment and duly
executed by Company and Employee.

 

18.          Duplicate Originals.  This
Contract has been executed in duplicate originals, each of which for all
purposes is to be deemed an original, and all of which constitute,
collectively, one agreement; but in making proof of this Contract, it will not
be necessary to produce or account for more than one such duplicate.

 

19.          Captions.  The captions or
section headings of this Contract are provided for convenience and shall not
limit or affect the interpretation of this Contract.

 

20.          Governing Law.  This Agreement
has been made in, and its validity, interpretation, construction, and
performance shall be governed by and be in accordance with, the laws of the
State of Texas, without reference to its laws governing conflicts of law.  Each party hereby irrevocably agrees that any
legal action or proceedings with respect to this Agreement may be brought in
the courts of the State of Texas, or in any United States District Court of
Texas, and, by its execution and delivery of this 

 

8

 

Agreement, each party hereby irrevocably submits to each such
jurisdiction and hereby irrevocably waives any and all objections which it may
have as to venue in any of the above courts. 
Each party further consents and agrees that any process or notice of
motion or other application to either of said Courts or any judge thereof, or
any notice in connection with any proceedings hereunder, may be served inside
or outside the State of Texas by registered or certified mail, return receipt
requested, postage prepaid, and be effective as of the receipt thereof, or in
such other manner as may be permissible under the rules of said Courts.

 

21.          Complete Understanding.  This
Contract constitutes the complete understanding between the parties hereto,
except as otherwise expressly provided or referenced herein, with respect to
the employment of Employee.  This
Contract supersedes all prior agreements and understandings between the parties
with respect to the subject matter hereof.

 

IN WITNESS
WHEREOF, the parties have executed this Contract to be effective September 11,
2008.

 

	
  COMPANY:

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
  TGC Industries

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  William J. Barrett

  	
   

  	
  /s/
  Wayne A. Whitener

  
	
   

  	
  William
  J. Barrett, Director

  	
  Wayne A. Whitener

  
	
   

  	
   

  	
  49 Sunrise Circle

  
	
   

  	
  Date:  September 11,
  2008

  	
  Pottsboro, Texas  75076

  
	
   

  	
   

  
	
   

  	
  Date:  September 11,
  2008

  
				

 

9

 

Exhibit “A”

to

Employment
Contract

 

I.              Change in the
ownership of a corporation.

 

(A)          In
general.  A change in the ownership of a corporation occurs on the
date that any one person, or more than one person acting as a group, acquires
ownership of stock of the corporation that, together with stock held by such
person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of such corporation.  However, if any one person, or more than one
person acting as a group, is considered to own more than 50 percent of the
total fair market value or total voting power of the stock of a corporation,
the acquisition of additional stock by the same person or persons is not
considered to cause a change in the ownership of the corporation (or to cause a
change in the effective control of the corporation).    An increase in the percentage of stock
owned by any one person, or persons acting as a group, as a result of a
transaction in which the corporation acquires its stock in exchange for
property will be treated as an acquisition of stock.  This applies only when there is a transfer of
stock of a corporation (or issuance of stock of a corporation) and stock in
such corporation remains outstanding after the transaction.

 

(B)           Persons acting
as a group.  Persons will not be considered to be acting as a group
solely because they purchase or own stock of the same corporation at the same
time, or as a result of the same public offering.  However, persons will be considered to be acting
as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase, or acquisition of stock, or similar business
transaction with the corporation.  If a
person, including an entity, owns stock in both corporations that enter into a
merger, consolidation, purchase, or acquisition of stock, or similar
transaction, such shareholder is considered to be acting as a group with other
shareholders in a corporation prior to the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.

 

II.            Change in the
effective control of a corporation.

 

(A)          In
general.  Notwithstanding that a
corporation has not undergone a change in ownership, (see above), a change in
the effective control of a corporation occurs only on the date that either –

 

(1)           Any one person, or more than
one person acting as a group, acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) ownership of stock of the corporation possessing 35 percent or more of
the total voting power of the stock of such corporation; or

 

(2)           A majority of members of the
corporation’s board of directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed 

 

A-1

 

by a majority of the members of the
corporation’s board of directors prior to the election, provided that for
purposes of this paragraph  the term
corporation refers solely to the relevant corporation for which no other
corporation is a majority shareholder for purposes of that paragraph (for
example, if Corporation A is a publicly held corporation with no majority
shareholder, and Corporation A is the majority shareholder of Corporation B,
which is the majority shareholder of Corporation C, the term corporation for
purposes of this paragraph would refer solely to Corporation A).

