AGREEMENT AND PLAN OF MERGER
by and among
ROSES, INC.,
THE STOCKHOLDERS OF ROSES, INC.
and
TUDOR ACQUISITION CORP.
Dated: September , 1996
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this
"Agreement"), dated as of September , 1996 by and among Roses, Inc., a
California corporation (the "Company"), the Stockholders of the Company as
listed on Exhibit A hereof (the "Stockholders") and Tudor Acquisition Corp., a
Delaware corporation ("Acquisition").
RECITALS
A. The Company is the sole shareholder of Rose Hills Mortuary,
Inc., a California corporation (the "Mortuary"), and the Mortuary is the sole
general partner, and the Company is the only limited partner, of Rose Hills
Mortuary, L.P., a Delaware limited partnership (the "Partnership"), with all
such entities doing business under the names "Rose Hills Company", "Rose Hills
Mortuary" and "Rose Hills Insurance Services" and being engaged in the mortuary
business and the cemetery management business.
B. The Stockholders are the holders of 100% of the issued and
outstanding shares of Common Stock of the Company (the "Shares").
C. The Board of Directors of Acquisition and the Board of
Directors of the Company each has determined that it is in the best interests of
their respective stockholders for Acquisition to acquire the Company upon the
terms and subject to the conditions set forth herein.
AGREEMENT
In consideration of the representations, warranties, covenants
and agreements contained herein, the Company, the Stockholders and Acquisition
hereby agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3) Acquisition shall
be merged with and into the Company and the separate corporate existence of
Acquisition shall thereupon cease (the "Merger"). The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of California. The Surviving Corporation shall have the name "Rose Hills,
Inc." and shall succeed, without other transfer, to all of the rights and
properties of Acquisition and shall be subject to all of the debts and
liabilities of Acquisition in the same manner as if the Company had itself
incurred them. The corporate existence, franchises and rights of the Company,
with its purposes, powers and objects, shall continue unaffected and unimpaired
by the Merger, and the Company shall succeed to and be fully invested insofar as
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permitted by law and not otherwise expressly provided for herein, with the
corporate existence, identity and all rights, franchises, assets, liabilities
and operations of Acquisition. The Merger shall have the effects specified in
both the Delaware General Corporation Law (the "DGCL") and the California
General Corporation Law (the "CGCL").
1.2 Closing. The closing of the Merger (the "Closing" or the
"Closing Date") shall take place (i) at the offices of Xxxxxx & Xxxxxxx, 000
Xxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at 9:00 a.m., Los Angeles
time, on November 26, 1996, or as promptly as practicable thereafter following
the satisfaction of the conditions set forth in Sections 7.1(b), 7.2(b) and
7.1(o) (and subject to the other conditions of Article VII), provided, that any
deferral of the Closing Date beyond November 26, 1996 shall not affect the
Company's or the Stockholders' rights under Section 8.6 to draw upon the Letter
of Credit in accordance with its terms, and provided further, that any deferral
of the Closing Date beyond December 13, 1996 shall not affect any party's rights
to terminate this Agreement pursuant to Section 8.2 or, at Acquisition's
election, in its sole and absolute discretion and without further cost, expense
or other consideration, on a date not later than December 13, 1996 (provided,
however, that any such extension shall not affect the Company's or the
Stockholders' rights under Section 8.6 to draw upon the Letter of Credit in
accordance with its terms,), or (ii) at such other place and time and/or on such
other date as the Company and Acquisition may agree.
1.3 Effective Time. As soon as practicable following the
Closing, and provided that this Agreement has not been terminated pursuant to
Article VIII hereof, a certificate of merger (the "Certificate of Merger") in
substantially the form attached as Exhibit B hereto, shall be prepared in
accordance with the DGCL and the CGCL, and thereafter delivered to the Secretary
of State of the State of Delaware and to the Secretary of State of the State of
California for filing as provided in both the DGCL and the CGCL. The Merger
shall become effective upon the filing of the Certificate of Merger (together
with any other documents required by law to effectuate the Merger) with both the
Secretary of State of the State of Delaware and the Secretary of State of the
State of California or at such time thereafter as is provided in the Certificate
of Merger (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until duly amended in
accordance with the terms thereof and both the DGCL and the CGCL.
2.2 By-Laws. The By-Laws of the Company in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until duly
amended in accordance with the terms thereof and both the DGCL and the CGCL.
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ARTICLE III
DIRECTORS
3.1 Board of Directors of the Surviving Corporation. At the
Effective Time, each of the members of the Board of Directors of the Company
immediately prior to the Effective Time shall submit their resignations and,
concurrently with such resignations, the directors of Acquisition shall become
the directors of the Surviving Corporation, each to serve until their successors
have been duly elected and appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and By-Laws. The directors of Acquisition on the date hereof
and at the Closing are identified on Schedule 3.1 hereto.
3.2 Officers of the Surviving Corporation. Except as
contemplated under the terms of the Employment and Consulting Agreements to be
entered into at the Closing pursuant to Section 7.1(h) hereof, at the Effective
Time, each of the officers of the Company immediately prior to the Effective
Time shall submit their resignations and, concurrently with such resignation,
the officers of Acquisition shall become the officers of the Surviving
Corporation, each to serve until their successors have been duly elected and
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-Laws.
ARTICLE IV
CONVERSION AND CANCELLATION OF SHARES IN THE MERGER
4.1 Conversion and Cancellation of Shares. The manner of
converting and canceling shares of the Company and Acquisition in the Merger
shall be as follows:
(a) At the Effective Time, the aggregate of all shares of the
Common Stock of the Company (the "Shares") issued and outstanding
immediately prior to the Effective Time (other than shares owned by
Acquisition or any subsidiary of Acquisition (collectively, the "the
Acquisition Companies"), or Shares owned directly or indirectly by the
Company as treasury stock) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the
right to receive, without interest, the following consideration,
subject to adjustment as provided for in Section 4.1(b) below (the
"Merger Consideration"):
(i) $ million, less the sum of the cash
actually received by the Stockholders
and/or the Company prior to the Effective
Time from (x) the LOC Payment and (y) the
No Shop Payment (the "Cash Consideration");
and
[(ii) Up to $ million in the form of Xxxxxx
Shares (the "Equity Consideration")
consisting of that number of Xxxxxx Shares
which shall be equal to the greater of [A]
the result obtained by dividing the dollar
amount of the Merger Consideration to be
paid in Xxxxxx Shares by the average
(mathematical mean) of the last sale price
(regular way) of a share of Xxxxxx Stock
in the NASDAQ National Market System (or
on the United States stock exchange on
which
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Xxxxxx'x shares are then listed), as
reported in the Wall Street Journal, on each
of the twenty (20) consecutive trading days
commencing October 1, 1996 or [B] the dollar
amount of the Purchase Price to be paid in
Xxxxxx Shares divided by [$32].
