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Exhibit 10.20
CONTINGENT ASSET SALE AGREEMENT
Conejo Mountain Funeral Home & Memorial Park
Camarillo, California 93012
CONTINGENT ASSET SALE AGREEMENT
("Agreement") dated this 22nd day of November, 2006, by and among
CARRIAGE CEMETERY SERVICES, INC. , a Texas corporation
("Buyer"), and SCI FUNERAL SERVICES, INC. , an Iowa
corporation ("SCI Funeral Services");
W I T N E
S S E T H :
WHEREAS, there is currently
pending a transaction (the "Alderwoods Transaction") described in
and to be accomplished pursuant to an Agreement and Plan of Merger
dated April 2, 2006 by and among Service Corporation
International ("SCI Parent"), Coronado Acquisition Corporation and
Alderwoods Group, Inc. ("Alderwoods Parent");
WHEREAS, upon the closing of the
Alderwoods Transaction (the "Alderwoods Merger Closing"), SCI
Funeral Services will be an affiliate of Alderwoods Group
(California), Inc., a California corporation ("Seller");
WHEREAS, Buyer desires to purchase
certain assets of the Seller;
WHEREAS, contingent upon the
Alderwoods Merger Closing, SCI Funeral Services will cause the
Seller to assume all obligations as the "Seller" under the terms of
this Agreement and to be bound by the terms of this Agreement, and
upon such assumption, SCI Funeral Services will be released of all
liability arising under this Agreement, all as set forth below;
WHEREAS, Seller owns and operates
a funeral business and cemetery business and conducts such business
under the name Conejo Mountain Funeral Home & Memorial Park
located at 2052 Howard Road, Camarillo, California 93012 (the
"Business");
WHEREAS, the names Conejo Mountain
Funeral Home and Conejo Mountain Memorial Park (whether separately
or in combination with each other) are hereinafter referred to as
the "Trade Names";
WHEREAS, SCI Funeral Services and
Buyer desire to establish, contingent upon the Alderwoods Merger
Closing, the terms for the sale and transfer from Seller to Buyer
of the Assets (hereafter defined), in exchange for cash, upon the
terms and subject to the conditions herein set forth; and
WHEREAS, this Agreement sets forth
the terms and conditions to which the parties have agreed;
NOW, THEREFORE, 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:
TERMS OF CONTINGENCY
A. SCI Funeral Services shall
promptly advise Buyer of the occurrence of the Alderwoods Merger
Closing and agrees that, contingent upon the Alderwoods Merger
Closing, within ten (10) days after the date of the Alderwoods
Merger Closing (the "Alderwoods Merger Closing Date"), SCI will
cause (x) the Seller (i) to execute the joinder (the
"Seller Joinder") following the signature page of this Agreement
whereby the Seller will assume all obligations as a "Seller" under
this Agreement, and (ii) to deliver the executed Seller
Joinder to Buyer and (y) SCI California Funeral Services,
Inc., a California corporation ("SCI California"), to execute and
deliver to Buyer the guaranty of Seller’s obligations under
this Agreement (the "Guaranty") following the signature page of
this Agreement. Buyer agrees that subject to and upon the
occurrence of Alderwoods Merger Closing, Seller’s execution
of the Seller Joinder and SCI California’s execution of the
Guaranty, Buyer will thereupon become obligated to purchase the
Assets (defined below) of Seller subject to the terms and
conditions of this Agreement.
B. Buyer acknowledges that
SCI Funeral Services does not and will not own the Assets and that
the sole obligation of SCI Funeral Services under this Agreement is
to cause the Seller to execute the Seller Joinder and SCI
California to execute the Guaranty within ten (10) days after
the Alderwoods Merger Closing Date, but only if and when the
Alderwoods Merger Closing occurs. If the Alderwoods Merger Closing
Date has not occurred on or before December 15, 2006, then
either SCI Funeral Services or Buyer, at its option, may terminate
this Agreement upon fifteen (15) days prior written notice to
the other of its election to terminate this Agreement and, in such
event, no party shall have any further liability or obligation
under this Agreement, provided that no such termination will be
effective if the Alderwoods Merger Closing Date occurs during such
15-day notice period; in which event SCI Funeral Services will
immediately cause the Seller to assume the obligations as a
"Seller" under this Agreement. None of Alderwoods Parent, SCI
Parent, SCI Funeral Services, nor Buyer, nor any of its respective
affiliates, shall have any liability to any other party if the
Alderwoods Merger Closing is delayed or never occurs for any reason
whatsoever. In no event shall the foregoing operate to extend the
Closing past the Outside Closing Date specified in
Section 2.1, and this Agreement shall automatically terminate
if Buyer has not received the Seller Joinder and the Guaranty on or
before the fifth business day preceding the Outside Closing
Date.
