EXHIBIT 10.35
THIRD DEBT RESTRUCTURING AGREEMENT
This Agreement is entered into as of August 6, 2001 by and between Neptune
Society of America, Inc. (formerly known as Lari Acquisition Company, Inc.)
("Neptune America"), The Neptune Society, Inc. (formerly known as Lari Corp.)
("Neptune"), Xxxxxxx Xxxxxxxxx ("Xxxxxxxxx") and the Xxxxxxx Xxxxxxxxx Inter
Vivos Trust (the "Xxxxxxxxx Trust"):
WHEREAS:
1. Neptune America has certain existing obligations under a promissory note
issued pursuant to a credit sale in the original principal amount of
$19,000,000 dated March 31, 1999 and amended by an agreement dated August
1, 1999 executed by Neptune America, the Xxxxxxxxx Trust, Xxxxxxxxx,
Xxxxxxx Xxxxxxx, Xxx Xxxxxx Xxxxxx and Neptune and again amended by a Debt
Restructuring Agreement dated as of July 14, 2000 and a Second Debt
Restructuring Agreement dated as of June 19, 2001 (the "Second Debt
Restructuring Agreement"), each executed by Neptune America, the Xxxxxxxxx
Trust, Xxxxxxxxx and Neptune (the "$19 Million Note");
2. Neptune, Neptune America and the Xxxxxxxxx Trust entered into an amendment
to amended the $19 Million Note on June 19, 2001 (the "Third Amendment");
3. The $19 Million Note is secured by a security agreement dated March 31,
1999 between those parties listed on the attached Schedule "A" (the
"Lenders"), Neptune America, Neptune Management Corp. ("Neptune Corp."),
Neptune Pre-Need Plan, Inc. ("Neptune Pre-Need") and Heritage Alternatives,
Inc. ("Heritage") as amended by the Debt Restructuring Agreement dated as
of July 14, 2000 (the "Security Agreement");
4. The $19 Million Note was issued by Neptune America, inter alia, pursuant to
a Share Purchase Agreement dated March 26, 1999 between Neptune America,
the Xxxxxxxxx Trust, Xxxxxxxxx, Neptune Corp., Neptune Pre-Need, Heritage
and Neptune (the "Share Purchase Agreement");
5. On August 1, 2001 and pursuant to a letter of equal date delivered by
counsel for Xxxxxxxxx and the Xxxxxxxxx Trust (the "Xxxxxxxxx Letter"),
Neptune and Neptune America made a cash payment in the amount of $523,622
to the Xxxxxxxxx Trust, consisting of $500,000 toward the principal payment
under the $19 Million Note and accrued interest in the amount of $23,622,
and agreed to the terms and conditions set forth in this Agreement as
consideration for restructuring Neptune America's obligation under the $19
Million Note, as amended;
6. Neptune and Neptune America also paid the Xxxxxxxxx Trust $15,000 on August
2 1, 2001 and agreed to issue to Xxxxxxxxx'x designees the aggregate amount
of 10,000
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shares of Neptune Common Stock on or before August 7, 2001 as consideration
for extending the time in which the conditions to the Second Debt
Restructuring Agreement and the $19 Million Note, as amended, must be
satisfied, to August 7, 2001;
7. The remaining obligation due under the $19 Million Note, as amended by the
Third Amendment, is a principal payment in the amount of $4,224,398.60,
$1,862,199.30 of which is payable to the Xxxxxxxxx Trust on or before
August 7, 2001 under the terms of the Xxxxxxxxx Letter and the balance of
which is payable on January 1 2, 2002;
8. Xxxxxxxxx is a beneficiary of the Xxxxxxxxx Trust;
9. Neptune America wishes to restructure its obligations under the $19 Million
Note and the Xxxxxxxxx Trust has agreed to same;
10. Neptune America, Neptune and the Xxxxxxxxx Trust are concurrently entering
into an amendment of the $19 Million Note (the "Fourth Note Amendment");
and
11. Neptune America, Neptune, their affiliates and subsidiaries (the "Neptune
Entities") have agreed to provide certain consideration to Xxxxxxxxx and
the Xxxxxxxxx Trust in exchange for their agreement to modify Neptune
America's obligations to them. It is acknowledged and agreed by the parties
that the execution of this Agreement by Neptune America and Neptune shall
bind the Neptune Entities to any obligations hereunder.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
warranties and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree with each other
as follows:
1. Neptune America agrees to reimburse Xxxxxxxxx and the Xxxxxxxxx Trust for
all reasonable fees and out-of-pocket costs incurred by them in connection