(b) (i) The Cash Consideration shall be decreased by
an amount equal to the amount, if any, by
which Operating Capital on the Closing Date
is less than $180,000 (the "Adjustment").
For purposes of the calculations in this
Section 4.1(b)(i), each item comprising
Operating Capital shall be determined using
the same methodology as was used to
determine such item on the Interim Financial
Statements. The Adjustment shall consist of
an Interim Adjustment and a Post-Closing
Adjustment as set forth below:
(A) The Interim Adjustment shall be the
amount, if any, by which Operating
Capital is less than $180,000 on the
date of the most recently available
balance sheet (the "Pre-Closing
Balance Sheet") and shall reduce the
amount of the Cash Consideration
payable on the Closing Date. The
Company shall provide a copy of the
Pre-Closing Balance Sheet to the
Acquisition no later than five (5)
business days prior to the Closing
Date which shall serve as the basis
for the calculation of the Interim
Adjustment;
(B) The Post-Closing Adjustment shall be
the amount, if any, by which the
Adjustment exceeds the Interim
Adjustment. As promptly as
practicable but no later than thirty
(30) days after the Closing Date,
Acquisition shall cause to be
prepared a calculation of Operating
Capital as of the Closing Date (the
"Closing Date Calculation") which
shall serve as the basis for the
calculation of the Adjustment and
the Post-Closing Adjustment. Upon
the availability of the Closing Date
Calculation, Acquisition shall
deliver the Closing Date Calculation
to the Stockholders, together with a
certificate of the President and
Chief Financial Officer of
Acquisition to the effect that, to
the best of their knowledge, such
Closing Date Calculation is true and
correct and has been prepared in a
manner consistent with the Interim
Financial Statements. Within five
(5) days of delivering the Closing
Date Calculation, the Stockholders
shall pay Acquisition the Post-
Closing Adjustment, if any.
(C) In the event of any disagreement
concerning the Post-Closing
Adjustment, each party shall make
available to the other such books
and records as are relevant to such
disagreement and are in the
possession of such party, and the
parties shall work together in good
faith to resolve such disagreement.
The portion of the Post-Closing
Adjustment, if any, as to which the
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parties are unable to agree after
sixty (60) days shall be referred
for resolution to a nationally
recognized accounting firm, mutually
and reasonably acceptable to both
parties. The determination of such
third party, whose costs and
expenses shall be borne equally by
Acquisition and the Stockholders,
shall be final and determinative.
Upon such determination, the
Stockholders shall make any
additional payment required to be
made, together with interest thereon
at the rate set forth in Section
11.8 of this Agreement.
(ii) The Cash Consideration shall also be
decreased by an amount equal to (A) $200,000
(together with accrued interest thereon to
the Effective Date) and (B) the amount of
indebtedness for borrowed money (together
with accrued interest thereon to the
Effective Time and any prepayment penalties)
owed by the Company and its Subsidiaries on
the Closing Date to Xxxxx Fargo Bank, N.A.
or any other entity to which the Company
owes funded debt on such date, except for
indebtedness owed to the Association under
those certain promissory notes dated
and in the original
principal amounts of $1.2 million and
$835,000, respectively, and any amounts owed
by the Company to USL Capital Corporation
under those certain Master Lease Agreements
dated December 22, 1994 and August 28, 1996.
(iii) The Cash Consideration shall also be
decreased by the amount (if any) of any and
all fees and expenses incurred and unpaid by
the Company and its subsidiaries at the
Closing Date to brokers and finders,
attorneys, accountants, appraisers and other
professional advisors, including, without
limitation, O'Melveny & Xxxxx LLP, Grief &
Co., Xxxxxx Capital Group, LLC, U.S. Trust
Company of California, N.A., Xxxxxx Xxxxxxxx
& Company and Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
in connection with the transactions
contemplated by this Agreement and the
Association Asset Purchase Agreement or
other matters related to the relationship
between the Company and any of its
Subsidiaries and the Association.
(c) The LOC Payment, the No Shop Payment, the Equity
Consideration and the Cash Consideration shall be distributed pro rata
to each Stockholder in the proportion (the "Ownership Percentage") that
the number of Shares issued and outstanding in the name of each such
Stockholder immediately prior to the Effective Time bears to the total
number of Shares issued and outstanding immediately prior to the
Effective Time. For income tax purposes, the fair value of the Xxxxxx
Shares shall be the price of the Xxxxxx Shares in the NASDAQ National
Market System (or United States stock exchange on which it is then
traded) as of the Closing Date.
(d) At the Effective Time, all Shares, by virtue of the Merger
and without any action on the part of the holders thereof, shall cease
to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such
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Shares shall thereafter cease to have any rights with respect to such
Shares, except the right of holders (other than the Acquisition
Companies) to receive the Merger Consideration upon the surrender of
such certificate in accordance with Section 4.2.
(e) At the Effective Time, each Share owned directly or
indirectly by the Company as treasury stock and each Share issued and
outstanding at the Effective Time and owned by any of the Acquisition
Companies shall, by virtue of the Merger and without any action on the
part of the holder thereof, cease to be outstanding, shall be canceled
and retired without payment of any consideration therefor and shall
cease to exist.
(f) At the Effective Time, each share of Common Stock of
Acquisition issued and outstanding immediately prior to the Effective
Time shall remain outstanding and each certificate therefor shall
continue to evidence one share of Common Stock of the Surviving
Corporation.
4.2 Payment for Shares.
(a) Immediately prior to the Effective Time, Acquisition shall
deliver to such agent as is mutually acceptable to Acquisition and the
Company (the "Exchange Agent") the Merger Consideration specified in
Section 4.1(a) hereof (the Cash Consideration component of which shall
be delivered by means of a federal wire transfer of immediately
available funds). The Exchange Agent shall hold and disburse the Merger
Consideration pursuant to the terms hereof and the terms of an Exchange
Agreement (the "Exchange Agreement") to be entered into prior to the
Effective Time among Acquisition, the Exchange Agent and the
Stockholders. At the Effective Time, and upon surrender to the Exchange
Agent of the certificate or certificates representing such
Stockholder's Shares (together with such duly executed letters of
transmittal or other similar instruments as may be required under the
Exchange Agreement or applicable law), each holder of record of Shares
shall be entitled to receive in exchange therefor its proportionate
share of the Merger Consideration as provided in Section 4.1(a) hereof,
and the certificate or certificates so surrendered shall forthwith be
canceled.
