|
EXHIBIT
10.1
Execution Copy
ASSET PURCHASE AND SALE
AGREEMENT
This ASSET PURCHASE AND SALE
AGREEMENT ( “ Agreement ” )
dated this 4 th day
of December, 2007, 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 ”),
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 CEMETERY MANAGEMENT SERVICES OF
OHIO , L.L.C. , a Delaware limited liability company
(“ Ohio Management LLC ” and individually
and collectively with StoneMor LLC, Buyer LLC and Buyer NQ Sub,
“ Buyer ”), and SCI FUNERAL SERVICES,
INC. , an Iowa corporation (“ Parent
”), joined herein by those of its direct and indirect
subsidiary entities which are listed in the “ Subsidiary
Owner ” column on Exhibit B attached hereto (all
such entities individually and collectively referred to herein as
“ Seller Entity ”), SCI OHIO FUNERAL
SERVICES, INC. , an Ohio corporation (“ SCI
Ohio ”), ALDERWOODS (OHIO) CEMETERY MANAGEMENT,
INC. , an Ohio corporation (“ Alderwoods
Ohio ” and together with Parent, Seller Entity, SCI
Ohio and Alderwoods Ohio “ Seller
”).
WITNESSETH:
W HEREAS
, the designated Seller entity owns and operates those funeral,
cremation, cemetery and other related businesses which are listed
on Exhibit B attached hereto (each location listed on
Exhibit B referred to herein as an “ Owned
Location ,” and the business conducted at each Owned
Location referred to individually and collectively as the “
Owned Business ”);
Page 1 of
96
W HEREAS
, Sierra View Memorial Park, a California nonprofit corporation
(“SVMP”), owns certain ground at the cemetery operated
by SCI California Funeral Services, Inc., a California corporation
(“SCI California”) and located at 4900 Olive Avenue,
Olivehurst, California 95961; and
W HEREAS
, SCI Ohio and Alderwoods Ohio each provide certain sales,
accounting, management and other administrative services for the
cemetery businesses which are listed on Exhibit C attached
hereto (the locations listed on Exhibit C and owned by those
particular Ohio non-profit corporations also listed on Exhibit
C are referred to as the “Ohio NFPs” and the
“ Managed Locations ”, respectively, SVMP
and the Ohio NFPs are referred to as the “NFPs”, the
marketing and accounting services agreements with SCI Ohio and
Alderwoods Ohio, for their respective Managed Locations, are
referred to as the “ Management Agreements
”, the businesses conducted at the Managed Locations are
referred to individually and collectively as the “
Managed Businesses ” and together with the
Owned Business, as the “ Business ”);
and
W HEREAS
, the parties desire to provide for the purchase, sale and
transfer of the Owned Business, including certain of the personal
property located at, used in connection with, or arising out of,
such Owned Business, together with the real estate utilized in the
Owned Business, the assumption and assignment of the Management
Agreements, and the ongoing operation of SVMP in exchange for cash
and other consideration, upon the terms and subject to the
conditions herein set forth; and
W HEREAS
, the NFPs desire to provide their consent to the terms and
provisions of the Agreement and the transactions contemplated
hereunder including the assignment of the Management Agreements;
and
W HEREAS
, this Agreement sets forth the terms and conditions to which
the parties have agreed.
Page 2 of
96
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, Seller, which as to each particular Owned
Location shall be the particular Subsidiary Owner of such Owned
Location as designated on Exhibit B hereto and which as to
the Management Agreements shall be SCI Ohio or Alderwoods Ohio, as
applicable) does hereby agree to sell, transfer, convey, assign and
deliver to Buyer, and Buyer does hereby agree to purchase and
accept from Seller 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) All of Seller’s
real property used in the operation of the Owned Business as
specifically described in the commitments for title insurance
received from Land Services USA, Inc. (the “Title
Company” ), 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 Seller exclusively or primarily in the operation of the Owned
Business as of the date hereof or acquired between the date hereof
and the Effective Time, including, without limitation, those items
listed on Schedule 2 to this Agreement;
(c) All vehicles listed on
Schedule 3 to this Agreement;
Page 3 of
96
(d) All caskets, crypts,
urns, vaults, monuments, grave spaces, mausoleum spaces, niches,
lawn crypts, supplies and other merchandise inventory of the Owned
Business ( “Inventory” ), including,
without limitation, the Inventory of the funeral homes, crematories
and flower shops included in the Owned Business and the items
stored for or delivered to customers at the cemeteries included in
the Owned Business, plus or minus any changes to such Inventory
which result from the ordinary course of operation of the Owned
Business, consistent with past practices, 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 or delivered to 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 (including
the Management Agreements and those other items) listed on Schedule
5 to this Agreement ( “Business
Contracts” );
(f) All benefits, rights and
entitlements under any leases for any real property at the Owned
Location or otherwise exclusively or primarily related to the Owned
Business (whether Seller is lessee or lessor thereunder) (
“Real Property Leases” ), including,
without limitation, those listed on Schedule 5 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 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 Owned Business of at-need or pre-need cemetery, funeral or
cremation merchandise, properties or services and all deposits,
prepaid amounts, insurance policies and trust funds relating to
such Contracts, engagements and commitments,
Page 4 of
96
including, without limitation, those
items listed on Schedules 7 and 8 to this Agreement, plus or
minus any similar items entered into or delivered or furnished in
the ordinary course of the operation of the Owned Business
subsequent to the date(s) of the listing(s) on Schedules 7 and 8
until the Effective Time (collectively, the
“Pre-/At-Need Contracts” and, together
with the Business Contracts, any collective bargaining or similar
agreements included in Schedule 6 and the Real Property
Leases, the “Assumed Contracts”
);
(h) All of the Permits of
each of Seller necessary for the ownership, operation, maintenance
or presently planned expansion (by Seller) of the Owned 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;
(k) All accounts and notes
receivable (i) of Alderwoods Ohio and SCI Ohio generated in or
relating to the management of the Managed Businesses; (ii) of
SCI California due from SVMP, and (iii) relating to the
operation of the Owned Business ( “Owned
Receivables” ), including, without limitation, those
listed on Schedule 9 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 9 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 Seller’s
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, including,
without limitation, all rights of the Seller against the prior
owner of the Alexander Funeral Home, but specifically excluding
pending trust claims specified in Section 5.5(b)(ii) and
pending insurance claims; and
Page 5 of
96
(m) All goodwill associated
with the Owned Business, together with all lists of present or
former customers of the Owned Business, all business books,
documents, records, files, databases and reports relating to the
Acquired Assets and reasonably necessary for Buyer to continue the
Owned Business to conduct the business of SVMP or to manage the
Managed Businesses (collectively, “Seller
Records” ) (whether or not the Seller Records are
physically located at the Owned Location or the Managed Locations),
the wired telephone numbers and listings for the Owned Business,
and all Intellectual Property owned and/or used by the Seller
exclusively or primarily in connection with the Owned 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 Owned Location as listed on Exhibit B hereto. All Seller
Records not physically located at the Managed or Owned 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 (as defined below) or
shipped to Buyer by Seller at Buyer’s expense by such
delivery service selected by Buyer. All requests and other
communications from Buyer to Seller regarding Seller Records,
either before or after the Closing (as defined below), 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.
