Exhibit 10.1
ASSET PURCHASE AND SALE
AGREEMENT
This ASSET PURCHASE AND SALE
AGREEMENT (“ Agreement ”) dated this
28 th day of September, 2006, is made by
and among STONEMOR OPERATING LLC , a Delaware limited
liability company (“ StoneMor LLC ”),
joined herein by those of its direct and indirect subsidiary
entities which are listed in the “ Operating LLC
” column on Exhibit A attached hereto (all such
entities individually and collectively referred to herein as
“ Buyer LLC ”) and those of its direct
and indirect subsidiary entities which are listed in the “
NQ Sub ” column on Exhibit A attached hereto
(all such entities individually and collectively referred to herein
as “ Buyer NQ Sub ” and individually and
collectively with StoneMor LLC and Buyer LLC, “
Buyer ”), and SCI FUNERAL SERVICES, INC.
, an Iowa corporation (“ SCI ”), joined
herein by those of its direct and indirect subsidiary entities
which are listed in the “ Subsidiary Owner ”
column on Exhibit B attached hereto (SCI and all such direct
and indirect subsidiary entities individually and collectively
referred to herein as the “ Sellers
”);
W
I T N
E S S E T H
:
W HEREAS , Sellers own and operate those funeral, cremation
and cemetery businesses which are listed on Exhibit B
attached hereto (each location listed on Exhibit B referred
to herein as a “ Location ,” and the
business conducted at the Locations referred to individually and
collectively as the “ Business ”);
and
W HEREAS , the
parties desire to provide for the purchase, sale and transfer of
the Business, including certain of the personal property located
at, used in connection with, or arising out of, such Business,
together with the real estate utilized in the Business, in
exchange
ASSET PURCHASE AND SALE
AGREEMENT
for cash and other consideration, upon the terms
and subject to the conditions herein set forth; and
W HEREAS , this
Agreement sets forth the terms and conditions to which the parties
have agreed;
W HEREAS , simultaneously affiliates of Buyer and Hawes,
Inc. a Michigan corporation, and Hillcrest Memorial Company, a
Delaware corporation, are entering into transactions to purchase
cemetery businesses in Michigan (the “ Michigan
Transactions ”);
N OW ,
T HEREFORE
, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein
contained, the parties, intending to be legally bound hereby, agree
as follows:
ARTICLE I
Purchase and
Sale
Section 1.1 Transfer of
Acquired Assets . Subject to the terms and conditions
of this Agreement, and except as provided in Section 1.2,
Sellers (which as to each particular Location shall be the
particular Subsidiary Owner of such Location as designated on
Exhibit B hereto) do hereby agree to (or, if applicable,
cause their Affiliates to) sell, transfer, convey, assign and
deliver to Buyer, and Buyer does hereby agree to purchase and
accept from Sellers (or their Affiliates, if applicable), free and
clear of all Liens and Liabilities (other than the Assumed
Liabilities (as defined below)), all right, title and interest to
the following property and rights located at, used in connection
with, arising out of or relating to the Business (collectively, the
“ Acquired Assets ”):
(a) The real property described in
Schedule 1.1(a) to this Agreement, together with all
buildings, structures, improvements, fixtures, easements, benefits
and rights and appurtenances benefiting, belonging or pertaining
thereto, (the “ Owned Real Property
”);
(b) All furniture, equipment, tools,
supplies and other tangible personal property owned or used by
Sellers exclusively or primarily in the operation of the
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ASSET PURCHASE AND SALE
AGREEMENT
Business as of the date hereof or
acquired between the date hereof and the Effective Time, including,
without limitation, those items listed on Schedule 1.1(b) to
this Agreement;
(c) All vehicles listed on
Schedule 1.1(c) to this Agreement;
(d) All caskets, crypts, urns,
vaults, monuments, grave spaces, mausoleum spaces, niches, lawn
crypts, supplies and other merchandise inventory of the Business
(“ Inventory ”), including, without
limitation, the Inventory of the funeral homes included in the
Business and the items stored for customers at the cemeteries
included in the Business, plus or minus any changes to such
Inventory which result from the ordinary course of operation of the
Business, consistent with past practices, subsequent to the date(s)
of such listing(s) and until the Effective Time (and specifically
limited to the rights permitted by or provided under applicable
Laws with regard to merchandise designated as being
“stored” for customers under Pre-/At-Need Contracts (as
defined below)), and all Services in Progress (as hereinafter
defined);
(e) All benefits, rights and
entitlements of or relating to the Business under and in all
contracts, agreements, leases, licenses and commitments listed on
Schedule 1.1(e) to this Agreement (“ Business
Contracts ”);
(f) All benefits, rights and
entitlements under any leases for any real property at the
Locations or otherwise exclusively or primarily related to the
Business (whether a Seller is lessee or lessor thereunder) (“
Real Property Leases ”), including, without
limitation, those listed on Schedule 1.1(f) to this
Agreement, together with any security deposits held or paid on
account of any of the Real Property Leases (the real property
leased by any Seller as a lessee or sublessee under the Real
Property Leases being referred to herein as “ Leased
Real Property ” and, together with the Owned Real
Property, the “ Real Property
”);
(g) All benefits, rights and
entitlements under all of the Contracts, engagements and
commitments, written or oral, relating to the provision or sale by
the Business of at-need or preneed cemetery, cremation or funeral
home merchandise, properties or services and all deposits, prepaid
amounts, insurance policies and trust funds relating to such
Contracts, engagements and commitments, including, without
limitation, those items listed on Schedule 1.1(g) to this
Agreement, plus or minus any similar items entered into or obtained
in the ordinary course of the operation of the Business subsequent
to the date(s) of the listing(s) on Schedule 1.1(g) until
the Effective Time (collectively, the “ Pre-/At-Need
Contracts ” and, together with the Business Contracts
and the Real Property Leases, the “ Assumed
Contracts ”);
(h) All of the Permits of Sellers
necessary for the ownership, operation, maintenance or presently
planned expansion (by Sellers) of the Business, to the extent
transferable;
(i) Intentionally
omitted;
(j) All utility and other deposits