(b) Until surrendered to the Exchange Agent or the Surviving
Corporation to effect the exchange of the Shares for the Merger
Consideration as provided in the Exchange Agreement and Section 4.2(a)
hereof, each certificate evidencing the Shares shall, on or after the
Effective Time, be deemed for all corporate purposes to represent and
evidence only the right to receive the amount payable in the form of
the Merger Consideration, without interest thereon, on such terms as
are provided for in Section 4.1(a) hereof. Except as provided in
subsection (c) of this Section 4.2, until the certificate representing
the Shares shall have been so surrendered, the holder of such Shares
shall not have any right to receive any portion of the Merger
Consideration allocable to such Shares.
(c) In the event any certificate representing Shares shall
have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by
such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made
against it with respect to such certificate, the Surviving Corporation
will cause the Exchange Agent to deliver in exchange for such lost,
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stolen or destroyed certificate the Merger Consideration deliverable in
respect thereof pursuant to this Agreement and the Exchange Agreement.
(d) No interest shall be paid or shall accrue on the amount
payable upon the surrender of any certificate, whether or not such
certificate was surrendered for the Merger Consideration. If payment is
to be made to a person other than the registered holder of the
certificate surrendered, it shall be a condition of such payment that
the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer, as determined by the Surviving
Corporation, and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person
other than the registered holder of the certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such
tax has been paid or is not payable.
4.3 Transfer of Shares After the Effective Time. No transfers
of Shares shall be made on the stock transfer books of the Surviving Corporation
at or after the Effective Time. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Stockholders. Each
of the Stockholders, severally, and not jointly, hereby represents and warrants
to Acquisition that:
(a) Ownership of Shares. Except as described on Exhibit A or
on Schedule 5.1(a), (i) such Stockholder is the legal and beneficial
owner of the number of Shares listed opposite, his, hers or its name on
Exhibit A, and (ii) the Shares so listed are free and clear of all
Encumbrances.
(b) Power, Authorization and Enforceability of Agreement. Such
Stockholder has the legal capacity, and, if such Stockholder is a
corporation or partnership, the corporate or partnership power and
authority, to execute and deliver this Agreement, to perform his, hers
or its obligations hereunder and to consummate the transactions
contemplated hereby with respect to such Stockholder. If such
Stockholder is a corporation or partnership, such execution, delivery,
performance and consummation by such Stockholder has been duly
authorized by all necessary corporate or partnership action on the part
of such Stockholder. Except as described on Schedule 5.1(b), this
Agreement has been, and all other agreements, documents and instruments
required to be delivered by such Stockholder, pursuant to the
provisions hereof (the "Stockholder Documents") have been, or at the
Effective Time will be, duly executed and delivered by such Stockholder
and this Agreement constitutes, and such of the Stockholder Documents,
when executed and delivered will constitute, the legal, valid and
binding obligations of such Stockholder enforceable against such
Stockholder in accordance with its respective terms, except as
enforcement may be limited by debtor relief laws or equitable
principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion.
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(c) Compliance with Other Instruments and Regulations. Except
as disclosed on Schedule 5.1(c), the execution and delivery by such
Stockholder of, and the performance by such Stockholder of his, hers or
its respective obligations under, this Agreement and the Stockholder
Documents and the consummation of the transactions contemplated hereby
and thereby with respect to each such Stockholder do not violate,
conflict with, result in any breach of, or constitute a default under
(or with the giving of notice or the passage of time or both, violate,
conflict with or constitute a default under), (i) any Regulation that
is applicable to such Stockholder, (ii) any provision of the articles
or certificate of incorporation or bylaws or other organizational
documents of such Stockholder, or (iii) any mortgage, lease, indenture,
agreement, contract or other instrument, document or understanding,
oral or written, to which such Stockholder is a party or by which such
Stockholder is bound or has rights, except, in the cases of clause (i)
and clause (iii) above, for such instances as do not have, singly or in
the aggregate, a material adverse effect on such Stockholder's ability
to perform its obligations under this Agreement or the Stockholder
Documents.
(d) No Third Party Options. Except as described on Schedule
5.1(d), there are no existing agreements, options, contracts or rights
with, of or to any person to acquire any of the Shares owned by such
Stockholder from such Stockholder.
(e) Brokers and Finders. Such Stockholder has not employed any
broker or finder or incurred any liability for any fees or commissions
in connection with the transactions contemplated herein.
(f) Pre-Existing Entity. Except as set forth on Schedule
5.1(f), such Stockholder has not been organized for the specific
purpose of acquiring the Xxxxxx Shares.
(g) Acquisition Without View to Distribute. Except as set
forth on Schedule 5.1(g), the Xxxxxx Shares to be acquired by such
Stockholder are being acquired by such Stockholder for its own account,
not as a nominee or agent, and not with a view to the resale or
distribution thereof within the meaning of the Securities Act, and such
Stockholder will not distribute the Xxxxxx Shares in violation of the
Securities Act or any applicable state securities laws.
(h) Additional Representations of the Stockholders. (i) Except
as set forth in Schedule 5.1(h), such Stockholder is an "accredited
investor" as such term is defined in Rule 501 promulgated under the
Securities Act, (ii) each Stockholder's financial situation is such
that it can afford to bear the economic risk of holding the Xxxxxx
Shares for an indefinite period of time, (iii) such Stockholder's
knowledge and experience in financial and business matters are such
that it is capable of evaluating the merits and risks of its
acquisition of the Xxxxxx Shares as contemplated by this Agreement,
(iv) such Stockholder does not have any contract, arrangement or
understanding with any broker, finder or similar agent with respect to
the transactions contemplated by this Agreement respecting the Xxxxxx
Shares (except for such fees and compensation as may be owing by the
Company to Xxxxx & Co. and Xxxxxx Capital Group, LLC under the those
certain agreements dated November 6, 1995, and January 16, 1996,
respectively.