Page 6 of
96
It is understood that in
general the Buyer is not purchasing the assets that comprise SVMP
or the assets that comprise the Managed Businesses (the
“Managed Assets” ). Following Closing,
SVMP shall continue to own its assets, and the Managed Assets shall
remain the property of the Ohio NFPs, the owners of the Managed
Locations; however, SVMP shall consent to the termination of its
current arrangement with SCI California, and the Ohio NFPs shall
consent to the assignment of the Management Agreements.
Notwithstanding the foregoing, Buyer shall acquire all assets,
property and rights in the Managed Businesses that permit the Buyer
to manage the Managed Businesses pursuant to the Management
Agreements.
Section 1.2
Excluded Assets . Seller shall not transfer,
convey or assign to Buyer, and Buyer shall not purchase, the
following assets (collectively, the “Excluded
Assets” ): (a) non-pre-need related cash and
cash equivalents, (b) 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
shareholders’ and directors’ meetings of Seller,
provided, however, custody or control of such records and minutes
of the NFPs along with any existing Tax records, general ledger and
other books of original entry, and original payroll records (the
“NFP Records” ) shall be transferred to
Buyer at Closing, (d) any pending trust claims specified in
Section 5.5(b)(ii) and any pending insurance claims,
(e) those items specifically identified in Schedule 2 as being
subject to a corporate lease or otherwise excluded from the sale of
the Acquired Assets, including the Managed Assets;
(f) approximately 31 acres of undeveloped real property (the
exact amount and configuration of which shall be mutually
determined by the parties after good faith
Page 7 of
96
negotiation before or subsequent to
Closing) at Graceland East Memorial Park in Simpsonville, South
Carolina (the “Graceland Tract”) 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 a
crematory or for any other purpose (or use that is related to the
death care business or that is inconsistent with the operation of
Graceland East Memorial Park as a cemetery; (g) all of
Seller’s claims and rights in and under the matter captioned
SCI California Funeral Services, Inc. v. Five Bridges
Foundation , Case No. 432392 in the San Mateo County,
California Superior Court; (h) the real estate comprising
Donelson, Sewell and Mathews Mortuary; and (i) all other
assets of Seller 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 Seller’s past practices, including
training, promotional materials, procedure and policy
manuals.
Section 1.3
Consideration for the Business 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 1.4(a)
below, pay to Seller at the Closing the sum of Sixty-Eight Million
Dollars ($68,000,000) (the “ Closing Purchase Price
”), to be delivered by bank wire transfer to such account as
Seller shall designate to Buyer in writing at least three
(3) business days prior to the Closing Date.
Section 1.4
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
Page 8 of
96
breach or default by Seller 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 Seller was 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)). For purposes hereof, Buyer Burial
Resolutions as defined in Section 5.22 shall constitute an
Assumed Liability.
(b) Retained
Liabilities . Except as provided in Section 1.4(a) hereof,
Seller (and/or as applicable, the NFPs) 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 1.4(b)), whether or not arising out of or relating to
the conduct of Seller 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 irrespective of whether such liability relates
to the period before or after Closing;
(ii) Liabilities of Seller
that constitute trade payables;
(iii) Liabilities of Seller
or the NFPs 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 Seller or the
NFPs 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, including the
Seller Burial Resolutions (as defined in Section 5.22
below);
Page 9 of
96
(iv) Liabilities of Seller or
the NFPs 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 Seller or the NFPs 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 Seller or the NFPs
(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 Seller or the NFPs, 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) Seller’s or the
NFPs’ deferred sales commissions;
(vii) Liabilities of Seller
or the NFPs, based in whole or in part on violations of, or failure
to comply with, 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.
(viii) Except as otherwise
specifically provided in this Agreement, all Liabilities of Seller
or the NFPs for any Tax for (A) operations of the Business
prior to the Effective Time; (B) Pre-Closing Tax Periods and
Straddle Tax Periods for the NFPs to the extent specified in
Section 5.12; (C) 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 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);
Page 10 of
96
(ix) Liabilities of Seller or
any of the NFPs arising out of or relating to any Proceeding to
which Seller or any of the NFPs is a party on the date of this
Agreement and relating to the Business or any of the matters
referenced on Schedule 10 (“Retained Proceedings”);
and
(x) Liabilities arising out
of the management of the Managed Businesses by Seller.