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C. SCI Funeral Services and
Buyer expressly agree that even though the terms of this Agreement
as set forth below in Articles I-X are written as being effective
on the date hereof, such terms will only become effective on the
date, if ever, that Seller executes the Seller Joinder and SCI
California executes the Guaranty, and then such provisions will be
effective only between Seller and Buyer (and, pursuant to the
Guaranty, SCI California); provided however, that (i) SCI
Funeral Services and Buyer agree that the provisions of
Section 8.6 and Article X shall apply to and govern this
Terms of Contingency Section, (ii) once Seller executes the
Seller Joinder, the representations and warranties of Seller
hereunder shall be effective as of and relate back to the effective
date of this Agreement, and (iii) notwithstanding when the
Alderwoods Merger Closing Date or Seller Joinder occurs, SCI
Funeral Services shall permit Buyer beginning no later than the day
after the date of this Agreement to have the access described in
Section 5.2 and to enable the Survey described in
Section 7.2 and inspections described in Section 7.3 to
be conducted.
ARTICLE I
Purchase and Sale
Section 1.1.
Transfer of Assets . Subject to the terms and conditions of
this Agreement, Seller does hereby agree to sell, transfer, convey
and deliver to Buyer, and Buyer does hereby agree to purchase and
accept from Seller, all of the assets, property and rights located
at, used in connection with or arising out of the Business,
including without limitation those described below, excluding only
the Excluded Assets described in Section 1.2:
(a) Fee simple title to the
real property described in Schedule 1 to Exhibit A to
this Agreement (the "Real Property");
(b) All furniture, fixtures,
equipment, and other tangible personal property owned by Seller
located at the Real Property which is necessary to operate the
Business including, without limitation, those items listed on
Schedule 2 to Exhibit A to this Agreement;
(c) All vehicles listed on
Schedule 3 to Exhibit A to this Agreement;
(d) All merchandise inventory
located at the Business, including but not limited to that
described in Schedule 4 to Exhibit A to this Agreement,
plus or minus any changes in said inventories which result from the
ordinary course of the operation of the Business subsequent to the
date of such listing and until the Effective Time and all Services
in Progress (as hereinafter defined);
(e) All rights of the
Business in all contracts, agreements and commitments listed on
Schedule 5 to Exhibit A to this Agreement;
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(f) All preneed funeral
and/or cemetery merchandise and/or service agreements generated in
the operation of the Business (the "Preneed Agreements"),
including, without limitation, those described in Schedules 7
and/or 8 to Exhibit A to this Agreement, including contracts
and accounts receivable associated therewith;
(g) All interest of Seller in
all proceeds of insurance policies relating to or arising from the
Preneed Agreements, including those described in Schedule 7 to
Exhibit A to this Agreement;
(h) All interest of Seller in
and to all bank, trust, investments or other funds or accounts
relating to or arising from the Preneed Agreements, including those
described in Schedule 8 to Exhibit A to this
Agreement;
(i) All funeral at need
accounts and notes receivable, and all cemetery preneed and at need
accounts and notes receivable, in each case generated in the
operation of the Business including, without limitation, those
listed on Schedule 9 to Exhibit A to this Agreement, plus
or minus any changes in said receivables which result from the
ordinary course of the operation of the Business subsequent to the
date(s) of such listing(s) and until the Effective Time (as
hereafter defined), but not including any receivables due from
insurance companies or trust funds as a result of the Preneed
Agreements Serviced (as hereafter defined) by the Business prior to
the Effective Time;
(j) All utility and other
deposits previously paid to and/or now held by third parties in
connection with the operation of the Business;
(k) The goodwill of Seller in
the Business, together with all lists of present or former
customers of the Business, all business books and records (whether
in tangible or electronic format) that are beneficial and useful to
Buyer in continuing the Business, the telephone and fax numbers and
listings for the Business and all internet domain names (if any),
all transferable government licenses and permits of the Business,
and all of Seller’s right, title and interest in and the
right to use the Trade Names throughout the trade areas in which
the Business is currently doing business, and any other names so
similar as to require consent of Seller to their rightful use, and
all goodwill associated therewith; and
(l) All other assets, rights
and properties owned or held by Seller used in the operation of, or
in connection with, the Business or located thereon, excluding
those described in Section 1.2.