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5.2 Representations and Warranties of the Stockholders and the
Company. The Stockholders and the Company, jointly and severally, hereby
represent and warrant to Acquisition that:
(a) Existence and Qualification; Power; Compliance With Laws.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company is
duly qualified to transact business, and is in good standing, in its
jurisdiction of organization and each other jurisdiction in which the
conduct of its business or the ownership or leasing of its properties
makes such qualification necessary. The Company has all requisite
corporate power and corporate authority to conduct its business, to own
and lease its properties and to execute and deliver this Agreement and
consummate the transactions contemplated hereby; all requisite approval
from the Stockholders has been duly and legally obtained. The
Stockholders have caused the Company to deliver to Acquisition complete
and correct copies of the Company's Articles of Incorporation and
By-Laws, as amended to date. The Company's Articles of Incorporation
and By-Laws, as so delivered, are in full force and effect.
(b) Subsidiaries.
(i) Schedule 5.2(b) hereto correctly sets forth the
names, the forms of legal entity, jurisdictions of organization, chief
executive offices and principal places of business of all subsidiaries
of the Company (each a "Subsidiary" and together the "Subsidiaries").
Except as described on Schedule 5.2(b), neither the Company nor any
Subsidiary owns any capital stock or equity interest in any other
entity. All (100%) of the outstanding shares of capital stock, or all
of the units of equity interest, as the case may be, of each Subsidiary
are owned of record and beneficially by the Company, except as
described on Schedule 5.2(b), and all such shares or equity interests
so owned are duly authorized, validly issued, fully paid and, except as
described on Schedule 5.2(b), nonassessable, and were issued in
compliance with all applicable state and federal securities and other
laws, and, except as described on Schedule 5.2(b), are owned free and
clear of all Encumbrances. No Subsidiary has any shares of capital
stock or units of equity interest reserved for issuance. Except as set
forth in Schedule 5.2(b), there are no shares of capital stock of any
corporate Subsidiary or any units of equity interest in any partnership
Subsidiary authorized, issued or outstanding, and no preemptive rights
or any outstanding subscriptions, options, warrants, rights (including
any form of "poison pill" rights), convertible securities or other
agreements or commitments of any character to which any Subsidiary is a
party relating to the issued or unissued capital stock, units of equity
interest or other securities of any Subsidiary.
(ii) Each Subsidiary is a legal entity of the form
described for that Subsidiary on Schedule 5.2(b), duly organized,
validly existing, and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business as a
foreign organization and is in good standing as such in each
jurisdiction in which the conduct of its business or the ownership or
leasing of its properties makes such qualification necessary except
where the failure to be so duly qualified and in good standing does not
result in a Material Adverse Effect or Material Adverse Change, and has
all requisite power and authority to conduct its business and to own
and lease its properties.
(iii) Each Subsidiary has all requisite corporate or
partnership, as the case may be, power and authority to conduct its
business and to own and lease its properties. The
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Stockholders have caused the Company to deliver to Acquisition complete
and correct copies of the Articles of Incorporation and By-laws,
Partnership Agreements and other similar organizational documents, as
amended to date, respecting each Subsidiary. The Articles of
Incorporation and By-laws, Partnership Agreements and other
organizational documents of the Subsidiaries, as so delivered, are in
full force and effect.
(c) Authorized Capital. The authorized capital stock of the
Company consists of: 1,000,000 Shares of Common Stock, constituting the
only capital stock of the Company, of which 100,000 Shares are issued
and outstanding on the date of this Agreement. All of the outstanding
Shares of Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. The Company has no Shares
reserved for future issuance. Except as set forth above and in Schedule
5.2(c), there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights (including any form of "poison
pill" rights), convertible securities or other agreements or
commitments of any character to which the Company is a party relating
to the issued or unissued Common Stock or other securities of the
Company or any of its Subsidiaries. After the Effective Time, the
Surviving Corporation shall have no obligation to issue, transfer or
sell any shares of Common Stock of the Surviving Corporation pursuant
to any Employee Plans of the Company which are in effect on the date
hereof.
(d) Authority; Compliance With Other Agreements and
Instruments and Government Regulations. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby by the Company have been duly authorized by all necessary
corporate and shareholder action, and do not:
(i) except as set forth on Schedule 5.2(d), require any
consent or approval not heretofore obtained of any director,
stockholder, security holder or creditor of the Company or any other
entity;
(ii) violate or conflict with any provision of the
Company's Articles of Incorporation or By-Laws;
(iii) except as set forth on Schedule 5.2(d), result in
a breach of, constitute a default under or cause or permit the
triggering of any payment or obligations pursuant to, any of the
Company's Employee Plans existing on the date of this Agreement or any
grant or award made under any of the foregoing;
(iv) except as set forth on Schedule 5.2(d), result in
or require the creation or imposition of any Encumbrance upon or with
respect to any property now owned or leased by the Company, except for
Permitted Encumbrances;
(v) except as set forth on Schedule 5.2(d), violate in
any material respect any requirement of any Regulation applicable to
the Company;
(vi) except as set forth on Schedule 5.2(d), result in a
material breach of, constitute a material default under, or otherwise
give any contracting party, in any material respect, additional rights
or compensation under, or cause or permit the acceleration of any
material obligation owed under, any indenture or loan or credit
agreement, note, deed,
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instrument, lease, security agreement, mortgage, commitment or any
other contract to which the Company is a party or by which the Company
or any of its property is bound or affected.
(e) No Governmental Approvals Required. Other than the filings
provided for in Section 1.3, under the HSR Act, those as are set forth
on Schedule 5.2(e) and those which are not material to the operation of
the Business (collectively, the "Company Regulatory Filings"), no
authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, any governmental agency is
required to authorize or permit under applicable Regulations the
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby.
(f) Financial Statements. The Stockholders have caused the
Company to furnish to Acquisition the Balance Sheets, Statements of
Income and Statements of Cash Flow for the years ended December 31,
1994 and December 31, 1995 (collectively the "Audited Financial
Statements") and unaudited statements for the five (5) month period
ended May 31, 1996 (the "Interim Financial Statements"), for the
Partnership (the Audited Financial Statements and the Interim Financial
Statements, including the notes thereto, are sometimes collectively
referred to as the "Financial Statements"). Except as described on
Schedule 5.2(f), or as disclosed in the Financial Statements, as of
their respective dates, the Financial Statements (i) are in accordance
with the Books and Records of the Partnership, (ii) were prepared in
accordance with generally accepted accounting principles ("GAAP"),
consistently applied from period to period (except for changes, if any,
permitted by GAAP and disclosed therein), and (iii) fairly present in
all material respects in accordance with GAAP, the financial position,
results of operations and cash flows of the Partnership as of the dates
and for the periods covered thereby, subject, in the case of the
Interim Financial Statements, to normal year-end accruals and audit
adjustments, none of which are expected to be material, and the absence
of footnotes. As of the date of this Agreement, except as set forth on
Schedule 5.2(f), neither the Company nor the Mortuary has any Assets or
Liabilities whatsoever.