It is intended that the Management
Agreements shall govern the rights and duties between Seller and
the Ohio NFPs and, after the Effective Time, between Buyer and the
Ohio NFPs. Notwithstanding the foregoing, the terms of this
Agreement shall control in the event of any conflict between this
Agreement and any of the Management Agreements.
Section 1.5
Post-Closing Adjustments to Purchase Price
.
(a) Audit Report .
Seller and Buyer acknowledge that PricewaterhouseCoopers (the
“Independent Auditor” ) has performed 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 on or before 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 last day of the quarter immediately preceding
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 last day of the quarter immediately
preceding
Page 11 of
96
the Closing Date as reflected in the
Audit Report. Buyer shall deliver a copy of the Audit Report to
Seller within 15 days after receiving the Audit Report. No later
than ten (10) days after the Closing Date, Seller shall
deliver to Buyer a detailed statement of Merchandise Liabilities as
of the last day of the quarter immediately preceding the Closing
Date as reflected in the Audit Report of all of the cemeteries
included in the Owned Location and each of the Managed
Locations.
(b) Accounts Receivable
Adjustment . If the Base Gross AR Amount is less than
$6,615,800, then, subject to Section 1.5(e), the Purchase
Price shall be decreased by, and Seller 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 $6,964,000, using a discount
rate of .065 and a discount period of three (3) years. If the
Base Gross AR Amount is greater than $7,312,200, then, subject to
Section 1.5(e), the Purchase Price shall be increased by, and
Buyer shall pay to Seller, an amount equal to the discounted
present value of the amount by which the Base Gross AR Amount is
greater than $6,964,000, 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 $6,615,800, but less than or
equal to $7,312,200, then no adjustment shall be made to the
Purchase Price, and no amount shall be due by any party hereto,
under this Section 1.5(b).
(c) Merchandise Trust
Adjustment . If the Base Net Merchandise Trust Amount is less
than $36,353,650, then, subject to Section 1.5(e), the
Purchase Price shall be decreased by, and Seller shall pay to
Buyer, the discounted present value of the amount by which the Base
Net Merchandise Trust Amount is less than $38,267,000, using a
discount rate of .065 and a discount period of ten (10) years.
If the Base Net Merchandise Trust Amount is greater than
$40,180,350, then subject to Section 1.6(e), the Purchase
Price shall be increased by, and Buyer shall pay to Seller, an
amount equal to the discounted present value of the amount by which
the Base Net Merchandise Trust Amount is greater than $38,267,000,
using a discount rate of .065 and a discount period of ten
(10) years. If the Base Net
Page 12 of
96
Merchandise Trust Amount is greater than
or equal to $36,353,650, but less than or equal to $40,180,350,
then no adjustment shall be made to the Purchase Price, and no
amount shall be due by any party hereto, under this
Section 1.5(c).
(d) Endowment Care Trust
Adjustment . If the Transferred Endowment Care Trust Amount is
less than $43,557,000, then, subject to Section 1.5(e), the
Purchase Price shall be decreased by, and Seller shall pay to
Buyer, the Net Endowment Care Adjustment Amount. If the Transferred
Endowment Care Trust Amount is greater than $43,557,000, then,
subject to Section 1.5(e), the Purchase Price shall be
increased by, and Buyer shall pay to Seller, the Net Endowment Care
Adjustment Amount.
(e) Net Purchase Price
Adjustment Amount . The Purchase Price adjustment amounts
provided for in Sections 1.5(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 Seller and no
amount shall be payable by Buyer to Seller under this
Section 1.5, (ii) a single amount shall be payable to
Seller by Buyer, and no amount shall be payable by Seller to Buyer
under this Section 1.5, or (iii) no amount shall be
payable by any party hereto under either this Section 1.5. By
way of example only, if $150,000 is payable by Seller to Buyer
pursuant to Section 1.5(b), $50,000 is payable by Seller to
Buyer pursuant to Section 1.5(c) and $100,000 is payable by
Buyer to Seller pursuant to Section 1.5(d), then Seller shall
pay to Buyer, in accordance with Section 1.5(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 1.5(e) by Seller on the one hand or Buyer on the other
hand 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.
Page 13 of
96
(g) Tax Treatment .
Any payments made pursuant to this Section 1.5 shall be
treated by Seller and Buyer as adjustments to the Purchase Price
for all Tax purposes.
Section 1.6
Prorations; Services in Progress; Transaction Taxes
.
(a) Seller shall be
responsible for all Taxes (i) arising as a result of the
operation of the Business or ownership of the Acquired Assets prior
to the Effective Time and (ii) for Pre-Closing Tax Periods (as
hereinafter defined in Section 5.12) of the NFPs. At Closing,
all real and personal property Taxes on the Acquired Assets shall
be prorated between Seller on the one hand and Buyer on the other
hand on a per diem basis. Seller shall also be responsible for all
Taxes on income earned by the Pre-Need Trust Funds and the
Endowment Care Funds relating to periods prior to the Effective
Time to the extent such income (A) is not taxable to the
applicable trusts as independent taxpayer entities, and (B) is
withdrawn by or for Seller or otherwise distributed to Seller
(whether such withdrawal or distribution is made before or after
the Effective Time), and Seller 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 Seller with respect to the Pre-Need Trust Funds and the
Endowment Care Funds, the amount of such Taxes shall be computed as
if the tax year of such funds ended on the Effective Time with
regard to the Managed Businesses and SVMP and the date of the Final
Trust Delivery (as defined in Section 5.5(e) below) with
regard to the Owned Business.