previously paid to and/or held by third parties in connection with
the operation of the Business as of the Effective Time;
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ASSET PURCHASE AND SALE
AGREEMENT
(k) All accounts and notes
receivable generated in or relating to the operation of the
Business (“ Receivables ”), including,
without limitation, those listed on Schedule 1.1(k) to this
Agreement, plus or minus any changes in such receivables which
result from the ordinary course of the operation of the Business,
consistent with past practices, subsequent to the date(s) of the
listing(s) on Schedule 1.1(k) until the Effective Time, but
specifically excluding pending trust claims specified in
Section 5.5(b)(ii) and pending insurance claims;
(l) All of the Sellers’ rights
and incidents of interest in and to causes of action, suits,
proceedings, judgments, claims and demands of any nature, whenever
maturing or asserted, relating to or arising directly or indirectly
out of any of the Acquired Assets or the Business, but specifically
excluding pending trust claims specified in Section 5.5(b)(ii)
and pending insurance claims; and
(m) All goodwill associated with the
Business, together with all lists of present or former customers of
the Business, all business books, documents, records, files,
databases and reports relating to the Acquired Assets and
reasonably necessary for Buyer to continue the Business
(collectively, “ Seller Records ” )
(whether or not the Seller Records are physically located at one of
the Locations), the telephone numbers and listings for the
Business, and all Intellectual Property owned and/or used by the
Sellers exclusively or primarily in connection with the Business
(“ Business Intellectual Property ”),
including, without limitation, all right, title and interest in and
the right to use the trademarks, service marks and trade names for
the Locations as listed on Exhibit B hereto. All Seller
Records not physically located at one of the Locations shall be
copied and, at the election of Buyer, either delivered in person to
a representative of Buyer at the location where such Seller Records
are held on the Closing Date or shipped to Buyer by Sellers at
Buyer’s expense by such delivery service selected by Buyer.
All requests and other communications from Buyer to any Seller
regarding Seller Records, either before or after the Closing, shall
be directed to Michael Lehmann, Service Corporation International,
1929 Allen Parkway, Houston, Texas 77019, fax:
(713) 525-7372.
Except as specifically provided in
Section 1.2, it is intended that the assets, properties and
rights of the Business to be sold to Buyer pursuant to this
Agreement shall include all of the assets, properties and rights
reflected in the Schedules relating to the subsections of
Section 1.1, other than those assets, properties and rights
that may have been disposed of in the ordinary course of business
prior to the Effective Time, but including all similar assets,
properties and rights of the Business that may have been acquired
in the ordinary course of business since the dates of the listings
in the Schedules relating to the subsections of Section 1.1
until the Effective Time.
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ASSET PURCHASE AND SALE
AGREEMENT
Section 1.2 Excluded
Assets . Sellers shall not transfer, convey or assign
to Buyer, and Buyer shall not purchase, the following assets
(collectively, the “ Excluded Assets ”):
(a) non-preneed related cash and cash equivalents,
(b) computers, computer software and information and similar
rights (provided, however, that none of the Seller Records shall be
deemed to be an Excluded Asset, whether or not contained or stored
in or on the hard drive of any computers or on any computer system
or server, disk or any other electronic media), (c) corporate
records, minutes and records of Sellers’ shareholders’
and directors’ meetings, (d) any pending trust claims
specified in Section 5.5(b)(ii) and any pending insurance
claims, (e) those items specifically identified in Schedule
1.1(b) as being subject to a corporate lease or otherwise excluded
from the sale of the Acquired Assets hereunder,
(f) approximately 67.45 acres of undeveloped real property
located at Hillcrest Memorial Park in Medford, Oregon, (the “
Hillcrest Subdivision ”) with such retained
acreage to include a restriction that the property will not be used
as a cemetery, as part of the operation of a funeral home, or for
another purpose inconsistent with the operation of Hillcrest
Memorial Park as a cemetery, (g) the real estate comprising
Chapel of the Firs and Long and Shukle Memorial Chapel and
(h) all other assets of the Sellers which are not used
exclusively or primarily in the ownership, operation or maintenance
of the Business and which are not necessary to the continued
operation of the Business in a manner consistent with the
Sellers’ past practices, including training, promotional
materials, procedure and policy manuals.
Section 1.3 Consideration
for Acquired Assets Payable at the Closing . On the
terms and subject to the conditions of this Agreement, Buyer, in
consideration for the transfer and delivery to it of the Acquired
Assets as herein provided, will, in addition to the assumption of
liabilities set forth in Section 1.5(a) below, pay to Sellers
at the Closing (as defined below) the
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ASSET PURCHASE AND SALE
AGREEMENT
sum of Ten Million Three Hundred Ninety Thousand
Dollars ($10,390,000) (the “ Closing Purchase
Price ”) in the following forms:
(a) the sum of Four Million Five
Hundred Fifteen Thousand Dollars ($4,515,000) in cash (“
Cash Purchase Price ”), to be delivered by bank
wire transfer to such account as Sellers shall designate to Buyer
in writing at least three (3) business days prior to the
Closing Date; and
(b) the number of common units (the
“ Units ”) of StoneMor Partners L.P.
(“ SPLP ”) equal in value to Five Million
Eight Hundred Seventy-five Thousand Dollars ($5,875,000), in the
aggregate, based on the closing price per unit of SPLP’s
common units on NASDAQ Global Markets for the second business day
immediately preceding the Closing Date (as such closing price is
reported on www.nasdaq.com) which shall be issued/delivered to an
affiliate of Sellers, SCI New Mexico Funeral Services, Inc., a New
Mexico corporation (“ SCI New Mexico
”).
Section 1.4 Contingent
Consideration Payable After Closing . Reference is made
to the Registration Rights Agreement between SPLP and SCI New
Mexico, the form of which is attached hereto as Exhibit C
(the “ Registration Rights Agreement ”).