 

(B)           Multiple change
in control events.  A change in effective
control also may occur in any transaction in which either of the two
corporations involved in the transaction has a change in control event.  Thus, for example, assume Corporation P
transfers more than 40 percent of the total gross fair market value of its
assets to Corporation O in exchange for 35 percent of O’s stock.  P has undergone a change in ownership of a
substantial portion of its asset, and O has a change in effective control.

 

(C)           Acquisition of
additional control.  If any one person,
or more than one person acting as a group, is considered to effectively control
a corporation, the acquisition of additional control of the corporation by the
same person or persons is not considered to cause a change in the effective
control of the corporation (or to cause a change in the ownership of the
corporation).

 

(D)          Persons acting
as a group.  Persons will not be
considered to be acting as a group solely because they purchase or own stock of
the same corporation at the same time, or as a result of the same public
offering.  However, persons will be
considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase, or acquisition of stock, or
similar business transaction with the corporation.  If a person, including an entity, owns stock
in both corporations that enter into a merger, consolidation, purchase, or
acquisition of stock, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only with respect
to the ownership in that corporation prior to the transaction giving rise to
the change and not with respect to the ownership interest in the other
corporation.

 

III.           Change in the ownership of a
substantial portion of a corporation’s assets.

 

(A)          In
general.  Change in the ownership of a
substantial portion of a corporation’s assets. 
A change in the ownership of a substantial portion of a corporation’s
assets occurs on the date that any one person, or more than one person acting
as a group, acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person or person) assets from the
corporation that have a total gross fair market value equal to or more than 40
percent of the total gross fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value
means the value of the assets of the corporation, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.

 

A-2

 

(B)           Transfers to a
related person.

 

(1)           There is no change in
control event when there is a transfer to an entity that is controlled by the
shareholders of the transferring corporation immediately after the
transfer.  A transfer of assets by a
corporation is not treated as a change in the ownership of such assets if the
assets are transferred to –

 

(i)            A shareholder of the
corporation (immediately before the asset transfer) in exchange for or with
respect to its stock;

 

(ii)           An entity, 50 percent or
more of the total value or voting power of which is owned, directly or
indirectly, by the corporation;

 

(iii)          A person, or more than one
person acting as a group, that owns, directly or indirectly, 50 percent or more
of the total value or voting power of all the outstanding stock of the
corporation; or

 

(iv)          An entity, at least 50
percent of the total value or voting power of which is owned, directly or
indirectly, by a person described in “(iii)” immediately preceding.

 

(2)           A person’s status is
determined immediately after the transfer of the assets.  For example, a transfer to a corporation in
which the transferor corporation has no ownership interest before the
transaction, but which is a majority-owned subsidiary of the transferor
corporation after the transaction is not treated as a change in the ownership
of the assets of the transferor corporation.

 

(C)           Persons acting as a
group.  Persons will not be considered to
be acting as a group solely because they purchase assets of the same
corporation at the same time.  However,
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase, or acquisition
of assets, or similar business transaction with the corporation.  If a person, including an entity shareholder,
owns stock in both corporations that enter into a merger, consolidation,
purchase, or acquisition of assets, or similar transaction, such shareholder is
considered to be acting as a group with other shareholders in a corporation
only to the extent of the ownership in that corporation prior to the
transaction giving rise to the change and not with respect to the ownership
interest in the other corporation.

 

A-3

 

Exhibit “B”

to

Employment
Contract

 

Confidentiality
Agreement and

Covenant
Not To Compete

 

Wayne A.
Whitener (hereafter called “Employee”)
has entered into an Employment Contract with TGC
Industries, Inc., a Texas corporation (hereafter called “Company”), which is in the business of
providing seismic data acquisition services primarily to onshore oil and
natural gas exploration and production companies.