(b) The parties shall
cooperate in transferring from the Seller, to Buyer, all water,
electrical, gas and other utility services provided to or
benefiting the Real Property, SVMP and the Managed Locations, and
as and to whatever extent billings are received by any party
relating to services utilized both before the Effective Time (for
which Seller shall be responsible) and after the Effective Time
(for which Buyer shall be responsible), the parties shall cooperate
to make appropriate adjustments and reimbursements between them to
accomplish the proper allocation of such billings.
Page 14 of
96
(c) With respect to the Owned
Business, 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” cemetery, crematory and/or funeral
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 cemetery, crematory and/or funeral
related services are complete when the body or remains have been
cremated or interred.
(d) Except as set forth in
Sections 1.6(e) and (f) below, Seller 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. Seller shall prepare and timely
file all Tax Returns required to be filed in respect of such
Transfer Taxes. Seller 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 becomes
liable for as a result of the Seller’s 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 Seller shall pay for
the recording of the release of any Lien (other than Permitted
Encumbrances) with respect to any Acquired Asset.
Page 15 of
96
(f) Buyer shall be
responsible for the timely payment of, and shall indemnify and hold
harmless Seller against, all Transfer Taxes arising out of or in
connection with or attributable to the transfer of the vehicles
listed on Schedule 3 to this Agreement. Buyer shall prepare and
timely file all Tax Returns required to be filed in respect of such
Transfer Taxes.
Section 1.7
Allocation of Closing Purchase Price
.
(a) On or prior to the
Closing Date, Buyer and Seller 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 Ohio Management LLC,
Buyer LLC and Buyer NQ Sub; (ii) the portion of the Closing
Purchase Price that will be paid by or on behalf of Ohio Management
LLC, 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 Ohio Management LLC, Buyer
LLC and Buyer NQ Sub ( “Purchased Acquired Assets
Allocation” ) among each of the respective categories
of Acquired Assets that are purchased. Buyer and Seller agree that
each of the allocations required to be prepared pursuant to this
Section 1.7 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 Seller and Buyer shall be filed
consistently with the information set forth on the Statement of
Allocation. Moreover, Seller 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. Seller and Buyer
agree to promptly provide each other with any information necessary
to complete such
Page 16 of
96
Tax Returns and IRS Form 8594 (and any
corresponding form required to be filed by a state or local Taxing
Authority). Seller 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.
Section 1.8
Effective Time . The Effective Time of the
transfer of the Acquired Assets shall be 11:59 p.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, Pennsylvania 19103, on December 19, 2007 (the
“Closing Date” ), or at such other
location, time and date as the parties shall mutually agree. In the
event of any postponement 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, Seller shall deliver to Buyer such special warranty
deeds, bills of sale, endorsements, assignments, title affidavits
and other documents reasonably requested by the Title Company, 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. Seller 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.
Page 17 of
96
ARTICLE III
Representations and
Warranties by Seller
Seller (which as to each
Owned Location shall include Parent and the applicable Seller
Entity, as to SVMP shall include Parent and SCI California and as
to the Managed Locations shall include Parent and as applicable,
SCI Ohio or Alderwoods Ohio, in each case jointly and severally)
hereby represents and warrants to Buyer, both as of the date hereof
and as of the Effective Time, as follows:
Section 3.1
Organization; Standing; Authorization .
Capacity. Each of Seller and the NFPs is a corporation, nonprofit
corporation or limited liability company, as applicable, duly
organized, validly existing and in good standing under the laws of
its state of formation, with all requisite power and authority to
own the Acquired Assets or the Managed Assets, as the case may be,
and to conduct the Business as it is now being conducted and is
presently proposed by Seller to be conducted. Each of Seller and
the NFPs 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, or consent to, this Agreement by each of Seller
and the NFPs, as the case may be, has been duly and effectively
authorized by all necessary action on the part of Seller and the
NFPs, including authorization by the board of directors, trustees
or managers of each of Seller and the NFPs, and no further action
or Consent is required from Seller or the NFPs. This Agreement has
been duly executed and delivered by Seller and consented to by the
NFPs, and constitutes the valid and binding obligation of each of
Seller, enforceable against Seller in accordance with its
terms.
Section 3.2
Financial Information . The unaudited income
and expense statements for the Business for the twelve month
periods ending December 31, 2004, 2005 and 2006 (collectively,
the “Income Statements” ), copies of
which are attached hereto as Schedule 4 , accurately reflect
in all material respects the income and expenses of each Owned
Location and Managed Location for the periods covered.
Page 18 of
96
Section 3.3 Tax
Matters .
(a) (i) each of Seller and
the NFPs have properly and timely filed all Tax Returns required to
be filed by it, which, with respect to NFPs, were correct and
complete in all material respects; (ii) each of Seller and the
NFPs 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, SVMP, the Managed Assets, or the
Business other than for Taxes not yet due and payable.
(b) With regard to the NFPs:
(i) since January 1, 2002, no audit or other tax
proceeding by any Taxing Authority has ever been conducted, is
currently pending or, is threatened; (ii) no notice of any
proposed Tax audit, or of any Tax deficiency or adjustment, has
been received and there is no known reasonable basis for any Tax
deficiency or adjustment to be assessed; (iii) there are no
agreements or waivers currently in effect that provide for an
extension of time for the assessment of any Tax; and (iv) no
claim has ever been made by a Taxing Authority in a jurisdiction
where an NFP does not file a Tax Return that it is or may be
subject to taxation by that jurisdiction.