In addition to the Closing Purchase Price, Buyer shall cause SPLP
to pay to SCI New Mexico, as additional consideration for the
Acquired Assets, any additional amounts which may become payable
after the Closing pursuant to the Registration Rights
Agreement.
Section 1.5 Liabilities
.
(a) Assumed Liabilities .
From and after the Effective Time, Buyer agrees to assume and
perform the liabilities and obligations of the Business (“
Assumed Liabilities ”) under and pursuant to
the terms and conditions of any Assumed Contract, but only to the
extent such obligations arise, accrue or first become due after the
Effective Time under the terms of the Assumed Contracts;
provided , however , that Buyer will not assume or be
responsible for any such liabilities or obligations which arise
from any breach or default by Sellers under any Assumed Contract
that occurs prior to the Effective Time or that arises out of or
relates to events or circumstances that occur or exist prior to the
Effective Time, all of which liabilities and obligations will
constitute Retained Liabilities (as defined herein).
Notwithstanding anything to the contrary contained in this
Agreement or any document delivered in connection herewith,
Buyer’s obligations in respect of the Assumed Liabilities
will not extend beyond the extent to which Sellers were obligated
in respect thereof and will be subject to Buyer’s right to
contest in good faith the nature and extent of any liability or
obligation (but such right to contest shall not affect
Buyer’s indemnification responsibilities under
Section 8.4(a)(iii)).
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ASSET PURCHASE AND SALE
AGREEMENT
(b) Retained Liabilities .
Except as provided in Section 1.5(a) hereof, Sellers will
retain, and Buyer will not assume or be responsible or liable with
respect to, any Liabilities of the Business that precede the
Effective Time (except as specifically provided in subclause
(vii) of this Section 1.5(b)), whether or not arising out
of or relating to the conduct of the Sellers or associated with or
arising from any of the Acquired Assets, whether fixed or
contingent or known or unknown (collectively, the “
Retained Liabilities ”), including, without
limitation, the following:
(i) Liabilities relating to any
Excluded Asset;
(ii) Liabilities of Sellers that
constitute trade payables;
(iii) Liabilities of Sellers arising
under or relating to any Assumed Contract to the extent such
Liabilities relate to periods prior to the Effective Time or arise
from any breach or default by any Seller (or any of its Affiliates)
under any Assumed Contract that occurs prior to the Effective Time
or that arises out of or relates to events or circumstances that
occur or exist prior to the Effective Time;
(iv) Liabilities of Sellers arising
under or relating to any Contract other than an Assumed
Contract;
(v) Liabilities with respect to
(A) any Employee Plan maintained, sponsored, contributed to or
participated in by Sellers or any Affiliate of Sellers for the
benefit of or relating to any current or former employee of the
Business ( “Seller Employee Plan” ) and
the amendment to or the termination of any Seller Employee Plan, or
(B) any person at any time employed by Sellers or any
Affiliate of Sellers (including, without limitation, any such
person who fails to accept an offer of employment by Buyer or any
of its Affiliates), and any such person’s spouse, children,
other dependents or beneficiaries, with respect to any such
person’s employment or termination of employment by Sellers
or any Affiliate of Sellers including, without limitation, claims
arising under health, medical, dental, disability or other benefit
plan for products, supplies or services provided or rendered prior
to the Effective Time;
(vi) Sellers’ deferred sales
commissions;
(vii) Liabilities of Sellers, based
in whole or in part on violations of Law or environmental
conditions occurring or existing prior to the Closing and arising
out of or relating to Environmental Requirements, except to the
extent that such Liabilities are identified in the Environmental
Reports; provided that the Sellers shall remain liable for
the environmental Liabilities identified on Exhibit D until
Sellers or Buyers at Sellers’ expense have remediated, to the
extent required by existing governmental standards, such
environmental Liabilities as noted on Exhibit D ;
(viii) Except as otherwise
specifically provided in this Agreement, all Liabilities of Sellers
for any Tax for (A) operations of the Business prior to the
Effective Time; (B) the transfer of the Acquired Assets; and
(C) income earned by the Pre-Need Trust Funds and the
Endowment Care Funds (as each of these terms is defined in
Section 5.4) prior to delivery thereof to Buyer’s
Trustee pursuant to Section 5.5 below to the extent such
income (1) is not taxable to the applicable trusts as
independent taxpayer
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ASSET PURCHASE AND SALE
AGREEMENT
entities, and (2) is withdrawn
by or for any Seller or otherwise distributed to any Seller
(whether such withdrawal or distribution is made before or after
the Effective Time); and
(ix) Liabilities of Sellers arising
out of or relating to any Proceeding to which any Seller is a party
on the date of this Agreement and relating to the Business or any
of the matters referenced on Schedule 1.5(b)(ix)
.
Section 1.6 Post-Closing
Adjustments to Purchase Price .
(a) Audit Report . Sellers
and Buyer acknowledge that Harper & Pearson Company, P.C.
(the “ Independent Auditor ”) is
currently performing a financial audit and review of the Business
and that the report of the Independent Auditor with respect to such
audit and review (the “ Audit Report ”)
is expected to be delivered to Buyer within 30 days after the
Closing Date. For purposes of this Agreement, the term “
Base Gross AR Amount ” means the aggregate
amount of the gross accounts receivable of all of the cemeteries
included in the Business as of the Closing Date (excluding any
trust claims specified in Section 5.5(b)(ii) and any pending
insurance claims), as reflected in the Audit Report (without regard
to any allowance for doubtful accounts or other reserve in respect
of accounts receivable of the Business), and the term “
Base Net Merchandise Trust Amount ” means the
Net Transferred Merchandise Trust Amount minus the aggregate
amount of the Merchandise Liabilities of all of the cemeteries
included in the Business, as of the Effective Time. Buyer shall
deliver a copy of the Audit Report to SCI within 15 days after
receiving the Audit Report. No later than ten (10) days after
the Closing Date, SCI shall deliver to Buyer a detailed statement
of Merchandise Liabilities as of the Effective Time of each of the
cemeteries included in the Business.