All property to be sold by Seller
to Buyer described above shall be hereinafter collectively referred
to as the "Assets." At the Closing referred to in Section 2.1,
the Seller shall
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convey to the Buyer the Assets free and clear of any and all
liens, security interests, pledges, encumbrances, leases (including
vehicle leases) or title restrictions of any kind (collectively,
"Liens"), other than the Permitted Encumbrances against Real
Property determined in accordance with Section 7.2.
Section 1.2.
Excluded Assets . Seller shall not transfer, convey or
assign to Buyer the following assets: (a) non-preneed related
cash and cash equivalents, subject to Section 1.6(b) below,
(b) accounts receivable related to funeral or cemetery Preneed
Agreements that have matured and been Serviced (as defined below)
prior to the Effective Time, (c) computer software and similar
rights, (d) corporate records, minutes and records of
shareholders’ and directors’ meetings, and (e) all
other assets of the Seller which are not used exclusively or
primarily in the ownership, operation or maintenance of the
Business and which are not necessary or useful 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 and other similar
intellectual property rights (together the "Excluded Assets").
Except as specifically excepted above, it is intended that the
assets, properties and rights of the Business to be sold to the
Buyer shall include all of the assets, properties and rights
reflected in the Schedules to Exhibit A to this Agreement, other
than inventory and accounts receivable that are disposed of, and/or
Preneed Agreements that are Serviced (as defined below) or
transferred/refunded, in each case in the ordinary course of
business prior to the Effective Time, but including all similar
assets, properties and rights that may have been acquired in the
ordinary course of business since the date of such listings and
prior to the Effective Time.
Section 1.3.
Consideration for 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 Assets as
herein provided, will, in addition to the assumption of liabilities
set forth in Section 1.4 below, pay to Seller at the Closing
the sum of Eight Million and No/100 Dollars ($8,000,000.00) (the
"Purchase Price"), in cash, to be delivered by bank wire transfer
to such account as Seller shall designate to Buyer at least one
business day prior to the Closing Date.
Section 1.4.
Assumption of Liabilities . From and after the Effective
Time, Buyer agrees to assume and perform only the following
liabilities and obligations (collectively, the "Assumed
Liabilities"):
(a) The obligations of Seller
under and pursuant to the terms and conditions of the Preneed
Agreements, including any contracts associated therewith as well as
all Services in Progress, as defined below, but excluding
obligations under any Preneed Agreements not
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disclosed in Schedules 7 and/or 8 to Exhibit A unless such
undisclosed Preneed Agreements are properly funded (by trust funds,
insurance or otherwise) to legally required levels which will
become available to Buyer upon Servicing thereof ("Undisclosed
Preneed Obligations"); and
(b) The obligations of the
Business under and pursuant to the terms and conditions of those
contracts included in Schedule 5 to Exhibit A to this
Agreement.
The assumption by the Buyer of the
Assumed Liabilities shall not enlarge any rights or remedies of any
third parties under any contracts or arrangements with the Seller.
Nothing herein shall prevent the Buyer from contesting in good
faith any of the Assumed Liabilities, but such right to contest
shall not affect Buyer’s obligation to indemnify Seller from
the Assumed Liabilities, as set forth herein.
Section 1.5.