with and related to the negotiation and documentation of this Agreement and
any ancillary agreements and instruments. Neptune America agrees and
acknowledges that Xxxxxxxxx and the Xxxxxxxxx Trust shall determine, in
their sole discretion, whether such fees and costs are reasonable, and
Xxxxxxxxx and the Xxxxxxxxx Trust agree to exercise such discretion in good
faith. Neptune America shall deposit in advance and in trust with
Xxxxxxxxx'x attorneys, Xxxxx & Flugge, LLP, such sums as Xxxxxxxxx and the
Xxxxxxxxx Trust reasonably believe necessary to pay such reasonable fees
and costs (the "Advanced Costs") and Xxxxx & Xxxxxx, LLP is authorized to
pay such reasonable fees and out-of-pocket costs upon instruction from
Xxxxxxxxx and the Xxxxxxxxx Trust. Neptune shall pay any reasonable fees
and costs not covered by the Advanced Costs not later than 10 days after
delivery by Xxxxxxxxx, the Xxxxxxxxx Trust or their attorneys of the
invoice reflecting the incurrence of such fees and costs. The obligation to
reimburse these fees and costs
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shall be deemed to be a secured obligation under the Security Agreement,
and the failure to pay such fees and costs in a timely manner shall
constitute a default under the Security Agreement.
2. Xxxxxxxxx and the Xxxxxxxxx Trust acknowledge that Neptune America paid
$500,000 toward the principal balance and $23,622 in accrued interest due
under the $19 Million Note on August 1, 2001.
3. Xxxxxxxxx and the Xxxxxxxxx Trust acknowledge that Neptune America paid the
Xxxxxxxxx Trust $15,000 on August 1, 2001 as partial consideration for
extending the obligations under the $19 Million Note and the Second Debt
Restructuring Agreement until August 7, 2001.
4. In addition to the balance of the payments due under the $19 Million Note
and the Second Debt Restructuring Agreement, Neptune America agrees to (i)
to issue to Xxxxxxxxx'x nominees, on or before August 7, 2001, the
aggregate amount of 10,000 shares of Neptune Common Stock (the "Extension
Shares"); (ii) to issue to Xxxxxxxxx'x nominees, on or before August 15,
2001, the aggregate amount of 15,000 shares of Neptune Common Stock (the
"Consideration Shares"); and (iii) to pay the Xxxxxxxxx Trust, on or before
January 2, 2002, an additional cash payment of $35,000.
Xxxxxxxxx will cause his nominees to acknowledge and agree that the
Extension Shares and the Consideration Shares have not been and will not be
registered under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state, and are being issued to Xxxxxxxxx'x nominees
in reliance upon an exemption from such registration requirements. In
connection therewith, Xxxxxxxxx will cause his nominees to represent and
warrant to Neptune and Neptune America as set forth on Schedule B hereto,
prior to the delivery of the Extension Shares and the Consideration Shares.
In the event that, on or before January 2, 2002, Neptune and/or Neptune
America enters into a written agreement involving the acquisition of
Neptune and /or Neptune America, whether by merger, sale of assets or
consolidation, Neptune will use reasonable efforts to provide the Xxxxxxxxx
Trust, at the Xxxxxxxxx Trust's sole option and in the Xxxxxxxxx Trust's
sole discretion, an election to convert all or any portion of the remaining
principal amount due under the $19 Million Note into common shares of the
acquirer. Such conversion, if any, shall be made at the closing price of
the acquirer's common shares on the day prior to the date of the public
announcement of such proposed acquisition, and, at the election of the
Xxxxxxxxx Trust, may be made effective as of the day prior to the closing
date of such acquisition.
5. This Agreement and the Fourth Note Amendment shall not become effective
until and are expressly conditioned upon the occurrence of each of the
following on or
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before August 7, 2001: (i) the payment of $1,500,000 to the Xxxxxxxxx
Trust; and (ii) the delivery of the Extension Shares to Xxxxxxxxx'x
nominees (in care of Xxxxxxxxx); and (iii) the delivery to Xxxxxxxxx of an
agreement executed by CapEx, in a form acceptable to Xxxxxxxxx'x counsel,
acknowledging and agreeing that the obligation to the Xxxxxxxxx Trust
remains in a first secured position.