(g) Absence of Certain Changes; No Other Liabilities. Except
as disclosed on Schedule 5.2(g), from May 31, 1996 to the date hereof,
the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any transaction other than
according to, the ordinary and usual course of such businesses
consistent with past practice, and there has not been (i) any Material
Adverse Effect or Material Adverse Change; (ii) any declaration,
setting aside or payment of any dividend or other distribution with
respect to the Common Stock of the Company, or (ii) any material change
by Partnership in the accounting principles, practices or methods
applicable to it. As of the date of this Agreement, the Partnership
does not have any Liability which is required to be reflected in the
Financial Statements in accordance with GAAP and which is not so
reflected or disclosed in the Financial Statements, except for (i) any
Liability incurred after May 31, 1996 in the ordinary course of
business and which is substantially offset in amount by rights or
assets relating to such Liability, (ii) Liabilities which are covered
in full by insurance, and (iii) any Liability that is set forth on
Schedule 5.2(g).
(h) Brokers and Finders, Attorneys, Accountants and Other
Professionals. Except as disclosed on Schedule 5.2(h), neither the
Company nor any of its Subsidiaries have employed any broker or finder,
attorneys, accountants, appraisers or other professional
12
advisors, or incurred any liability for any fees, commissions or other
compensation to any such Persons in connection with the transactions
contemplated herein.
(i) Actions. Except for those matters set forth on Schedule
5.2(i) (i) there are no Actions [A] pending as to which the Company or
any of its Subsidiaries have been served or have received notice, or
[B] to the knowledge of the Stockholders and the Company, threatened in
writing against or affecting the Company or any of its Subsidiaries or
any property of any of them, and (ii) there is no reasonable basis, to
the knowledge of the Stockholders and the Company, for any Action
against or affecting the Company or any of its Subsidiaries or any
property of any of them, which would constitute a Material Adverse
Effect or result in a Material Adverse Change.
(j) Binding Obligations. This Agreement will, when executed
and delivered by the Company, constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by
debtor relief laws or equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of
judicial discretion.
(k) Material Contracts. Schedule 5.2(k) lists each Contract to
which the Company or any Subsidiary is a party or to which the Company,
any Subsidiary, or any of their respective properties is subject or by
which any thereof is bound, that is deemed a Material Contract (as
defined in the next succeeding sentence) under this Agreement and
unless otherwise so noted on Schedule 5.2(k), each such Contract was
entered into in the ordinary course of business. A Material Contract
for the purposes of this subsection (k) is each contract that (a) after
May 31, 1996 obligates the Company or any Subsidiary to pay an amount
of $25,000 or more, (b) has a term expiring beyond May 31, 1997, (c)
contains a covenant not to compete, (d) provides for the extension of
credit other than in the ordinary course of business and other than
consistent with normal credit terms, (e) limits the ability of the
Company or any Subsidiary to conduct its business, including as to
manner or place, (f) provides for a guaranty or indemnity by the
Company or any Subsidiary, (g) grants a power of attorney, agency or
similar authority to another person or entity, (h) contains an option
or a right of first refusal, (i) contains a right or obligation other
than in the ordinary course of business of or to any Affiliate, officer
or director, of the Company or any Subsidiary, (j) constitutes a
collective bargaining agreement or provides for severance benefits to
any officer, director or employee of the Company or any Subsidiary, (k)
represents a contract upon which the business of the Company or any
Subsidiary is materially dependent, (l) requires the Company or any
Subsidiary to buy or sell goods or services with respect to which there
reasonably could be expected to be material losses or will be costs and
expenses materially in excess of expected receipts (other than as
provided for or otherwise reserved against on the balance sheets
contained in the Interim Financial Statements), or (m) was not made in
the ordinary course of business and consistent with the Company's past
custom and practices. True, correct and complete copies of the
Contracts appearing on Schedule 5.2(k), including all amendments and
supplements, have been delivered to Acquisition. Each Contract is valid
and subsisting; the Company or the applicable Subsidiary has duly
performed all its obligations thereunder to the extent that such
obligations to perform have accrued; and no breach or default, alleged
breach or default, or event which would (with the passage of time,
notice or both) constitute a breach or default thereunder by the
Company or any Subsidiary, as the case may be (or, to the knowledge of
the Stockholders or the Company, any other party or obligor with
respect
13
thereto), has occurred or as a result of this Agreement or its
performance will occur. Except as set forth on Schedule 5.2(k),
consummation of the transactions contemplated by this Agreement will
not (and will not give any person a right to) terminate or modify any
rights of, or accelerate or augment any obligation of the Company or
any Subsidiary under any of the Material Contracts so listed.
(l) No Other Agreements to Sell the Shares or Assets. Except
as described on Schedule 5.2(l), neither the Company nor any Subsidiary
has any legally enforceable commitment or legal obligation, absolute or
contingent, to any other person or firm other than Acquisition, to
sell, assign, transfer or effect a sale of any of the Shares, any
capital stock or equity investment in any Subsidiary, or any material
amount of the Assets of the Company or any Subsidiary (other than
Inventory in the ordinary course of business or fixed assets which are
no longer necessary to the operation of the Business as heretofore
conducted), to effect any merger, consolidation, liquidation,
dissolution or other reorganization of the Company or any Subsidiary,
or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
(m) Title and Condition of Assets. Schedule 5.2(m) includes a
correct and complete list of all Fixtures and Equipment owned, leased
or used by the Company and its Subsidiaries on the date of this
Agreement in connection with the Business and where the net book value
of an individual item exceeds $10,000.00. Except as described in
Schedule 5.2(m), (i) the Company and its Subsidiaries have title to (or
are the lessees or the licensees of) all of the Fixtures and Equipment
identified on Schedule 5.2(m), free and clear of all Encumbrances
(other than Permitted Encumbrances), and (ii) the Fixtures and
Equipment identified on Schedule 5.2(m) are in reasonable operating
condition and repair (subject to normal wear and tear and except for
items that are undergoing repair or refurbishment in the ordinary
course of business) and are sufficient (together with working capital
and the other Assets of the Company and its Subsidiaries) to permit the
Surviving Corporation to conduct the Business as now conducted.