(b) Accounts Receivable
Adjustment . If the Base Gross AR Amount is less than
$2,435,850, then, subject to Section 1.6(e), the Purchase
Price shall be decreased by, and SCI shall pay to Buyer, an amount
equal to the discounted present value of the amount by which the
Base Gross AR Amount is less than $2,564,051, using a discount rate
of .065 and a discount period of three (3) years. If the Base
Gross AR Amount is greater than $2,692,250, then, subject to
Section 1.6(e), the Purchase Price shall be increased by, and
Buyer shall pay to SCI, an amount equal to the discounted present
value of the amount by which the Base Gross AR Amount is greater
than $2,564,051, using a discount rate of .065 and a discount
period of three (3) years. If the Base Gross AR Amount is
greater than or equal to $2,435,850, but less than or equal to
$2,692,250, then no adjustment shall be made to the Purchase Price,
and no amount shall be due by any party hereto, under this
Section 1.6(b).
(c) Merchandise Trust
Adjustment . If the Base Net Merchandise Trust Amount is less
than $4,877,021, then, subject to Section 1.6(e), the Purchase
Price shall be decreased by, and SCI shall pay to Buyer, the
discounted present value of the amount by which the Base Net
Merchandise Trust Amount is less than $5,133,706, using a discount
rate of .065 and a discount period of ten (10) years. If the
Base Net Merchandise Trust Amount is greater than $5,390,391, then,
subject to Section 1.6(e), the Purchase Price shall be
increased by, and Buyer shall pay to SCI, an amount equal to the
discounted present value of the amount by which the Base Net
Merchandise Trust Amount is greater than $5,133,706, using a
discount rate of .065 and a discount period of
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ASSET PURCHASE AND SALE
AGREEMENT
ten (10) years. If the Base Net
Merchandise Trust Amount is greater than or equal to $4,877,021 but
less than or equal to $5,390,391, then no adjustment shall be made
to the Purchase Price, and no amount shall be due by any party
hereto, under this Section 1.6(c).
(d) Endowment Care Trust
Adjustment . If the Transferred Endowment Care Trust Amount is
less than $10,862,056, then, subject to Section 1.6(e), the
Purchase Price shall be decreased by, and SCI shall pay to Buyer,
the Net Endowment Care Adjustment Amount. If the Transferred
Endowment Care Trust Amount is greater than $10,862,056, then,
subject to Section 1.6(e), the Purchase Price shall be
increased by, and Buyer shall pay to SCI, the Net Endowment Care
Adjustment Amount.
(e) Net Purchase Price Adjustment
Amount . The Purchase Price adjustment amounts provided for in
Sections 1.6(b), (c) and (d), if any, shall all be aggregated
and netted against each other such that either (i) a single
amount shall be payable to Buyer by SCI and no amount shall be
payable by Buyer to SCI under this Section 1.6, (ii) a
single amount shall be payable by SCI to Buyer, and no amount shall
be payable by SCI to Buyer under this Section 1.6, or
(iii) no amount shall be payable by any party hereto under
either this Section 1.6. By way of example only, if $150,000
is payable by SCI to Buyer pursuant to Section 1.6(b), $50,000
is payable by SCI to Buyer pursuant to Section 1.6(c) and
$100,000 is payable by Buyer to SCI pursuant to
Section 1.6(d), then SCI shall pay to Buyer, in accordance
with Section 1.6(f), an amount equal to $100,000 (i.e.,
$150,000 + $50,000 - $100,000).
(f) Payment of Purchase Price
Adjustment Amounts . Any payment due under Section 1.6(e)
by either SCI or Buyer, as the case may be, shall be paid in full,
in cash, no later than seventy-five (75) days after the
Closing Date, or, if later than such time, twenty (20) days
after the date that the Audit Report is delivered to Buyer. Any
amounts not paid within such time period shall accrue interest from
the Closing Date through the date of payment at the prime rate as
reported in The Wall Street Journal, Eastern Edition for the
date of the Audit Report.
(g) Tax Treatment . Any
payments made pursuant to this Section 1.6 shall be treated by
Sellers and Buyer as adjustments to the Purchase Price for all Tax
purposes.
Section 1.7 Prorations;
Services in Progress; Transaction Taxes .
(a) Sellers shall be responsible for
all Taxes arising as a result of the operation of the Business or
ownership of the Acquired Assets prior to the Effective Time. At
Closing, all real and personal property Taxes shall be prorated
between Sellers and Buyer on a per diem basis. Sellers shall also
be responsible for all Taxes on income earned by the Pre-Need Trust
Funds and the Endowment Care Funds (which are to be transferred to
Buyer) prior to delivery thereof to Buyer’s Trustee pursuant
to Section 5.5 below to the extent such income (A) is not
taxable to the applicable trusts as independent taxpayer entities,
and (B) is withdrawn by or for any Seller or otherwise
distributed to any Seller (whether such withdrawal or distribution
is made before or after the Effective Time), and Sellers shall make
all applicable estimated Tax payments to the relevant Taxing
Authorities associated with such income. For purposes of
determining the amount of Taxes owed by Sellers with respect to the
Pre-Need Trust Funds and the Endowment
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ASSET PURCHASE AND SALE
AGREEMENT
Care Funds, the amount of such Taxes
shall be computed as if the tax year of such funds ended on the
date of the Final Trust Delivery (as defined in Section 5.5(e)
below).
(b) The parties shall cooperate in
transferring from the applicable Seller to Buyer all water,
electrical, gas and other utility services provided to or
benefiting the Real Property, and as and to whatever extent
billings are received by any party relating to services utilized
both before the Effective Time (for which Sellers shall be
responsible) and after the Effective Time (for which Buyer shall be
responsible), the parties will cooperate to make appropriate
adjustments and reimbursements between them to accomplish the
proper allocation of such billings.