6. After Neptune makes the payment of $1,500,000 to the Xxxxxxxxx Trust on or
before August 7, 2001, the remaining balance due under the $19 Million Note
may not be pre-paid by Neptune prior to January 2 1, 2002, without the
expressed written consent of the Xxxxxxxxx Trust.
7. Neptune and Neptune America, as a material inducement to Xxxxxxxxx and the
Xxxxxxxxx Trust to enter into this Agreement, acknowledge and agree that as
of the date of this Agreement Neptune and Neptune America are not entitled
to set-off any amounts owing to Xxxxxxxxx or the Xxxxxxxxx Trust, pursuant
to the Share Purchase Agreement by reason of any claims against Xxxxxxxxx,
the Xxxxxxxxx Trust or their respective assigns, successors, heirs,
brokers, attorneys, accountants or agents, including specifically, without
limitation, any alleged right of set-off by reason of the settlement of the
Leneda litigation whch may be concluded pursuant to the mediation held
before the Hon. Xxxxxxx Xxxxxx (Xxx.) on August 3, 2001 whether or not that
settlement is concluded prior to or after the date of this Agreement.
8. Time shall be of the essence with respect to the performance of all
obligations under this Agreement.
9. Each of the parties hereto agrees promptly to do, make, execute, deliver or
cause to be done, made, executed or delivered at their own expense all such
further acts, documents and things as the other party hereto may reasonably
require for the purpose of giving effect to this Agreement.
10. This Agreement may be executed in any number of counterparts, each of which
when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or
telecopied copy of this Agreement shall be effectual and valid proof of
execution and delivery. This Agreement shall not be effective unless and
until it is signed by each of the parties hereto.
11. Except as expressly herein amended, this Agreement does not modify, amend
or supersede any of the existing obligations between Neptune, Neptune
America, Xxxxxxxxx and the Xxxxxxxxx Trust.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
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NEPTUNE SOCIETY OF AMERICA, INC.
Per: [Illegible]
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Authorized Signatory
THE NEPTUNE SOCIETY, INC.
Per: [Illegible]
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Authorized Signatory
XXXXXXX XXXXXXXXX INTER VIVOS TRUST
Per: [Illegible]
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Xxxxxxx Xxxxxxxxx, Trustee
[Illegible]
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XXXXXXX XXXXXXXXX
Representations and Warranties
The undersigned (collectively, the "Purchaser") in connection with the
acquisition of the Consideration Shares pursuant to the Agreement hereby make
the following representations and warranties to Neptune (the "Company"):
1. The Purchaser represents and warrants that he, she, or it is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
promulgated under the Act.
2. The Purchaser represents and warrants that he, she or it is acquiring
the Consideration Shares solely for Purchaser's own account for investment and
not with a view to or for sale or distribution of such securities or any portion
thereof and without any present intention of selling, offering to sell or
otherwise disposing of or distributing such securities or any portion thereof in
any transaction other than a transaction complying with the registration
requirements of the Act, and applicable state securities or "blue sky" laws, or
pursuant to an exemption therefrom. Purchaser also represents that the entire
legal and beneficial interest of the Consideration Shares is being acquired for,
and will be held for, Purchaser's account only, and neither in whole nor in part
for any other person or entity.
3. The Purchaser acknowledges that he, she or it has received all such
information as Purchaser deems necessary and appropriate to enable him, her or
it to evaluate the financial risk inherent in making an investment in the
Consideration Shares. Purchaser further acknowledges that Purchaser has received
satisfactory and complete information concerning the business and financial
condition of the Company in response to all inquiries in respect thereof.
4. The Purchaser alone, or with the assistance of professional advisors,
has such knowledge and experience in financial and business matters that the
undersigned is capable of evaluating the merits and risks of Purchaser's
acquisition of the Consideration Shares, or has a pre-existing personal or
business relationship with the Company or any of its officers, directors, or
controlling persons of a duration and nature that enables the undersigned to be
aware of the character, business acumen and general business and financial
circumstances of the Company or such other person.
5. The Purchaser acknowledges that the Company has hereby disclosed to
Purchaser in writing:
(a) The Consideration Shares have not been registered under the Act, or
the securities laws of any state of the United States, and such
securities must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such
registration is available; and
(b) The Company will make a notation in its records of the above-described
restrictions on transfer and of the legend described below.
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT."
Dated: ------------------------------
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