(n) Real Property. Schedule 5.2(n) constitutes a complete and
correct list of all Real Properties owned by the Company and its
Subsidiaries. The Company is not a tenant or lessee of nor does it hold
any leasehold interest in any of the Real Property pursuant to any
lease or other agreement. The Company and its Subsidiaries hold fee
simple title to all of the Real Property, free and clear of any
Encumbrances except for Permitted Encumbrance. Except as described on
Schedule 5.2(n), to the knowledge of the Stockholders and the Company:
(i) the structures, improvements and fixtures at or
upon the Real Property, including, but not limited to, roofs and
structural elements thereof and the electrical, plumbing, heating,
ventilation, air conditioning and similar units and systems, have to
date been maintained by the Company in a manner it considers to be
reasonable for the conduct of the Business and are in reasonable
operating condition to allow the Business to continue to be conducted
as heretofore conducted, subject to the provision of usual and
customary maintenance and repair performed in the ordinary course of
business consistent with past practice; and
14
(ii) there is no material water diffusion or other
intrusion into any buildings, structures or other improvements included
in the Real Property which would require a material expenditure for
repairs in the next twelve (12) months;
(o) Trademark and Trade Names. Except as described on Schedule
5.2(o), the Company owns or has the right to use all Proprietary Rights
which are necessary or required for the operation of the Business, (a
true and complete list of which is included in Schedule 5.2(o)), and
with respect to all Trademarks, to the knowledge of the Stockholders
and the Company, the Company has the right to bring actions for the
infringement thereof.
(p) [Reserved]
(q) Environmental Issues.
(i) Except as described on Schedule 5.2(q), neither
the Company nor any of its Subsidiaries has generated, stored, handled,
manufactured, transported, disposed of or released any Hazardous
Materials on or at the Real Property, except in substantial compliance
with all applicable Environmental Requirements pertaining to the
Company and each of its Subsidiaries.
(ii) Except as described on Schedule 5.2(q), to the
knowledge of the Stockholders and the Company [A] the Real Property and
the activities and operations of the Company and its Subsidiaries and
the prior owners or occupants of the Real Property, comply in all
material respects with all Environmental Requirements pertaining to the
Company and each of its Subsidiaries, [B] neither the Company nor any
of its Subsidiaries has received any written notice or other
communication concerning any alleged material violation of
Environmental Requirements pertaining to the Company and each of its
Subsidiaries, [C] there exists no judgment, decree, order, writ or
injunction outstanding, nor any litigation, action, suit, claim
(including citation or directive) or proceeding pending against the
Company, any of its Subsidiaries, or any of the Real Property arising
from the alleged violation of Environmental Requirements pertaining to
the Company and each of its Subsidiaries, or from an alleged release of
Hazardous Materials, and [D] no Hazardous Materials have migrated from
other properties to, upon, about or beneath the Real Property.
(r) Preneed Contracts. Prior to the date hereof, all monies
paid to or for the benefit of the Company and its Subsidiaries in
respect of the Preneed Contracts have been set aside as described in
Schedule 5.2(r). The terms and conditions of the Preneed Contracts,
including but not limited to the collection of interest, comply with
applicable Regulations (including but not limited to full disclosure to
customers of all funeral and finance charges and other fees associated
with multi-payment plans for Preneed Contracts). Neither the Company
nor any of its Subsidiaries nor, to the knowledge of the Stockholders
and the Company, any other party to any Preneed Contract, is in default
or breach of any Preneed Contract. Other than as indicated on Schedule
5.2(r), the Preneed Contracts are the only agreements pursuant to which
caskets, funeral commodities and other inventory or funeral services
are sold by the Company or its Subsidiaries on a pre-need basis.
The Company and its Subsidiaries have deposited in
trust in respect of each of the Preneed Contracts all amounts as are
required by all applicable Regulations and/or the
15
particular underlying Preneed Contracts (collectively, the "Funds"),
and all such Funds have at all times been and are now held in all
material respects in conformity with all such Preneed Contracts and
applicable Regulations. All withdrawals of and investment and other
uses of the Funds (including but not limited to payment to the trustees
of the applicable trusts) have been made in accordance with all
applicable Regulations and the Preneed Contracts. The Company and its
Subsidiaries have paid or accrued, as of the respective dates of the
Financial Statements, and will have paid or accrued, as of the
Effective Time, all commissions due and owing with respect to the
Preneed Contracts.
For those Preneed Contracts that are funded by
insurance, the Company or its Subsidiaries are the current named
beneficiaries of all such insurance policies required to fund all such
Preneed Contracts in accordance with their respective terms.
(s) Permits. Schedule 5.2(s) sets forth a full and complete
list of all material Permits required as of the date of this Agreement
to allow the present operations, planned expansion of operations set
forth on Schedule 5.2(s), and any past or ongoing alterations of the
operations of the Company and its Subsidiaries under any applicable
Regulation. Except as set forth on Schedule 5.2(s), (i) all Permits
identified on Schedule 5.2(s) (the "Existing Permits") are in full
force and effect, and (ii) the consummation of the transactions
contemplated by this Agreement will not conflict with the terms of,
result in default under, or violate the terms of, any Existing Permit
or result in the termination of, or, require Consent or other action
pursuant to, any of the Existing Permits. Except as set forth on
Schedule 5.2(s), the Company and its Subsidiaries are in full
compliance with all Existing Permits.
(t) [Reserved].
(u) Compliance with Regulations. Except as disclosed in
Schedule 5.2(u), the Company and each of its Subsidiaries are now
operating and conducting the Business, and have been operating and
conducting the Business, in all material respects in compliance with
applicable Regulations, excluding, however, for purposes of this
Section 5.2(u), the Code, OSHA, ADA, Environmental Requirements and
other Regulations which are the subject of or are referred to in
specific representations and warranties contained in this Section 5.2
(it being the understanding of the parties that any representations and
warranties with respect to compliance with such Regulations are limited
to the specific representations and warranties set forth in such
Section).
(v) OSHA, ADA and FTC. The Company and each of its
Subsidiaries are, except as set forth Schedule 5.2(v), in compliance in
all material respects with all requirements of the Occupational Safety
and Health Act ("OSHA") and the Americans with Disabilities Act ("ADA")
pertaining to the facilities and operations of the Company and its
Subsidiaries, and with all requirements of the Federal Trade
Commission's Funeral Industry Practices Regulation ("FTC Funeral
Rule"),.
(w) [Reserved]
(x) Political Contributions and Other Payments. None of the
Company, any of its Subsidiaries, nor any Person acting on their behalf
has, during the past five (5) years (i) except for lawful political
contributions in the ordinary course of business, made any
16
payment to any governmental official, employee or agent (domestic or
foreign) to wrongfully induce the recipient or the recipient's employer
to do business with, grant favorable treatment to or compromise or
forego any claim by or against the Company or any of its Subsidiaries,
or (ii) made any significant payment or conferred any significant
benefit which the Company or the Stockholders, in the exercise of
reasonable business judgment, considers or reasonably should consider
to be improper.