(c) All revenues from and direct
costs for merchandise paid to third parties in the ordinary course
of business associated with Services in Progress will be allocated
to Buyer. For purposes of this Agreement, “ Services in
Progress ” means any “at need” funeral or
cemetery related services for which a Contract has been entered
into, but which have not been completed as of the Effective Time.
For purposes of this Agreement, such funeral or cemetery related
services are complete when the body or remains have been cremated
or interred.
(d) Except as set forth in Sections
1.7(e) and (f) below, Sellers shall be responsible for the
timely payment of, and shall indemnify and hold harmless Buyer
against, all sales, use, value added, documentary, stamp, gross
receipts, registration, transfer (including, without limitation,
real estate), conveyance, excise and other similar Taxes and fees
(collectively, “ Transfer Taxes ”)
arising out of or in connection with or attributable to
(i) the transfer of the Acquired Assets and (ii) the
transactions contemplated by this Agreement. Sellers shall prepare
and timely file all Tax Returns required to be filed in respect of
such Transfer Taxes. Sellers shall be responsible for filing all
required notices related to bulk sales laws and shall indemnify and
hold harmless Buyer against all Taxes or other Losses that Buyer
become liable for as a result of the Sellers’ failure to file
any applicable bulk sales notices or pay any of its
Taxes.
(e) The parties shall share in the
payment of any recording and other similar fees arising out of or
in connection with or attributable to the transactions contemplated
by this Agreement in accordance with the normal practices in the
applicable states in which the various Acquired Assets are located;
provided , however , that Sellers shall pay for the
recording of the release of any Lien (other than Permitted
Encumbrances) with respect to any Acquired Asset.
(f) Except to the extent that any
Transfer Tax amounts are included in the amounts paid by Buyer
pursuant to Section 1.3(a)(ii), Buyer shall be responsible for
the timely payment of, and shall indemnify and hold harmless
Sellers against, all Transfer Taxes arising out of or in connection
with or attributable to the transfer of the vehicles listed on
Schedule 1.1(c) to this Agreement. Buyer shall prepare and timely
file all Tax Returns required to be filed in respect of such
Transfer Taxes.
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Section 1.8 Allocation of
Closing Purchase Price .
(a) On or prior to the Closing Date,
Buyer and Sellers shall mutually agree upon a written statement
(the “ Statement of Allocation ”) setting
forth an allocation of the Closing Purchase Price (“
Purchase Price Allocation ”) (which for such
purpose shall be increased by the amount of the liabilities assumed
by Buyer). The Statement of Allocation shall include: (i) the
assets to be purchased by each of Buyer LLC and Buyer NQ Sub;
(ii) the portion of the Closing Purchase Price (whether cash
or Units) that will be paid by or on behalf of Buyer LLC and Buyer
NQ Sub to acquire the Acquired Assets, and (iii) an allocation
of the portion of the Closing Purchase Price paid by or on behalf
of each of Buyer LLC and Buyer NQ Sub (“ Purchased
Acquired Assets Allocation ”) among each of the
respective categories of Acquired Assets that are purchased. Buyer
and Sellers agree that each of the allocations required to be
prepared pursuant to this Section 1.8 shall be prepared in
accordance with the provisions of Section 1060 of the Code,
the Treasury Regulations promulgated thereunder and any similar
provisions of state, local or foreign law, as
applicable.
(b) All federal, state, local and
foreign income Tax Returns of Sellers and Buyer shall be filed
consistently with the information set forth on the Statement of
Allocation. Moreover, Sellers and Buyer further agree to file IRS
Form 8594 (and any corresponding form required to be filed by a
state or local Taxing Authority) in a manner that is consistent
with the Purchased Acquired Assets Allocation. Sellers and Buyer
agree to promptly provide each other with any information necessary
to complete such Tax Returns and IRS Form 8594 (and any
corresponding form required to be filed by a state or local Taxing
Authority). Sellers and Buyer shall not take any position on a Tax
Return, tax proceeding or audit that is inconsistent with any
information set forth on the Statement of Allocation.
(c) Sellers and Buyer, as
applicable, agree that all “ Book-Tax
Disparities ” (as such term is defined in the First
Amended and Restated Limited Partnership Agreement of StoneMor
Partners L.P.) on property acquired by Buyer for Units shall be
eliminated through application of the principles of Treasury
Regulation Section 1.704-3(d).
Section 1.9 Effective
Time . The Effective Time of the transfer of the
Acquired Assets shall be 12:01 a.m. on the Closing Date.
ARTICLE II
Closing
Section 2.1 Closing
. The closing of the transaction provided for in this
Agreement (the “ Closing ” ) shall take
place at the offices of Buyer’s counsel, Blank Rome LLP, One
Logan Square, Philadelphia, PA 19103, on September 28, 2006
(the “ Closing Date ” ), or at such other
location, time and date as the parties shall mutually agree. In the
event of any postponement
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thereof, all references in this Agreement to the
Closing Date shall be deemed to refer to the time and to the date
to which the Closing Date shall have been so postponed as herein
provided.
Section 2.2 Instruments of
Conveyance and Transfer . At the Closing, the
applicable Sellers shall deliver to Buyer such special warranty
deeds, leases, bills of sale, endorsements, assignments, title
affidavits and other documents reasonably requested by the Title
Company (as defined in Section 5.7), and such other
instruments of transfer, conveyance and assignment as may be
reasonably requested by Buyer, in forms reasonably satisfactory to
Buyer, in order to more fully vest in Buyer good and marketable
title to the Acquired Assets. Sellers shall take all such steps as
may be reasonably requested by Buyer to put Buyer in actual
possession and control of the Acquired Assets and the Business as
of the Closing.