(c) Each of Seller and the
NFPs have 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.
(d) Neither the Seller nor
any of the NFPs is a “foreign person” as such term is
defined in Section 1445(f)(3) of the Code.
Page 19 of
96
(e) All amounts received by
Seller or the NFPs 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.
(f) Each NFP is not and has
not been a party to any Tax allocation or Tax sharing agreement. No
NFP is a member of any Affiliated Group (as defined in
Section 1504(a) of the Code or any corresponding provision of
state, local or foreign Tax Law) other than the Affiliated Group of
which SCI is the parent. No NFP has any Liabilities for Taxes of
any Person (A) under United States Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or
foreign Law), except those which shall be discharged by SCI or one
of its Affiliates, (B) as a transferee or successor, or
(C) by contract or otherwise.
(g) No NFP has been the
“distributing corporation” (within the meaning of
Section 355(a)(1) of the Code or any corresponding provision
of state, local or foreign Tax Law) nor the “controlled
corporation” (within the meaning of Section 355(a)(1) of
the Code or any corresponding provision of state, local or foreign
Tax Law) within the two-year period ending as of the date of this
Agreement.
(h) No NFP (i) has
agreed to and is not required to make any adjustment pursuant to
Section 481(a) of the Code; (ii) has knowledge that the
Internal Revenue Service has proposed any such adjustment or change
in accounting method with respect to such NFP; and (iii) has
no application pending with any Taxing Authority requesting a
change in accounting method.
(i) No NFP will be required
to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any
(i) “closing agreement” as described in
Section 7121 of the Code (or any corresponding
Page 20 of
96
provision of state, local or foreign
income Tax Law); (ii) installment sale or open transaction
disposition made on or prior to the Closing Date;
(iii) prepaid amount received on or prior to the Closing Date;
or (iv) intercompany transactions or excess loss accounts
described in the Treasury Regulations promulgated under
Section 1502 of the Code (or any corresponding provision of
state, local or foreign income Tax Law).
(j) No NFP is subject to any
private letter ruling of the Internal Revenue Service or comparable
rulings of other Taxing Authorities. No power of attorney currently
in force has been granted by any NFP concerning any Tax
matter.
Section 3.4 No
Violation . Neither the execution, delivery or
performance of this Agreement by the Seller nor the consent to this
Agreement by the NFPs will, 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 Seller and/or the NFPs
is a party or by which any of the Acquired Assets, the Managed
Assets or the Business is bound, or (c) result in the creation
or imposition of any Liens with respect to the Acquired Assets, the
Managed Assets or the Business.
Section 3.5
Status of Acquired Assets and Managed Assets
.
(a) Title to Acquired
Assets . Seller has 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
Page 21 of
96
Assets, subject to no Liens, except for
Permitted Encumbrances and as otherwise disclosed in Schedule 1
or Schedule 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 1 , neither Seller nor the NFPs have entered into
any Contract granting rights to third parties in any real or
personal property of Seller or the NFPs included in the Acquired
Assets or the Managed Assets, and no Person has any right to
possession or occupancy of any of the Acquired Assets.
(b) Condition of Acquired
Assets and Managed Assets . The Real Property and the tangible
Acquired Assets that are reasonably necessary for the operation of
the Owned Business are in operating condition and reasonable repair
(subject to normal wear and tear) and are sufficient to permit
Buyer to conduct the Owned Business as presently conducted. The
Managed Assets are sufficient to permit Buyer to manage the Managed
Businesses as presently conducted in accordance with the terms of
the Management Agreements. The assets of SVMP are sufficient for
its business.
Section 3.6
Improvements . To the Knowledge of Seller, no
municipal or other governmental improvements affecting the Real
Property or the real property utilized by the NFPs (the
“NFP 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 or the NFP Real Property
which have been constructed or 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 neither Seller nor the NFPs has entered into
any private contractual obligations relating to the installation of
or connection to any sanitary sewers, storm sewers or any other
improvements.
Page 22 of
96
Section 3.7
Real Property Approvals . To the Knowledge of
Seller, 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 the Real Property or the NFP 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
municipality where the Real Property or the NFP Real Property is
located, neither Seller nor the NFPs have received notice from any
Governmental Authority that: (i) any parcel of the Real
Property or the NFP Real Property is not in compliance with current
zoning and use classifications under the respective municipal
zoning ordinance governing such Real Property or the NFP Real
Property; (ii) any existing use at or on the Real Property or
the NFP 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 or the NFP 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 or the NFP Real
Property.
Section 3.9 No
Violations Relating to Real Property . No portion of
the Real Property or the NFP Real Property, and no current use of
the Real Property or the NFP Real Property, is in violation of any
applicable Law, except where such violation would not have a
Material Adverse Effect. Seller has not received notice of any
presently outstanding and uncured violations of any building,
housing, safety or fire ordinances with respect to the Real
Property or the NFP Real Property.
Section 3.10
Real Estate Taxes . Seller has not received
notice of any proceeding pending for the adjustment of the assessed
valuation of all or any portion of the Real Property or the NFP
Real Property. To the Knowledge of Seller, 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 or the NFP Real Property.
Page 23 of
96
Section 3.11
Eminent Domain . Seller has not received any
notice of any condemnation proceeding or other proceedings in the
nature of eminent domain ( “Taking” ) in
connection with the Real Property or the NFP Real Property and, to
the Knowledge of Seller, no Taking has been threatened.