(y) Tax Matters.
(i) Except as disclosed on Schedule 5.2(y), the Company
and its Subsidiaries have, as of the date hereof, correctly and
properly prepared, and duly and timely filed, all Tax Returns required
to be filed by them and each of them prior to such dates and have duly
and timely paid, or will prior to the Effective Time duly and timely
pay, all Taxes shown as due on such Tax Returns, including all
withholding or other payroll related taxes shown as due on such Tax
Returns (other than taxes being contested in good faith). The federal
income tax basis of the Assets as reflected in the Tax Returns and
related work papers of the Company and its Subsidiaries is correct and
accurate in all material respects. Except as described on Schedule
5.2(y) to this Agreement, neither the Company nor any of its
Subsidiaries is, nor will they become, subject to any additional Taxes
with respect to taxable periods (or partial periods) of the Company or
its Subsidiaries which end on or before the Effective Time. No
assessments or written notices of deficiency have been received by the
Company or any of its Subsidiaries with respect to any Tax Returns
which the Company and its Subsidiaries have filed which have not been
paid in full, completely discharged or fully reserved in accordance
with GAAP in the Financial Statements or disclosed on Schedule 5.2(y).
Except as disclosed on Section 5.2(y), the statute of limitations for
assessment of Taxes for all taxable years of the Company and each of
its Subsidiaries on or before December 31, 1992 have expired, and there
are no agreements between the Company or its Subsidiaries and any
taxing authority, including, without limitation, the Internal Revenue
Service or the Franchise Tax Board of the State of California, waiving
or extending any statute of limitations for assessment or collection of
any Tax which the Company or any of its Subsidiaries have filed which
remain in effect as of the date hereof. Neither the Company nor any of
its Subsidiaries has filed any consent, statement or election with the
Internal Revenue Service under Section 341(f) of the Code or any
corresponding provision of state or local income Tax law.
(ii) Except as described on Schedule 5.2(y), the
Company and its Subsidiaries [A] have timely withheld proper and
correct amounts in compliance with the Tax withholding provisions of
all applicable Regulations for all compensation paid to the officers
and employees of the Company and its Subsidiaries, [B] have correctly
and properly prepared and duly and timely filed all Tax Returns
relating to such amounts withheld from its officers and employees and
to their employer liability for employment Taxes under the Code and
applicable state and local Regulations, and [C] have duly and timely
paid and remitted to the appropriate taxing authorities the amounts
withheld from their officers and employees and any additional amounts
that represent their employer liability under applicable Regulations
for employment Taxes.
(iii) Except as indicated on Schedule 5.2(y), the
income tax returns of the Company and its Subsidiaries have been
audited by the Internal Revenue Service and the
17
Franchise Tax Board of the State of California for all taxable years of
the Company through the year ended December 31, 1992.
(iv) Except as disclosed on Schedule 5.2(y) the
Company and its Subsidiaries have paid, have duly reserved for in the
Financial Statements in accordance with GAAP, or, as reflected on
Schedule 5.2(y), are contesting in good faith, all Taxes required by
applicable Regulations to have been paid prior to the date hereof.
(v) Except as described in Schedule 5.2(y), no issue
has been raised in writing by the Internal Revenue Service or any state
or local taxing authority in connection with any audit of any Tax
Return which the Company or its Subsidiaries have filed that will have,
or which the Company reasonably believes may have, a significant effect
for any taxable year of the Company or its Subsidiaries which, as of
the date hereof, remains open for assessment.
(vi) The Financial Statements include and Schedule
5.2(y) discloses, for all periods up to and including the Effective
Time (including the final partial period of the Company and its
Subsidiaries which ends on such date), adequate provision for all
unpaid applicable Taxes relating to the Company and its Subsidiaries.
(vii) None of the Company or any of its Affiliates is a
"United States real property holding corporation" as defined in Section
897(c)(2) of the Code.
(viii) Except as reflected on Schedule 5.2(y), none of
the Company or any of its Affiliates is a party to any Tax sharing or
Tax allocation agreement.
(z) Reserved.
(aa) Accounts Receivable. All of the accounts receivable shown
on the balance sheets contained in the Interim Financial Statements
(exclusive of accounts receivable from the Association) [A] reflect
actual transactions, [B] have arisen from bona fide transactions in the
ordinary and usual course of the conduct of the Business (except as
disclosed on Schedule 5.2(aa)), and [C] to the knowledge of the
Stockholders and the Company, are not subject to any setoff or
counterclaim and are fully collectible in accordance with the terms of
the underlying contracts, subject to the reserve(s) shown on the
Interim Financial Statements, which in all respects is (are) adequate.
(bb) Inventory. The values at which Inventory is shown on the
Interim Financial Statements have been determined in accordance with
the normal valuation policies of the Company and its Subsidiaries,
consistently applied. The Inventory as of the date of this Agreement
consists only of items of a quality and quantity commercially usable or
saleable in the ordinary course of business.
(cc) Labor Relations. Except as described on Schedule 5.2(cc)
(i) the Company is not a party to any collective bargaining or union
contract and is not aware of any current union organization effort or
campaign with respect to its employees, and (ii) during the most recent
five-year period, neither the Company nor any of its Subsidiaries has
received [A] any written notice of any pending or threatened unfair
labor practice complaints, and [B] any notice of, and there have not
been, any strikes, slowdowns, work stoppages, lockouts, material
18
labor disputes or other material labor controversy, or threats thereof,
by or with respect to any of its employees.
(dd) Insurance. Schedule 5.2(dd) to this Agreement constitutes
a full and complete list of all insurance policies maintained by the
Company and its Subsidiaries necessary or required for the operation of
their respective businesses, properties and employees. Except as
reflected on Schedule 5.2(dd), all such policies are in full force and
effect and, to the knowledge of the Stockholders and the Company, no
event has occurred that would give any insurance carrier a right to
terminate any such policy. The Company has received no written notice
of any default, cancellation or non-renewal with respect to any of such
policies. Except as disclosed on Schedule 5.2(dd), all premiums due on
such policies have been paid in full or have been duly accrued for in
the Interim Financial Statements in accordance with GAAP and, other
than as set forth in Schedule 5.2(dd), none of such policies provides
for retrospective premium adjustments.