ARTICLE III
Representations and Warranties
by Sellers
Sellers (which as to each particular
Location shall include SCI and the designated Subsidiary Owner
thereof, jointly and severally) hereby represent and warrant to
Buyer, both as of the date hereof and as of the Effective Time, as
follows:
Section 3.1 Organization;
Standing; Authorization; Capacity . Each Seller is a
corporation or limited liability company, as applicable, duly
organized, validly existing and in good standing under the laws of
its state of formation as designated on Exhibit B , with all
requisite power and authority to own the Acquired Assets and to
conduct the Business as it is now being conducted and is presently
proposed (by Sellers) to be conducted. Each Seller is duly
qualified to conduct business and is in good standing in each
jurisdiction in which the nature of its business or location of its
properties makes such qualification necessary, except where the
failure to be so qualified would not reasonably be expected to have
a Material Adverse Effect. The execution, delivery and performance
of this Agreement by Sellers have been duly and
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effectively authorized by all necessary action
on the part of Sellers, including authorization by the board of
directors/managers (as applicable) of each Seller, and no further
action or Consent is required in connection with such execution,
delivery and performance of this Agreement by Sellers. This
Agreement has been duly executed and delivered by each Seller, and
constitutes the valid and binding obligation of each Seller,
enforceable against each Seller in accordance with its
terms.
Section 3.2 Financial
Information . The unaudited income and expense
statements for each Location making up the Business for the twelve
month periods ending December 31, 2003, 2004 and 2005
(collectively, the “Income Statements” ),
copies of which are attached hereto as Schedule 3.2 ,
accurately reflect in all material respects the income and expenses
of such Locations for the periods covered.
Section 3.3 Tax
Matters .
(a) (i) each Seller has properly and
timely filed all Tax Returns required to be filed by it;
(ii) each Seller has paid all Taxes required to be paid by it
(whether or not shown on a Tax Return); and (iii) there are no
encumbrances for Taxes on the Acquired Assets other than for Taxes
not yet due and payable.
(b) Each Seller has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other person for all periods
for which the statutory period of limitations for the assessment of
such Tax has not yet expired and all IRS Forms W-2 and 1099 (and
other applicable forms required to be filed by a state or local
Taxing Authority) required with respect thereto have been properly
completed and timely filed.
(c) None of the Sellers is a
“foreign person” as such term is defined in
Section 1445(f)(3) of the Code.
(d) All amounts received by Sellers
on sales by the Business which are required under applicable state
law to be trusted have been deposited in trust and all Tax Returns
required to be filed concerning such trusts and the income from
such trusts have been filed through all fiscal years ending prior
to the Closing Date.
Section 3.4 No
Violation . Neither the execution and delivery of this
Agreement by the Sellers nor the performance of their respective
obligations hereunder or thereunder will,
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subject to receipt of all Required Consents,
(a) violate, conflict with or result in a breach of any Law,
(b) violate, conflict with or result in a breach or
termination of, or otherwise give any contracting party additional
rights or compensation under, or the right to terminate or
accelerate, or constitute (with notice or lapse of time, or both) a
default under the terms of any organizational documents (i.e.,
charter, bylaws, operating agreement, partnership agreement or
similar document), any note, deed, lease, instrument, permit,
security agreement, mortgage, commitment, contract, agreement,
order, judgment, decree, license or other instrument or agreement,
whether written or oral, express or implied, including, without
limitation, the Assumed Contracts, to which Sellers are a party or
by which any of the Acquired Assets or the Business is bound, or
(c) result in the creation or imposition of any Liens with
respect to the Acquired Assets or the Business.
Section 3.5 Status of
Acquired Assets .
(a) Title to Acquired Assets
. Sellers have fee simple title to the Owned Real Property, a valid
leasehold interest in the Leased Real Property and good and
marketable title to all of the Acquired Assets, subject to no
Liens, except for Permitted Encumbrances and as otherwise disclosed
in Schedule 3.5 . At the Closing, Buyer will acquire fee
simple title to the Owned Real Property, a valid leasehold interest
in the Leased Real Property and good and marketable title to all of
the Acquired Assets, in each case free and clear of any and all
Liens except Permitted Encumbrances. Other than as disclosed in
Schedule 3.5 , no Seller has entered into any Contract
granting rights to third parties in any real or personal property
of Sellers included in the Acquired Assets, and no Person has any
right to possession or occupancy of any of the Acquired
Assets.
(b) Condition of Acquired
Assets . The Real Property and the tangible Acquired Assets
that are reasonably necessary for the operation of the Business are
in operating condition and reasonable repair (subject to normal
wear and tear) and are sufficient to permit Buyer to conduct the
Business as presently conducted.
Section 3.6
Improvements . To the Knowledge of Sellers, no
municipal or other governmental improvements affecting the Real
Property are in the course of construction or installation, and no
such improvement has been ordered to be made; and any municipal or
other governmental improvements affecting the Real Property which
have been constructed or
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installed have been paid for and will not
hereafter be assessed (except with respect to any currently
recorded assessments which are to become due after the Closing),
and all assessments heretofore made have been paid in full, other
than any recorded assessments which are to become due after the
Closing; and Sellers have not entered into any private contractual
obligations relating to the installation of or connection to any
sanitary sewers, storm sewers or any other improvements.
Section 3.7 Real Property
Approvals . To the Knowledge of Sellers, all
permanent certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals
required by all Governmental Authorities having jurisdiction and
the requisite certificates of the local board of fire underwriters
(or other body exercising similar functions), if applicable, have
been issued for all of the Real Property, have been paid for, and
are in full force and effect.
Section 3.8 Zoning
. Except as disclosed on the letters delivered by the
zoning code enforcement officers for the municipalities where the
Real Property is located, Sellers have not received notice from any
Governmental Authority that: (i) any parcel of the Real
Property is not in compliance with current zoning and use
classifications under the respective municipal zoning ordinance
governing such Real Property; (ii) any cemetery or funeral
home use, as the case may be, at or on the Real Property is not a
permitted use or an existing non-conforming use thereunder; and
(iii) the current construction, operation and use of the
buildings and other improvements constituting the Real Property
violate any zoning, subdivision, building or similar law,
ordinance, order, regulation or recorded plat or any certificate of
occupancy issued for the Real Property.