 

By signing this Agreement, Employee acknowledges
his understanding of the following:

 

A.            All companies have information, generally not known
outside the company, called “confidential
information.” All companies must conduct their businesses through
their employees, and consequently many employees must have access to
confidential information.  At times the
employee himself may generate confidential information as a part of his job;

 

B.            The phrase “confidential
information” as used in this Agreement includes information known
as, referred to, or considered to be, trade secrets, and comprises, without
limitation, any technical, economic, financial marketing, computer program,
computer software, computer data (regardless of the medium on which they are
stored), computer source and object programs or codes,  job operating control language procedures,
data entry utility programs, and miscellaneous utilities, disk record layouts,
flow charts, data entry input forms, operations and installation instructions,
report samples, data files, printouts, or other information about Company or
its business which is not common knowledge among competitors or other companies
who might like to possess such confidential information or might find it
useful.  Some examples of confidential
information include customer lists, price lists, details of training methods,
new products or new uses for old products, refining technology, contracts, and
licenses, purchasing, accounting, long-range planning, financial plans and
results, computer programs and operating manuals, computer source codes, and
any other information affecting or relating to the business of Company, its
manner of operation, its plans or processes. 
This list is merely illustrative, and the confidential information
covered by this Agreement is not limited to such illustrations; and

 

C.            Company’s confidential
information, including information referred to as, known as, or considered to
be, trade secrets, represents the most important, valuable, and unique aspect
of Company’s business, and it would be seriously damaged if Employee breached
the position of 

 

B-1

 

confidential
trust in which Company has placed him by disclosing such confidential
information to others or by departing and taking with him the aforesaid unique
information compiled over a period of time for the purpose of himself competing
against Company or disclosing such information to Company’s competitors, now
existing or hereafter formed.

 

Accordingly,
in consideration of TEN DOLLARS ($10.00) cash in hand paid to Employee by
Company, the receipt and sufficiency of which are hereby acknowledged, and
Company’s agreement to employ him, Employee agrees as follows (which will
constitute an agreement ancillary to Employee’s Employment Contract with
Company):

 

1.             Confidential information, including information
referred to as, known as, or considered to be, trade secrets, is proprietary to
Company.  Employee agrees to hold such
information in strictest confidence, and not to make use thereof except in
performance of duties under the Employment Contract.  Whether during or after his employment with
Company, Employee may not disclose to others (excepting Company officers or
employees having a need to know who have also signed a written agreement
expressly binding themselves not to use or disclose it) any confidential
information originated, known to, or acquired by Employee while employed by
Company.  Employee further agrees during
such period not to remove from the premises any of Company’s records or other
written or tangible materials, including without limitation computer programs
and floppy disks (whether prepared by Employee or others) containing any
confidential information, except as required for Employee to properly perform
his duties as an employee of Company. 
Exceptions to these restrictions may be made only by means of Company’s
permission given in writing signed by the Chairman of the Board of the Company
pursuant to an affirmative approval by a majority of Company’s Board of
Directors granting permission to disclose.

 

2.             In the event Employee is terminated “for cause,” (for any reason other than “Change in Control of Company” as defined
in paragraph 8.a.(3) of the Employment Contract), the “Non-Compete Period” shall be for a period of one (1) year
following the date of termination of employment.  If 
Employee’s termination is based on any reason other than “for cause,” the “Non-Compete Period”
shall be for the period of time during which Company is obligated to pay to
Employee his base salary plus one year.  During the “Non-Compete
Period,” Employee covenants that Employee, either individually or in
any capacity, including without limitation, as an agent, consultant, officer,
shareholder, or employee of any business enterprises or person with which he
may become associated or in which Employee may have a direct or indirect
interest, shall not, directly or indirectly for himself or on behalf of any
other person or business entity, engage in any business venture or other
undertaking which is directly or indirectly competitive with the business or
operations of Company (and/or any of its subsidiaries) as generally conducted
at, or prior to, the cessation of Employee’s employment with Company.  Without limiting the generality of the
foregoing, Employee shall not (i) so compete with Company or its
subsidiaries, (ii) be employed by, (iii) be an affiliate (as defined
by Securities and Exchange Commission Rule 405 under the Securities Act of
1933), (iv) perform any services for, or (v) have an equity or
ownership interest in, any person, firm, partnership, joint venture, or
corporation that so competes, directly or indirectly, with Company or any of
its subsidiaries.  