Section 3.12
Inventory . Seller or the NFPs have good and
marketable title to the Inventories (which for purposes of this
Section 3.12 includes the same categories of items at SVMP and
the Managed Businesses as are defined as the
“Inventory” of the Owned Business in
Section 1.1(d) above) 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. Neither Seller nor the NFPs have 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
the Knowledge of Seller, threatened, involving Seller and/or the
NFPs 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, require Buyer to divest itself of any
of the Acquired Assets or require termination of the Management
Agreements or the loss of any rights or benefits thereunder. To the
Knowledge of Seller, no facts or circumstances or other events have
occurred that can reasonably be expected to give rise to any such
Proceeding.
Page 24 of
96
Section 3.14
Court Orders and Decrees . There is not
outstanding or, to the Knowledge of Seller, threatened any order,
writ, injunction or decree of any Governmental Authority, mediator
or arbitrator against or affecting Seller, relating to any of the
Acquired Assets, the Managed Assets or the Business.
Section 3.15
Trade Names . The Owned Location names set
forth on Exhibit B and the Managed Location names set forth
on Exhibit C constitute the only trade names held for use or
used by the Seller and/or the NFPs in connection with the Business
and, other than such trade names, there are no Trademarks that are
material to the Business. Seller and/or the NFPs have the legal
right to use the Owned Location names set forth on Exhibit B
and/or the Managed Location names set forth on Exhibit C ,
as used by Seller and/or the NFPs in connection with the Business,
without the Consent of any other Person.
Section 3.16
Pre-need and Trust Accounts and Contracts
.
(a) All monies paid to Seller
or the NFPs 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 Schedules 7 and 8 .
Each of Seller and the NFPs have complied with the terms and
conditions of the Pre-/At-Need Contracts. Neither Seller nor the
NFPs are 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 Seller’s and the NFPs’
required contributions to, withdrawals from and investment and
other uses of the Trust Funds of Seller and the NFPs have been made
in accordance with all applicable Laws, and each of Seller and the
NFPs 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. Seller has no
Knowledge of any actual or alleged non-compliance on the part of
Seller or the NFPs with respect to the Trust Funds.
Page 25 of
96
(c) For those Pre-/At-Need
Contracts that are funded by insurance or performance bonds, Seller
or the NFPs have purchased and, when required, posted 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 7 .
(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
relating to the Owned Business are identified and described under
Schedule 8 . Copies of trust agreement pursuant to which
Trust Funds relating to SVMP or the Managed Businesses are held
have been furnished to the Buyer and are referenced on Schedule
8.
Section 3.17
Contracts . Except for the Assumed Contracts
(copies of which have been delivered to Buyer), neither Seller nor
any of the NFPs, is a party to or bound by any material Contract
relating to the Acquired Assets, the Managed Assets or the
Business. Except as disclosed on Schedule 11 , all of the
Assumed Contracts are in full force and effect, and there exists no
default or breach thereunder by Seller or the NFPs or, to the
Knowledge of Seller, any other party thereto other than with
respect to any Pre-/At-Need Contracts. Neither Seller nor the NFPs
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/or the NFPs and any of their affiliates that is a party thereto
and, to the Knowledge of Seller, against all other parties thereto
in accordance with their terms and applicable Laws.
Page 26 of
96
Section 3.18
Licenses and Permits . Except as set forth on
Schedule 11 , either the Seller or the NFPs holds all of the
Permits required to own, operate and maintain the Business under
any applicable Law as currently conducted or proposed (by Seller
and/or the NFPs) 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 Knowledge of Seller, except as set forth on Schedule
11 , there are no material restrictions on Buyer’s
ability to replace or renew any of the Existing Permits. Each of
Seller and the NFPs is 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 . Each of Seller and the NFPs 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 which
Seller or the NFPs, or any of their properties or business assets,
including, without limitation, the Acquired Assets and the Managed
Assets, are bound in connection with (a) the execution and
delivery of this Agreement by Seller; (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, or (c) the consent
of the NFPs to this Agreement.
Section 3.20
Compliance with Laws . The Business presently
is conducted, and the Acquired Assets and Managed 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.
Neither Seller nor the NFPs have 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.
Page 27 of
96
Section 3.21
OSHA or ADA . There is no Proceeding pending
with respect to Seller or the NFPs, and, to the Knowledge of
Seller, no charge or claim has been made against Seller or the NFPs
that has not been dismissed, discharged or otherwise fully
resolved, under the Occupational Safety and Health Act (
“OSHA” ) or the Americans with
Disabilities Act ( “ADA” ) pertaining to
the facilities and operations of the Business.
Section 3.22
Labor Relations . Except as otherwise set
forth in Schedule 6, neither Seller nor the NFPs are a party to any
collective bargaining or union Contract and Seller is 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, 2006, neither Seller nor the NFPs
have 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, 2006, neither
Seller nor the NFPs have had an “employment loss”
within the meaning of the WARN Act or any similar Law.
Section 3.23
Employees and Independent Contractors .
Schedule 6 sets forth a list of all employees of the
Business, together with (a) their titles or responsibilities,
(b) their salaries or wages during the 2006 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 5 or Schedule 6 and
except for any limitations of general application which may be
imposed under applicable employment Laws, either Seller or the NFPs
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. Each of the Seller and the NFPs
are in compliance with all Laws
Page 28 of
96
respecting employment practices, except
where the failure to so comply would not have a Material Adverse
Effect. To the Knowledge of Seller, no employee of the Business has
provided to Seller or the NFPs 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 . Neither Seller nor any Person acting on
behalf of 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 Seller, or any Person acting on behalf of Seller,
taken any action on which a claim for any such payment could be
based.