Limitations on Assumption . Notwithstanding Section 1.4
above, the Buyer will not assume and does not agree to pay or
discharge any obligations or liabilities of the Seller not
specifically included in the Assumed Liabilities and, in
particular, Buyer shall not assume or agree to pay or discharge any
of the following:
(a) any notes or accounts
payable of any kind, regardless of whether entered into in the
ordinary course of the Business;
(b) any federal, state or
local tax of any type, whether arising by reason of the sale of the
Assets (except as otherwise set forth herein) or by operation of
the Business prior to the Effective Time;
(c) any losses, costs,
damages or expense based upon or arising from any claims,
litigation, legal proceedings or other actions against the Seller
or the Business, whether asserted or unasserted, known or unknown,
based upon any set of facts occurring prior to the Effective Time,
including but not limited to litigation (if any) disclosed on
Exhibit A hereto;
(d) the liabilities and
obligations under any warranties to customers with respect to goods
or products sold or services provided by the Seller or the Business
prior to Effective Time;
(e) all personal injury,
product liability claims, claims of environmental damage, claims of
hazards to health, strict liability, toxic torts, enforcement
proceedings, cleanup orders and other similar actions or claims
instituted by private parties or governmental agencies, with
respect to the conduct of the Business by and operations of the
Seller prior to the Effective Time;
(f) all wages, salaries,
compensation, employment taxes and employee benefit costs arising
and accrued prior to the Effective Time;
(g) Undisclosed Preneed
Obligations; and
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(h) any other liability or
obligation not specifically included within the Assumed
Liabilities.
Section 1.6.
Prorations; Services in Progress; Transaction Taxes .
(a) At Closing, real and
personal property taxes, as well as rents under leases and utility
bills, and payments under the contracts included in Assumed
Liabilities, shall be prorated as of the Effective Time, the Seller
being charged and credited for all of same up to such date and
Buyer being charged and credited for all of same on and after such
time.
(b) All revenues from and
direct costs for merchandise paid to third parties associated with
Services in Progress will be allocated to the Buyer. For purposes
of this Agreement, "Services in Progress" means any "at need"
funeral or cemetery related services (including preneed maturities)
for which a contract has been entered into, but which has not been
Serviced, as of the Effective Time. For purposes of this Agreement,
a funeral or cemetery related service is deemed "Serviced" when the
body or remains have been cremated or interred. Seller shall
account to Buyer for the amount of any cash or other payments
received by it for Services in Progress. Buyer shall be responsible
for the delivery of any merchandise remaining after Closing to be
delivered under Serviced contracts, whether preneed or at-need, but
shall be entitled to all trust withdrawals associated with that
merchandise.
(c) Seller shall pay all
transfer taxes, and Buyer shall pay all sales taxes, deed stamps
and the like, in each case that arise directly as a result of the
transactions provided for in this Agreement.
Section 1.7.
Allocation of Purchase Price . The parties agree that the
Purchase Price shall be allocated among the categories of Assets as
set out in Exhibit B to this Agreement, for all accounting and
tax purposes, and that they shall not take any position
inconsistent therewith without the other party’s prior
consent.
Section 1.8.
Effective Time . The "Effective Time" of the transfer of the
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
Seller, 1929 Allen Parkway, Houston, Texas 77019, at 11:00
o’clock a.m. on the later to occur of
(i) February 7, 2007, or (ii) the fifth business day
following the later to occur of (x) the date that all
Regulatory Approvals are obtained for Buyer’s acquisition of
the Business, as described in Section 6.5, or (y) the
date on which Buyer
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receives from Seller its Seller Joinder and from SCI California
the Guaranty, under "Terms of Contingency" above (the "Closing
Date"), or at such other location, time and date as the parties
shall mutually agree, but in no event later than March 15,
2007 ("Outside Closing Date"). 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 warranty deeds, bills of sale,
endorsements, lease and other assignments, motor vehicle
registrations, internet domain name transfers, and other good and
sufficient instruments of transfer, conveyance and assignment, in
form reasonably satisfactory to Buyer, as shall be effective to
vest in Buyer good and marketable title to the Assets.
Seller’s warranty of title under such deeds shall extend back
to the date of acquisition of the Real Property by Seller and any
predecessor-in-interest that is or was affiliated with SCI Parent,
Alderwoods Parent or The Loewen Group, Inc., but not before. Both
Seller and Buyer shall execute and deliver such other documents and
pay such expenses as called for by this Agreement or which are
usual and customary and which are necessary to close the
transaction provided for herein. Seller shall take all such steps
as may be reasonably required to put Buyer in actual possession and
control of the Assets and the Business as of the Closing.