Section 3.9 No Violations
Relating to Real Property . No portion of the
Real Property, and no current use of the Real Property, is in
violation of any applicable Law, except
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where such violation would not have a Material
Adverse Effect. Sellers have not received notice of any presently
outstanding and uncured violations of any building, housing, safety
or fire ordinances with respect to the Real Property.
Section 3.10 Real Estate
Taxes . Sellers have not received notice of any
proceeding pending for the adjustment of the assessed valuation of
all or any portion of the Real Property. To Sellers’
Knowledge, there is no abatement, reduction or deferral in effect
with respect to all or any portion of the real estate Taxes or
assessments applicable to the Real Property.
Section 3.11 Eminent
Domain . Sellers have not received any notice of any
condemnation proceeding or other proceedings in the nature of
eminent domain (“ Taking ”) in connection
with the Real Property and, to Sellers’ Knowledge, no Taking
has been threatened.
Section 3.12 Inventory
. Sellers have good and marketable title to the Inventories
free and clear of any and all Liens (other than a customer’s
rights in items being stored for such customer). The Inventory does
not consist of any material amount of items that are obsolete or
damaged or items held on consignment. Sellers have not acquired or
committed to acquire or produce Inventory for sale which is not of
a quality usable in the ordinary course of business within a
reasonable period of time and consistent with past
practice.
Section 3.13 Litigation
. No Proceeding before any Governmental Authority, mediator
or arbitrator is pending or, to Sellers’ Knowledge,
threatened, involving any Seller wherein a judgment, decree, order,
settlement or other resolution would have a Material Adverse
Effect, or which would prevent the carrying out of this Agreement,
declare unlawful the transactions contemplated by this Agreement,
cause such transactions to be rescinded, or require Buyer to divest
itself of any of the Acquired Assets or the Business. To
Sellers’ Knowledge, no facts or circumstances or other events
have occurred that can reasonably be expected to give rise to any
such Proceeding.
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Section 3.14 Court Orders
and Decrees . There is not outstanding or, to the
Knowledge of Sellers, threatened any order, writ, injunction or
decree of any Governmental Authority, mediator or arbitrator
against or affecting any Seller, relating to any of the Acquired
Assets or the Business.
Section 3.15 Trade
Names . The Location names set forth on Exhibit
B constitute all of the trade names held for use or used by the
Sellers in connection with the Business and, other than such
tradenames, there are no Trademarks that are material to the
Business. Sellers have the legal right to use the Location names
set forth on Exhibit B , as used by Sellers in connection
with the Business, without the Consent of any other
Person.
Section 3.16 Preneed and
Trust Accounts and Contracts .
(a) All monies paid to Sellers for
the benefit of the Business in respect of the Pre-/At-Need
Contracts have been, and as of the Closing will be, set aside and
identified as set forth in Schedule 1.1(g) . Sellers have
complied with the terms and conditions of the Pre-/At-Need
Contracts. Sellers are not in default or breach of any Pre-/At-Need
Contract.
(b) The amounts (including interest)
held in trust in respect of each of the Pre-/At-Need Contracts,
including, without limitation, perpetual care funds, endowment care
funds, extended care funds, merchandise trust funds and prearranged
mortuary trust funds (collectively, the “ Trust
Funds ”), are held in conformity with all applicable
Laws. All of Sellers’ required contributions to, withdrawals
from and investment and other uses of the Trust Funds have been
made in accordance with all applicable Laws, and Sellers will have
paid as of the Closing (or will pay after Closing when due), all
commissions due and owing to commissioned sales people in respect
of the Pre-/At-Need Contracts. No Seller has Knowledge of any
actual or alleged non-compliance on the part of any Seller (or any
Affiliate of any Seller) with respect to the Trust
Funds.
(c) For those Pre-/At-Need Contracts
that are funded by insurance or performance bonds, Sellers have
purchased all such insurance policies and performance bonds
required to legally fund or secure all such Pre-/At-Need Contracts,
and no future premiums or other amounts remain to be paid, except
for those instances where, pursuant to the terms of such insurance
policies or performance bonds and in the ordinary course of
business, the policies or performance bonds specify payment of
premiums or other amounts over time. All such insurance policies
and performance bonds are fully identified on Schedule
1.1(g) .
(d) All of the Trust Funds are
interest bearing trust accounts or other investment accounts that
are permissible under applicable Laws. All of the Trust
Funds
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are identified and described under
Schedule 1.1(g) , which Schedule also attaches copies
of any and all trust agreements entered into by Sellers and a list
of the financial institutions described therein.
Section 3.17 Contracts
. Except for the Assumed Contracts (copies of which have
been delivered to Buyer), no Seller, nor any Affiliate of any
Seller, is a party to or bound by any material Contract relating to
the Acquired Assets or the Business. Except as disclosed on
Schedule 3.17 , all of the Assumed Contracts are in full
force and effect, and there exists no default or breach thereunder
by any Seller or, to Sellers’ Knowledge, other than with
respect to any Pre-/At-Need Contracts, any other party thereto. No
Seller has received any notice (written or oral) indicating the
intention of any party to any Assumed Contract to amend, modify,
rescind or terminate such Assumed Contract. All of the Assumed
Contracts are in full force and effect and are enforceable against
the Seller and any of its Affiliates that is a party thereto and,
to Sellers’ Knowledge, against all other parties thereto in
accordance with their terms and applicable Laws.
Section 3.18 Licenses and
Permits . Except as set forth on Schedule 3.18 ,
the Sellers hold all of the Permits required to own, operate and
maintain the Business under any applicable Law as currently
conducted or proposed (by Sellers) to be conducted (“
Existing Permits ”), and all Existing Permits
are, and as of immediately prior to the Closing will be, in full
force and effect. To the Sellers’ Knowledge, except as set
forth on Schedule 3.18 , there are no material restrictions
on Buyer’s ability to replace or renew any of the Existing
Permits. Sellers are in compliance with all Existing Permits,
except where the failure to be in compliance would not have a
Material Adverse Effect.