 

B-2

 

Further, Employee will not solicit for employment or advise or
recommend to any other person that such person employ, or solicit for
employment, any employee of Company or any of its subsidiaries who was an
employee at, or prior to, the cessation of Employee’s employment with Company.  The foregoing covenant not to compete shall
be limited to a territory consisting of those states in which Company was doing
business as of the time of cessation of Employee’s employment with
Company.  If for any reason any court of
competent jurisdiction finds these covenants to be unreasonable in duration or
geographic scope, the prohibitions herein contained shall be restricted to such
time and geographic areas as such court determines to be reasonable and
enforceable.  However, the restrictions
stated above will not apply if Company liquidates or if Employee becomes
employed by a company (or its affiliate) which acquires (in a voluntary
transaction) the stock or business assets of Company.

 

3.             Employee understands and agrees that his violation
of any of the provisions of this Agreement will constitute irreparable injury
to Company immediately authorizing it to enjoin Employee or the business
enterprise with which he may have become associated from further violations, in
addition to all other rights and remedies which Company may have under law and
equity, including recovery of damages from Employee and a right of offset.

 

4.             Each party shall be entitled to receive from the
other party reimbursement of attorney’s fees and related legal costs to the
extent incurred in connection with the successful enforcement or defense, as
the case may be, of the terms and conditions hereof.

 

5.             The waiver by Company of Employee’s breach of any
provision hereof shall not operate or be construed as a waiver of any
subsequent breach by Employee.  This
Agreement shall be binding upon the parties hereto and their heirs, successors,
executors, administrators, personal representatives, and assigns.  Employee may not assign to any person his
covenants, obligations and duties hereunder. 
All provisions of this Agreement shall survive the termination or
amendment of Employee’s Employment Contract.

 

6.             If any provision of this Agreement is held by a
court of law to be illegal or unenforceable, the remaining provisions of the
Agreement shall remain in full force and effect.  In lieu of such illegal or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal or unenforceable provision as may
be possible and be legal and enforceable.

 

7.             This Agreement has been made in, and its validity,
interpretation, construction, and performance shall be governed by and be in
accordance with, the laws of the State of Texas, without reference to its laws
governing conflicts of law.  Each party hereby
irrevocably agrees that any legal action or proceedings with respect to this
Agreement may be brought in the courts of the State of Texas, or in any United
States District Court of Texas, and, by its execution and delivery of this
Agreement, each party hereby irrevocably submits to each such jurisdiction and
hereby irrevocably waives any and all objections which it may have as to venue
in any of the above courts.  Each party
further consents and agrees that any process or notice of motion or other application
to either of said Courts or any judge thereof, or any notice in connection with

 

B-3

 

any proceedings hereunder, may be served inside or outside the State of
Texas by registered or certified mail, return receipt requested, postage
prepaid, and be effective as of the receipt thereof, or in such other manner as
may be permissible under the rules of said Courts.

 

IN WITNESS WHEREOF, the parties have executed
this Agreement to be effective September 11, 2008.

 

 

	
   

  	
  /s/ Wayne A. Whitener

  
	
   

  	
  Wayne A. Whitener

  
	
   

  	
  49 Sunrise Circle

  
	
   

  	
  Pottsboro, Texas 75076

  
	
   

  	
  Date:  September 11,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  TGC INDUSTRIES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William J. Barrett

  	
   

  	
   

  
	
   

  	
  William J. Barrett, Director

  	
   

  
	
   

  	
  Date:  September 11, 2008

  	
   

  
				

 

B-4

 

Exhibit “C”

to

Employment Contract

 

Disclosure and Invention Agreement

 

Wayne A. Whitener (hereafter called “Employee”) has entered into an Employment Contract with TGC Industries, Inc., a Texas
corporation (hereafter called “Company”),
which is in the business of providing seismic data acquisition services
primarily to onshore oil and natural gas exploration and production companies.