ARTICLE III
Representations and Warranties by
Seller
Seller hereby represents and
warrants to Buyer as follows:
Section 3.1.
Organization; Standing; Authorization; Capacity.
(a) Seller is a corporation
duly organized, validly existing and in good standing under the
laws of the State of California, with all requisite corporate power
and authority to own and to conduct the Business as it is now being
conducted. By the 15 th
day after the later of (i) the date of this
Agreement or (ii) the Alderwoods Merger Closing Date (the
"Approval Date"), the execution, delivery and performance of this
Agreement by Seller shall have been duly and effectively authorized
by the board of directors of Seller, and no further action or other
authorization or consent is required. Seller shall take all
commercially reasonable actions necessary to obtain such board
authorization by the Approval Date, and shall provide written
evidence thereof to Buyer by the Approval Date. This Agreement has
been duly executed and delivered by Seller, and subject to the
contemplated board authorization referenced above,
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constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
(b) Neither the execution or
delivery of this Agreement by Seller nor consummation of the
transactions contemplated hereby will result in a breach, violation
or default by Seller of or under any judgment, decree, mortgage,
agreement, indenture or other instrument or agreement, rule,
regulation or statute applicable to Seller or to which Seller is a
party or by which Seller, the Business or any of the Assets are
bound.
Section 3.2.
Financial Information . The income and expense statements
for each business location comprising the Business for the twelve
months ended December 31, 2003, 2004 and 2005, and for the six
months ended June 30, 2006, as well as the reports of cemetery
acreage, space sales (units) and property inventory at the
Business, copies of all of which are provided hereto as a part of
Exhibit C, fairly present and accurately reflect in all
material respects the results of operations of each such location
for the periods then ended and the acreage, units and inventory of
the Business as of the dates shown on such reports. However, such
income and expense statements historically have been prepared for
in house use only, and not for publication, and do not include
inter-company items, adjustments and other items required in
statements prepared in accordance with generally accepted
accounting principles. Expenses for merchandise and other items
reflected in the income and expense statements may be less than
those available to Buyer for the same items. Except to the extent
disclosed in this Agreement and such financial statements, there is
no liability or obligation (whether accrued, absolute, contingent
or otherwise) which is or might become an obligation of or Lien
against any Business or any of the Assets.
Section 3.3. Tax
Matters .
(a) Seller has (separately,
or as a part of a consolidated group) filed all federal, state and
local income, sales, ad valorem, intangible, franchise tax and
employee benefit plan returns/reports which are required to be
filed by it with respect to the Business as of the Effective Time,
and has reported all taxable income and loss, and paid all taxes
required to be paid or taxes due pursuant to any assessment
received by Seller, including both penalties and interest.
(b) Seller has properly
withheld from employees’ compensation all taxes required to
be withheld by it and has timely remitted all such withholdings to
the proper taxing authorities.
(c) All amounts received by
Seller on sales by the Business which are required under applicable
state law to be trusted have been deposited in trust, and all
federal, state and local
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income tax returns and information returns required to be filed
concerning such trusts and the income from such trusts have been
filed.
Section 3.4.
Rights of Third Parties . Other than as disclosed in
Schedule 5 to Exhibit A to this Agreement or included
within the Permitted Encumbrances (as provided for in
Section 7.2 of this Agreement), no third party has any lease,
license, easement, or agreement or other right, recorded or
unrecorded, arising by law or otherwise, giving such third party
any right or interest to use, occupy or possess any real or
personal property of Seller included in the Assets.
Section 3.5. Title
to Assets . Seller has good and marketable title to all of the
Assets, subject to no Lien, except for Permitted Encumbrances. All
assets, rights and properties presently used in the conduct of the
Business are owned or validly leased by Seller and are included
within the Assets (except for the Excluded Assets described in
Section 1.2). The Seller is in actual possession and control
of all properties owned or leased by it which are presently used in
the conduct of the Business.
Section 3.6.