Section 3.25
Accounts Receivable . None of the Owned
Receivables or the receivables of SVMP or the Managed Businesses
related to the Pre-/At-Need Contracts (together with the Owned
Receivables, the “Receivables” ) have
been sold and/or factored. All Receivables arising since
December 31, 2006, represent bona fide claims of Seller or the
NFPs 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 the Knowledge of Seller, setoff or counterclaim. With
regard to any receivables owed by any or all of the NFPs to SCI
Ohio, Alderwoods Ohio and/or SCI California, Seller makes no
representation or warranty whatsoever regarding the existence,
amount or collectibility thereof, or otherwise with respect
thereto, and all expressed or implied warranties and/or
representations regarding such receivables are expressly
disclaimed.
Section 3.26
Operations in Ordinary Course of Business .
Since December 31, 2006, Seller and the NFPs have operated and
conducted the Business in the ordinary and usual course consistent
with past practices. Since December 31, 2006, 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 the
Page 29 of
96
Knowledge of Seller 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 11 , since
December 31, 2006, neither the Seller nor the NFPs
have:
(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 any of them is a party or by
which any of them or any of their assets is bound providing for
aggregate annual revenues to Seller or the NFPs 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 practices (including, without limitation, past
practices with respect to amounts and timing), (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);
Page 30 of
96
(d) executed any lease for
real or personal property for the Business or incurred 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 any Permitted
Encumbrance) on, any material asset of the Business or group of
assets that are material in the aggregate to the
Business.
Section 3.27
Corporate Status of SVMP . SVMP is organized
as a California nonprofit corporation and has been classified as a
mutual benefit corporation. SVMP has no members and its Board fills
all vacancies arising on the Board. The individuals comprising the
current Board and their respective terms of office will be set
forth in the Secretary’s certificate furnished pursuant to
Section 7.1(m).
Section 3.28
Intentionally Deleted .
Section 3.29
Compliance with Cemetery Laws . In connection
with the ownership and operation of each cemetery included in the
Business, each of Seller and the NFPs have complied in all material
respects with all applicable Laws governing the operation of
cemeteries, the provision of cemetery services and the sale of
cemetery merchandise. Furthermore, with respect to the ownership
and operation of each cemetery included in the Business, there are
no pending or, to the Knowledge of Seller, threatened claims or
suspensions against Seller and/or the NFPs, by any Person related
to the operation of cemeteries, the provision of cemetery services
and the sale of cemetery merchandise.
Section 3.30
Full Disclosure . None of the representations
and warranties made by Seller in this Agreement (including the
Schedules hereto) or in any document delivered to Buyer by or on
behalf of
Page 31 of
96
Seller or the NFPs pursuant to
Section 7.1, contains any untrue statement of a material fact,
or omits any material fact necessary to make any of them, in light
of the circumstances in which it was made, not
misleading.
Section 3.31 No
Other Representations or Warranties . Except as
expressly stated in this Agreement, Seller makes no other
representation or warranty of any kind whatsoever.
ARTICLE IV
Representations and
Warranties of Buyer
Buyer hereby represents and
warrants to Seller, both as of the date hereof and as of the
Effective Time, as follows:
Section 4.1
Authority .
(a) Each of StoneMor LLC,
Buyer LLC, Buyer NQ Sub and Ohio Management LLC are limited
liability companies or corporations duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its formation. The execution, delivery and performance of this
Agreement by StoneMor LLC, Buyer LLC, Buyer NQ Sub and Ohio
Management LLC, have been duly authorized and consented to by the
Board of Managers or Board of Directors of each such Person, and no
other or additional consent or authorization on the part of any
such Person is required in connection therewith. The consummation
of the transactions contemplated by this Agreement will not result
in a breach, violation or default by StoneMor LLC, Buyer LLC, Buyer
NQ Sub or Ohio Management LLC of or under any judgment, decree or
Contract applicable to any of them except to the extent that any
such breach, violation or default would not reasonably be expected
to have a material adverse effect on the ability of StoneMor LLC,
Buyer LLC, Buyer NQ Sub and Ohio Management LLC to perform their
obligations hereunder.
Page 32 of
96
(b) Upon execution and
delivery hereof, this Agreement shall constitute the valid and
binding obligation of StoneMor LLC, Buyer LLC, Buyer NQ Sub and
Ohio Management LLC enforceable against each of them in accordance
with its terms.
Section 4.2 No
Brokers . Neither Buyer, nor any Person acting on
behalf of Buyer, has agreed to pay a commission, finder’s or
investment banking fee, or similar payment in connection with this
Agreement or any matter related hereto to any Person, nor has any
such Person taken any action on which a claim for any such payment
could be based.
Section 4.3 No
Other Representations or Warranties . Except as
expressly stated in this Agreement, Buyer makes no other
representation or warranty of any kind whatsoever.
Section 4.4
Knowledge of Seller Breach . Except as
disclosed to Seller in writing, none of the Buyer Representatives
(as defined below) have actual knowledge of a breach by Seller of
any representation or warranty contained in Article III, or any
covenant or agreement to be performed or complied with by Seller in
accordance with this Agreement prior to the Effective Time. For
purposes of this Section 4.4, the term “Buyer
Representative” means William R. Shane, Paul
Waimberg, Frank Milles, Michael Stache, Gregg Strom, Alan Fisher,
Ken Lee, Penny Casey and Tim Yost, and such persons shall be deemed
to have actual knowledge of any breach referred to in the preceding
sentence of which any individual assigned by a third-party
representative or advisor of Buyer to provide substantial services
in connection with the transaction contemplated hereby has actual
knowledge.