Section 3.19 Consents
. Sellers have, or will have prior to the Closing,
obtained, satisfied or made all Consents (the “
Required Consents ”) that are required to be
obtained, satisfied or made pursuant to any Laws, Permits, Assumed
Contracts or other agreements by
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which Sellers, or any of their properties or
business assets, including, without limitation, the Acquired
Assets, are bound in connection with (a) the execution and
delivery of this Agreement by Sellers, or (b) the sale and
transfer to Buyer of the Acquired Assets, including, without
limitation, the Assumed Contracts and, if transferable to Buyer
under applicable Law, the Existing Permits.
Section 3.20 Compliance
with Laws . The Business presently is conducted, and
the Acquired Assets and their respective uses are, in compliance
with all Laws applicable to them, including, without limitation,
the funding of or maintaining of all Trust Funds in compliance with
applicable Laws or to the posting of performance bonds in lieu
thereof, except where the failure to so comply would not have a
Material Adverse Effect. No Seller has received any written notice
of any administrative, civil or criminal investigation or audit by
any Governmental Authority relating to, or which could result in a
Material Adverse Effect.
Section 3.21 OSHA and
ADA . There is no Proceeding pending with respect to
any Seller, and, to Sellers’ Knowledge, no charge or claim
has been made against any Seller that has not been dismissed,
discharged or otherwise fully resolved, under the Occupational
Safety and Health Act (“ OSHA ”) and the
Americans with Disabilities Act (“ ADA ”)
pertaining to the facilities and operations of the
Business.
Section 3.22 Labor
Relations . Sellers are not a party to any collective
bargaining or union Contract and are not aware of any current union
organization effort with respect to employees of the Business.
There are no pending or unresolved unfair labor practice complaints
from or with respect to any employees of the Business. Since
December 31, 2005, Sellers have not received any written
notice of any strikes, slowdowns, work stoppages, lockouts or
threats thereof, by or with respect to any employees of the
Business. Since December 31, 2005, no Seller has had an
“employment loss” within the meaning of the WARN Act or
any similar Law.
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Section 3.23 Employees and
Independent Contractors . Schedule 3.23 sets
forth a list of all employees of the Business, together with
(a) their titles or responsibilities, (b) their salaries
or wages during the 2005 calendar year, (c) their dates of
hire, (d) any employment or severance agreements with them,
and (e) any outstanding loans or advances made to them. Except
as limited by any employment Contracts listed in Schedule
3.23 and except for any limitations of general application
which may be imposed under applicable employment Laws, Sellers have
the right to terminate the employment of each employee of the
Business at will and without incurring any penalty or liability
other than Retained Liabilities. Sellers are in compliance with all
Laws respecting employment practices, except where the failure to
so comply would not have a Material Adverse Effect. To
Sellers’ Knowledge, no employee of the Business has provided
to any Seller (or any Affiliate of any Seller) written notice of
such employee’s intent to terminate his or her employment
with the Business after the date hereof.
Section 3.24 No Brokers
. No Seller, nor any Person acting on behalf of any Seller,
has agreed to pay to any Person any commission, finder’s or
investment banking fee, or similar payment in connection with this
Agreement or the transactions contemplated thereby, nor has any
Seller, or any Person acting on behalf of any Seller, taken any
action on which a claim for any such payment could be
based.
Section 3.25 Accounts
Receivable . None of the Receivables have been sold
and/or factored. All Receivables arising since December 31,
2005, represent bona fide claims of Sellers against debtors of the
Business for sales made, services performed or other charges or
valid consideration arising on or before the date hereof. All such
Receivables are valid and enforceable claims for payment consistent
with past practices, without, to Seller’s Knowledge, setoff
or counterclaim.
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Section 3.26 Operations in
Ordinary Course of Business . Since December 31,
2005, Sellers have operated and conducted the Business in the
ordinary and usual course consistent with past practices. Since
December 31, 2005, there has been no material adverse change
in the financial condition, assets, liabilities, or operations of
the Business, nor have any events occurred, nor to Sellers’
Knowledge do there exist any circumstances, which would constitute,
either before or after the Closing, any such change. Without
limiting the generality of the foregoing and except as set forth on
Schedule 3.26 , since December 31, 2005, no Seller
has:
(a) sold, assigned, leased or
transferred any of their assets, which are material to the Business
singly or in the aggregate, other than assets sold or disposed of
in the ordinary course of business, consistent with past
practice;
(b) canceled, terminated, amended,
modified or waived any material term of any Contract relating to
the Business to which they are a party or by which they or any of
their assets is bound providing for aggregate annual revenues to
such Seller in excess of $25,000;
(c) (i) increased the base
compensation payable or to become payable to any of its employees
or independent contractors, except for normal periodic increases in
such base compensation in the ordinary course of business,
consistent with past practice, (ii) increased the sales
commission rate payable or to become payable to any of its
employees or independent contractors except in the ordinary course
of business consistent with past practices (including, without
limitation, past practices with respect to amounts and timing),
(iii) granted, made or accrued any loan, bonus, fee, incentive
compensation (excluding sales commissions), service award or other
like benefit, contingently or otherwise, to or for the benefit of
any of its employees or independent contractors, except in the
ordinary course of business consistent with past practices
(including, without limitation, past practices with respect to
amounts and timing), or (iv) entered into any new employment,
collective bargaining or consulting agreement or caused or suffered
any written or oral termination, cancellation or amendment thereof
(except for Assumed Contracts or with respect to any employee at
will without a written agreement);
(d) executed any lease for real or
personal property for the Business or incur any Liability therefor
except as otherwise disclosed herein;
(e) suffered any damage, destruction
or loss (whether or not covered by insurance) affecting the
Business or any assets used in the Business that exceeds $25,000 in
any one instance or $100,000 in the aggregate; or
(f) mortgaged or pledged, or
otherwise made or suffered any Lien (other than an