Description of Properties, Contracts and Personnel Data . On
or before the third business day preceding the Closing Date, the
following Schedules to Exhibit A to this Agreement shall be
delivered by Seller to Buyer on a compact disk, which delivery
shall constitute Seller’s certification that such Schedules,
which shall thereupon be incorporated herein by reference, conform
to the requirements of this Agreement. Each such Schedule shall set
forth true and complete information as to the matters described
below, all as of the date of such delivery, unless otherwise
indicated thereon (but in no event shall any information be as of a
date more than sixty (60) days prior to the Closing Date).
Items appropriately disclosed on one Schedule (or Exhibit) need not
also be disclosed on any other Schedule (or Exhibit), provided,
however, that the relevance or applicability of disclosure as to
each other Schedule is reasonably apparent; and by way of example,
any reference to "lease" in regard to vehicles on Schedule 3
to Exhibit A shall not mean that Buyer is thereby assuming or
taking subject to any such lease obligations.
(a) Real Property –
Schedule 1 to Exhibit A . A legal description of all
real property included in the Assets and a copy of each real
property lease included in the Assets.
(b) Equipment, Machinery,
Furniture, Etc. – Schedule 2 to Exhibit A . A
list of all major items of equipment, machinery, furniture and
fixtures, whether owned or leased, included in the Assets.
(c) Automobile Equipment
– Schedule 3 to Exhibit A . A list of all
automobiles, trucks, and other vehicles included in the Assets.
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(d) Merchandise Inventory
– Schedule 4 to Exhibit A . A description of
the merchandise inventory included in the Assets.
(e) Contracts –
Schedule 5 to Exhibit A . A list of all contracts,
agreements and commitments of Seller or the Business included in
the Assets, including without limitation lease agreements covering
items described in these Schedules and all outstanding no-compete,
employment, consulting, confidentiality and other similar
agreements with current and former employees, consultants and
owners, as well as the Business’s cemetery rules and
regulations (if not otherwise obtained by [as confirmed by Buyer in
writing] or delivered by Seller to Buyer prior to Closing), all as
amended and then in effect, which list includes copies of all such
documents. Contracts for interment rights and funeral and/or
cemetery merchandise or services will not be included in this
Schedule.
(f) Personnel –
Schedule 6 to Exhibit A . A list of the names,
position, date of hire and current annual salary or hourly salary
rate for each employee of the Business.
(g) Preneed Insurance
Policies – Schedule 7 to Exhibit A . A list of
all insurance policies used to fund Preneed Agreements, including
(where available) policy number, insured and owner names, issue
date, face amount of insurance, and other data normally included in
Seller’s internal records in a compilation of insurance
policies.
(h) Preneed Trust Funds
– Schedule 8 to Exhibit A . A list of all
uninsured Preneed Agreements included in the Assets, including
contract number and/or customer name, sale date, contract price and
other data normally included in Seller’s internal records in
a compilation of Preneed Agreements. Also, the trust liability (or
similar) report for each trust account relating to the Business,
indicating the location of each and the amount held in trust, with
detail (where available) of principal, income or earnings,
withdrawals and outstanding balance, and whether or not included in
a commingled trust; copies of the trust agreements, as amended and
currently in effect (for only those trusts which will be continued,
and not replaced or substituted for, by Buyer); and copies of the
most recent date available bank statements or other periodic report
of the Trustee for each trust, and the audit or other reports
furnished to or prepared by the state regulatory agency which
oversees such trusts.
(i) Accounts Receivable
– Schedule 9 to Exhibit A . A list of all
accounts and notes receivable included in the Assets.
Section 3.7.
Litigation . Except as disclosed to the Buyer in
Schedule 10 to Exhibit A (if any exists) and except for
any Decision and Order issued by the Federal Trade Commission
("FTC") in connection with the Alderwoods Transaction ("Decision
and Order"), there are no
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claims, actions, suits, proceedings or investigations pending
or, to the knowledge of the Seller, threatened against or affecting
the Seller (with respect to the operation of the Business) or any
of the Assets, at law or in equity or before or by any court,
governmental body or arbitration panel, except for any such claim,
action, suit, proceeding or investigation which would not,
individually or in the aggregate, have an adverse effect on the
business, operations or (in Seller’s reasonable judgment)
prospects of the Business (taken as a whole) or any substantial
portion of the Assets, 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 the Assets or the Business.
