Sept 19 (Reuters) - Family Memorials Inc FAM.V :
* Family Memorials Inc. announces proposed settlement with debentureholders and going private transaction
* It proposes to redeem convertible secured debentures of company in principal amount of $4.4 million
* Entered into letter of intent with Scott C. Kellaway, president of company, pursuant to which company will be taken private
* Board of directors of company will form a special committee comprised of independent directors to evaluate amalgamation
* Proposes to pay $3.4 million in full satisfaction of all liability to debentureholders holding debentures in principal amount of $4.4 million
* To be taken private by way of amalgamation with a company to be incorporated by Scott C. Kellaway to form an amalgamated company