Page 33 of
96
ARTICLE V
Covenants
Section 5.1
Access to Business . From and after the date
of this Agreement, Seller will give and will cause the NFPs to give
Buyer and its representatives full and free access to all
properties, Contracts, books and records of the Business so that
Buyer may have full opportunity to make such investigation as it
shall desire to make of the affairs of the Business, including,
without limitation, the conduct of any environmental investigations
or assessments, provided that (i) such investigation or
assessment shall not unreasonably interfere with the operations of
the Business, and (ii) prior to Buyer or any of its
representatives or contractors contacting any Owned or Managed
Location any personnel at such Location, Buyer shall first
communicate with and receive approval from Michael Lehmann, which
approval shall not be unreasonably withheld. Seller agrees to
furnish to Buyer and its representatives all data and information
of a financial or operational nature concerning the Acquired
Assets, the Managed Assets and the Business that may be reasonably
requested by them to conduct a complete a thorough due diligence
review of the Acquired Assets, the Managed Assets, the Business and
the employees of the Business. In furtherance and not in limitation
of the foregoing, Seller agrees to fully cooperate with Buyer as
reasonably requested and as reasonably necessary in connection with
the arrangement of any equity or debt financing required by Buyer
to consummate the transaction contemplated by this Agreement,
provided, however, such cooperation shall impose no monetary
obligation on Seller.
Section 5.2
Conduct of Business Pending Closing . From and
after the date of this Agreement until the Closing, and except as
otherwise permitted by this Agreement or as consented to by Buyer
in writing, Seller covenants that:
(a) Seller and the NFPs will
conduct the Business only in the ordinary course consistent with
past practices, which shall include, without limitation, compliance
in all material respects with all applicable Laws and the
maintenance in force of all insurance policies and performance
bonds;
Page 34 of
96
(b) Seller and the NFPs shall
maintain the Acquired Assets or the Managed Assets, as the case may
be, in their current state of repair, excepting normal wear and
tear and use their commercially reasonable efforts to protect the
goodwill of the Business and to maintain for the Business the
current relationships with suppliers and customers of the Business
and others having business relations with the Business;
(c) Seller and the NFPs shall
use their commercially reasonable efforts to ensure that key
employees and key independent contractors continue their
association with the Business through the Closing Date;
and
(d) Neither Seller nor the
NFPs shall engage in any practice, take, fail to take, or omit any
action, or enter into any transaction, (i) of the kind
described in Section 3.26 or (ii) which would make any of
the representations and warranties in Article III not
true.
Section 5.3
Consents and Licenses . Seller shall use
commercially reasonable efforts to obtain, satisfy or make, prior
to the Closing, all Required Consents.
Section 5.4
Buyer’s Trustee and Endowment Care and Pre-Need
Trust Funds . Buyer shall, prior to Closing,
(i) secure all licenses, permits and other governmental
authorizations and approvals required by those jurisdictions listed
on Exhibit D as a prerequisite to Buyer selling Pre-/At-Need
Contracts or accepting funds paid by customers toward Pre-/At-Need
Contracts with the Owned Business; and (ii) select and
formally designate a trustee or trustees (
“Buyer’s Trustee” ) that is
qualified under applicable Laws to receive all bank, trust or other
funds or accounts, excluding insurance premium payments, containing
amounts that have been received by Seller prior to the Effective
Time pursuant to
Page 35 of
96
Pre-/At-Need Contracts for pre-need
cemetery, funeral and/or cremation merchandise and/or services to
be provided by the Owned Business ( “Owned Pre-Need
Trust Funds” ), or which are being held as endowment
care, perpetual care, extended care or similar trust funds (
“Owned Endowment Care Funds” ), or which
are being held as pre-construction trust funds ( “Owned
Pre-construction Trust Funds” ) (all herein
collectively the “Owned Trust Funds” ).
(The Owned Pre-Need Trust Funds and their counterpart at SVMP or
the Managed Businesses (the “NFP Pre-Need Trust
Funds” ) are collectively referred to as the
“Pre-Need Trust Funds.” The Owned
Endowment Care Funds and their counterpart at SVMP or the Managed
Businesses (the “NFP Endowment Care
Funds” ) are collectively referred to as the
“Endowment Care Funds.” The Owned
Pre-construction Trust Funds and their counterpart at SVMP or the
Managed Businesses (the “NFP Pre-construction Trust
Funds” ) are collectively referred to as the
“Pre-construction Trust Funds.” The
Pre-Need Trust Funds, the Endowment Care Funds and the
Pre-construction Trust Funds are collectively referred to as the
“Trust Funds” ). At or prior to Closing,
Buyer shall confirm in writing to Seller and Seller’s
Trustees (as defined below) its compliance with the above
requirements and acceptance by Buyer’s Trustee of its/their
designation and appointment as such. After the Closing Date, all
amounts held in the Owned Trust Funds shall be transferred for
safekeeping to Buyer’s Trustee, pursuant to Section 5.5,
and assuming compliance with these requirements by Buyer, Buyer
agrees that all such amounts will be held, administered and
withdrawn in accordance with state and federal law. Promptly
following the Closing, Buyer shall obtain and post with the
requisite authorities in Alabama, California, Hawaii, Iowa,
Illinois, Kentucky and South Carolina bonds which are legally and
financial adequate to cause the release of the existing bonds
regarding the relevant Location Pre-/At-Need Contract performance
liability. At closing, Seller shall also provide sufficient
information regarding trust or other funds or accounts maintained
by SVMP or the Managed Businesses to permit Buyer to discharge its
duties pursuant to the terms of the Management Agreements or
otherwise with regard to the NFP Pre-Need Trust Funds, the NFP
Endowment Care Funds and the NFP Pre-construction Trust
Funds.
Page 36 of
96
Section 5.5
Delivery of Owned Trust Funds .
(a) Within the first five
(5) business days following the Closing, Seller shall cause
the trustees that hold the Owned Trust Funds (
“Seller’s Trustees” ) to
deliver
|