Section 3.8. Court
Orders and Decrees . Except as disclosed to the Buyer in
Schedule 10 to Exhibit A and except for any Decision and
Order, there is not outstanding or, to the knowledge of Seller,
threatened any order, writ, injunction or decree of any court,
governmental agency or arbitration tribunal against or affecting
Seller, relating to the Assets or the Business.
Section 3.9. Trade
Names . Seller has the legal right and title to use the Trade
Names in all trade areas in which the Business conducts business.
To Seller’s knowledge, neither the Trade Names (as they are
used in the trade areas in which the Business conducts business)
nor any other intellectual property included in the Assets
infringes upon the intellectual property rights of any other
person, and no other person is infringing upon the Trade Names (as
they are used in the trade areas in which the Business conducts
business) or other intellectual property rights included in the
Assets.
Section 3.10.
Contracts and Leases . All contracts, agreements, leases and
commitments included in the Assets are in good standing and in full
force and effect, valid and enforceable in accordance with their
respective terms, and neither the Seller, nor, to the knowledge of
the Seller, any of the other parties thereto (but specifically
excluding customer/purchaser obligations under Preneed Agreements),
are in default thereunder or breach thereof.
Section 3.11.
Preneed and Trust Accounts . All funds received by the
Business under or in connection with Preneed Agreements, as well as
all funds designated for endowment or perpetual care, have been
deposited on a timely basis in appropriate accounts and/or
insurance contracts to the extent required by applicable laws and
regulations and have been administered and reported in accordance
with the terms of agreements with the purchasers, under applicable
trust agreements, and as required by applicable laws and
regulations. All Preneed Agreements and endowment or perpetual care
obligations are funded by trust or insurance products; no preneed
liability is covered by bond, letter of credit or other similar
credit support.
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Section 3.12.
Licenses and Continuation of the Business . Seller and all
personnel at the Business who are engaged in licensed activity are
in possession of all licenses, permits, certificates of occupancy
and authorizations which under all applicable laws, regulations,
rules and ordinances are necessary to enable Seller to own and
operate the Business as the same is now being conducted, and all of
the same are in full force and effect.
Section 3.13.
Compliance with Laws . The Business is currently being (and
until the Closing will be) operated in compliance with all federal,
state, municipal and other statutes, rules, ordinances and
regulations applicable to the Business and the Assets, except for
any such noncompliance which would not, individually or in the
aggregate, have a material adverse effect on the condition,
business, operations or (in Seller’s reasonable judgment)
prospects of the Business or any substantial portion of the
Assets.
Section 3.14.
Environmental Matters . The Business is presently being
operated in compliance in all material respects with all applicable
federal, state, and local environmental statutes and regulations,
and to Seller’s knowledge, there is no existing regulatory
requirement with a future compliance date that will require
material operational changes or material capital expenditures at
the facilities of the Business. Since the date that the Business
was acquired by Seller or its predecessor affiliated with SCI
Parent or Alderwoods Parent (the "Acquisition Date"), no "hazardous
substance," as that term is defined in the federal Comprehensive
Environmental Response, Compensation and Liability Act, no
petroleum or petroleum products and no "solid waste," as that term
is defined in the Federal Resource Conservation and Recovery Act,
has been leaked, spilled, deposited or otherwise released, on the
Real Property. Any such substances that have been generated or used
on or about the Real Property since the Acquisition Date have been
used, managed and disposed of in accordance with all environmental
laws.
Section 3.15.
Accounts Receivable . At Closing the accounts receivable to
be included within the Assets will be valid and legally enforceable
obligations of the account parties whose names are listed in the
books and records of the Business, legally (but not necessarily
financially) collectible in accordance with their terms, subject to
bankruptcy, insolvency, moratorium, or other similar laws affecting
creditors’ rights generally.
Section 3.16.