 

In
consideration of TEN DOLLARS ($10.00) paid to Employee by Company, the receipt
and sufficiency of which are hereby acknowledged, and Company’s agreement to
employ him pursuant to an Employment Contract (to which this Exhibit “C” is attached) between
Company and Employee the provisions of which are herein fully incorporated by
reference for all purposes, Employee agrees as follows:

 

1.             Employee shall communicate
to Company promptly and fully all ideas and the expressions thereof,
conceptions, improvements, discoveries, methods, techniques, processes,
adaptations, creations, and inventions (whether patentable or copyrightable or
not) conceived or made by Employee (whether solely by Employee or jointly with
others) (“Ideas”) from the time
of entering Company’s employment until one year after Employee’s employment is
terminated for any reason, or Employee resigns or retires for any reason, (a) which
involve or pertain to, directly or indirectly, the business, assets,
activities, computers or computer programs, or investigations of Company as
existed at or prior to the cessation of Employee’s employment by Company, or (b) which
result from or are suggested by any work which Employee or other Employees or
independent contractors perform for or on behalf of Company, in whole or in
part, as existed at or prior to the cessation of Employee’s employment by
Company.

 

2.             Employee shall assist
Company during and subsequent to Employee’s employment in every proper way
(solely at Company’s expense) to obtain patents and/or copyrights for its own
benefit in any or all countries of the world, and to sign all proper papers,
patent applications, assignments, and other documents necessary for this
purpose, it being understood that such Ideas will remain the sole and exclusive
property of Company, and shall not be disclosed to any person, nor used by
Employee, except as expressly permitted herein.

 

3.             Written records of
Employee’s Ideas in the form of notebook records, sketches, drawings or
reports, will remain the property of and be available to Company at all times.

 

4.             Employee represents that
Employee has no agreements with or obligations to others in conflict with the
foregoing.

 

5.             Employee understands that
this Agreement may not be modified or released except in writing signed by all
members of Company’s Board of Directors.

 

6.             Employee understands and
agrees that his violation of any of the provisions of 

 

C-1

 

this
Agreement will constitute irreparable injury to Company immediately authorizing
it to enjoin Employee or the business enterprise with which he may have become
associated from further violations, in addition to all other rights and
remedies which Company may have at law and equity, including recovery of
damages from Employee and a right of offset. 
Each party shall be entitled to recover from the other party
reimbursement of attorney’s fees and related legal costs to the extent incurred
in connection with the successful enforcement or defense, as the case may be,
of the terms of conditions hereof.

 

7.             This Agreement shall be
binding upon the parties hereto and their respective heirs, successors,
executors, administrators, personal representatives, and assigns.  Employee may not assign his covenants,
duties, or obligations hereunder to any other person.  The waiver by Company of Employee’s breach of
any provision hereof shall not operate or be construed as a waiver of any
subsequent breach by Employee.

 

8.             If any provision of this
Agreement is held by a court of law to be illegal or unenforceable, the
remaining provisions of the Agreement shall remain in full force and
effect.  In lieu of such illegal or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal or unenforceable
provision as may be possible and be legal and enforceable.

 

9.             This Agreement has been made
in, and its validity, interpretation, construction, and performance shall be
governed by and be in accordance with, the laws of the State of Texas, without
reference to its laws governing conflicts of law.  Any dispute or controversy arising under or
in connection with this Agreement, or the breach thereof, shall be settled in
accordance with the arbitration provision in the Employment Contract.

 

IN WITNESS WHEREOF, the parties have executed
this Agreement to be effective September 11, 2008.

 

 

	
   

  	
  /s/ Wayne A. Whitener

  
	
   

  	
  Wayne A. Whitener

  
	
   

  	
  49 Sunrise Circle

  
	
   

  	
  Pottsboro, Texas 75076

  
	
   

  	
  Date:  September 11,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  TGC INDUSTRIES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William J. Barrett

  	
   

  	
   

  
	
   

  	
  William J. Barrett, Director

  	
   

  
	
   

  	
  Date:  September 11, 2008

  	
   

  
				

 

C-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]