Absence of Changes or Events . Since June 30, 2006, the
Business has been operated in the ordinary course and, without
limiting the generality of the foregoing, there has not been:
(a) any material adverse
change in the condition, operations, properties or (in
Seller’s reasonable judgment) prospects of the Business,
taken as a whole;
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(b) any material damage,
destruction or losses against the Business or any waiver of any
rights of material value to the Business, taken as a whole;
(c) any claim or liability
for any material damages for any actual or alleged negligence or
other tort or breach of contract against or affecting the Business;
or
(d) any transaction or event
entered into or affecting the Business other than in the ordinary
course of the business.
Section 3.17. Full
Disclosure . The representations and warranties made by the
Seller hereunder or in any Schedules or certificates furnished to
the Buyer pursuant hereto, do not and will not contain any untrue
statement of a material fact.
Section 3.18.
Transfer of Assets . On the Closing Date, Seller will convey
to Buyer all of the assets that Seller is required to transfer to
Buyer pursuant to any Decision and Order, and Seller shall have
obtained all approvals and consents necessary to make such
transfer.
Section 3.19. 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 as follows:
Section 4.1.
Authority.
(a) Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas, duly qualified to transact business as
a foreign corporation within the State of California, and with all
requisite corporate power and authority to own and conduct the
Business as it is now being conducted. By the Approval Date, the
execution, delivery and performance of this Agreement by Buyer
shall have been duly authorized and consented to by the board of
directors of Buyer and no other or additional consent or
authorization is required by law. Buyer shall take all commercially
reasonable actions necessary to obtain such board authorization by
the Approval Date, and shall provide written evidence thereof to
Seller by the Approval Date. The Closing of the transaction
contemplated by this Agreement will not result in a breach,
violation or default by Buyer of or under any judgment, decree,
mortgage, agreement, indenture or other instrument applicable to
Buyer.
(b) This Agreement has been
duly executed and delivered by Buyer, and subject to the
contemplated board authorization referenced above, constitutes the
valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
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Section 4.2.
Adequacy . Buyer acknowledges that the Assets and the
intellectual property to be transferred pursuant to this Agreement
will enable Buyer to operate the Business and that no other assets
are needed from Seller to do so.
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.
ARTICLE V
Covenants
Section 5.1.
Buyer’s Access to Website . Prior to the Closing,
Seller shall electronically post online all, or nearly all, of the
contents of Exhibit A and Exhibit C to this Agreement at
https://dre103606.bmcgroup.com/Login.aspx?
ReturnUrl=%2fDefault.aspx (the "Website") in order to permit
Buyer to timely conduct its due diligence of the Business. Seller
will periodically update such Exhibits and Schedules to this
Agreement as updated information is available and will post all of
such Exhibits and Schedules and updates thereto on the Website. The
final versions of such Exhibits and Schedules, as they exist on the
Closing Date, will be delivered by Seller to Buyer at least three
business days prior to Closing as contemplated in Section 3.6
above, and the same shall supersede any disclosures made on the
Website.
Section 5.2.
Access to Business . From and after the date of this
Agreement, Seller will give Buyer and its representatives full and
free access to all on-site properties, books and records of the
Business and to its personnel, so that Buyer may have full
opportunity to make such investigation as it shall desire to make
of the affairs of the Business and the Assets, provided that such
investigation shall not unreasonably interfere with the operations
of the Business. Such access shall include the opportunity to
interview employees of the Business and to inspect the personnel
files and other documentation relating to any such employee, to the
extent permissible under applicable laws.
Section 5.3.
Conduct of Business Pending Closing . From and after the
date of this Agreement and pending the Closing and except as
otherwise permitted by this Agreement or as consented to by Buyer
in writing, Seller covenants that:
(a) Seller will conduct the
Business only in the ordinary course which, without limitation,
shall include compliance in all material respects with all
applicable laws and regulations, and the maintenance in force of
all insurance policies;
(b) Seller shall preserve its
business organization intact and use commercially reasonable
efforts to maintain for the Business the goodwill of suppliers,
customers and others having business relations with the Business;
and
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(c) Seller shall not
(i) commit any act or permit the occurrence of any event or
the existence of any condition of the type described in
Section 3.16; (ii) alter, amend, cancel or modify in any
respect any of the contracts, leases and commitments included in
the Assets, or the standard form of, and terms and conditions
applicable to, Preneed Agreements; (iii) sell or otherwise
dispose of any of the assets required to be
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