(ee) Bank Accounts. Since May 31, 1996, and except for changes
incident to the merger of First Interstate Bank with Xxxxx Fargo Bank,
there has been no change in the banking or safe deposit arrangements of
the Company and its Subsidiaries and none of them have granted any
powers of attorney. A list of all bank accounts, safe deposit boxes and
powers of attorney of the Company and its Subsidiaries and of all
Persons authorized to act with respect thereto is set forth on Schedule
5.2(ee).
(ff) Employee Benefits and Plans.
(i) Schedule 5.2(ff) to this Agreement lists all Employee
Plans of the Company and its Subsidiaries. Neither the Company nor any
of its Subsidiaries is obligated to adopt any additional Employee
Plans. True, correct and complete copies of all Employee Plans and
related documents, including amendments thereto, any related trust
agreements, any documents setting out the Company's and its
Subsidiaries' personnel policies and procedures, any insurance
contracts under which benefits are provided, as currently in effect,
and descriptions of any such plan that is not written, have been
supplied to Acquisition. Acquisition has also been provided with a copy
of the Summary Plan Description, if any, for each Employee Plan, as
well as copies of any other summaries or descriptions of any such
Employee Plans that are currently provided to employees or other
beneficiaries.
(ii) The Company and its Subsidiaries have fulfilled
their respective obligations, to the extent applicable, under the
minimum funding requirements of Section 302 of the Employee Retirement
Insurance Security Act, as amended and the regulations thereunder
("ERISA") and Section 412 of the Code, with respect to each "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is subject to
such requirements. Except as disclosed on Schedule 5.2(ff), each
Employee Plan is in compliance in all material respects with, and has
been administered in all material respects consistent with, the
applicable provisions of ERISA, the Code and state Regulations
including, but not limited to, all applicable reporting and disclosure
requirements under the Code, ERISA and state Regulations. The Company
and its Subsidiaries have made all payments to all Employee Plans as
required by the terms of each such plan in accordance, if applicable,
with the actuarial and funding assumptions in effect as of the most
recent actuarial valuation of such plans. All required actuarial
valuations and reports relating to said plans have been prepared,
and a copy of the
19
most recent actuarial valuation and report for each pension plan, as
defined in Section 3(2) of ERISA, has been provided to Acquisition, if
applicable. The Company or its Subsidiaries, as the case may be, have
filed or caused to be filed with the Internal Revenue Service annual
reports on Form 5500 for each Employee Plan attributable to them for
all years and periods for which such reports were required and within
the time period required by ERISA and the Code, and true, correct and
complete copies of such reports for the past three (3) years are
attached hereto as a part of Schedule 5.2(ff). The foregoing
representations and warranties regarding reporting and disclosure
obligations under ERISA shall not apply to the Employee Plans described
in Section 5.2(ff)(xi). The Company and its Subsidiaries have funded or
will fund each Employee Plan attributable to it in accordance with and
to the extent required by its terms through the Effective Time,
including the payment of applicable premiums on any insurance contract
funding an Employee Plan for coverage provided through the Effective
Time. The Partnership has made all contributions for the current year
for all Employee Plans as are required to be made by applicable
Regulation or the terms of such Employee Plans and consistent with past
practice, and will make all contributions for the current year for all
Employee Plans as are required to be made by applicable Regulation or
the terms of such Employee Plans and consistent with past practice for
the period between the date of this Agreement and the Effective Time.
(iii) No "prohibited transaction", as defined in
Section 406 of ERISA and Section 4975 of the Code, has occurred in
respect of any such Employee Plan, and no civil or criminal action
brought pursuant to Part 5 of Title I of ERISA is pending or, to the
knowledge of the Stockholders or the Company threatened in writing
against any fiduciary of any such plan with respect to such plan,
which, in either of such events, which would result in a Material
Adverse Effect or Material Adverse Change.
(iv) The Internal Revenue Service has issued a letter
for each employee pension benefit plan, as defined in Section 3(2) of
ERISA, which is intended to be a qualified plan under Section 401(a) of
the Code (copies of which Stockholders have caused the Company to
deliver to Acquisition), determining that such plan is a qualified plan
under Section 401(a) of the Code, and, except as described on Schedule
5.2(ff), there has been no occurrence since the date of any such
determination letter that has adversely affected such qualification and
each plan is so qualified. In addition, neither the Company nor any of
its Subsidiaries maintains any plan or arrangement intended to qualify
under Section 501(c)(9) of the Code. Furthermore, neither the Internal
Revenue Service nor the Department of Labor, to the knowledge of the
Stockholders and the Company, is currently auditing any tax qualified
plan of the Company and its Subsidiaries, and the Company and its
Subsidiaries have not received any written notice, of an impending
audit or review of any such arrangements from the Internal Revenue
Service or the Department of Labor.
(v) Each Employee Plan that provides medical benefits
has been operated in compliance with all requirements of Section
4980B(f) of the Code and Sections 601 through 608 of ERISA relating to
continuation of coverage under certain circumstances in which coverage
would otherwise cease, except where non-compliance would not result in
a Material Adverse Effect or Material Adverse Change.
(vi) Except as described on Schedule 5.2(ff),
neither the Company, its Subsidiaries, nor any entity that is treated
as a single employer with the Company pursuant to
20
Section 414(b), (c), (m) or (o) of the Code, currently maintains any
Employee Plan that is subject to Title IV of ERISA, nor has the Company
or any of its Subsidiaries previously maintained any such plan that has
resulted in any liability or potential liability for the Company or any
of its Subsidiaries under said Title IV. In the case of any Employee
Plan that is subject to Title IV of ERISA, the Company or its
Subsidiaries, as the case may be, has paid all premium payments
required to be made to the Pension Benefit Guaranty Corporation or will
make such payments by the Effective Time. There shall not be as of the
Effective Time any outstanding unpaid waived funding deficiency within
the meaning of Section 412(d) of the Code. No reportable event, as
defined in Section 4043 of ERISA, other than a reportable event for
which the 30-day notice requirement has been waived, or which results
solely from the transactions contemplated by this Agreement, or which
results from transactions described on Schedule 5.2(ff), has occurred
with respect to any Employee Plan that is subject to Title IV of ERISA.
Except as described on Schedule 5.2(ff), in the case of any such plan,
the assets of such plan are at least sufficient to satisfy all benefit
liabilities of the plan, within the meaning of Section 4001(a)(16) of
ERISA.
(vii) Attached hereto as a part of Schedule 5.2(ff)
is a two-year contribution history indicating the dollar amount
contributed and the level of contribution as a percentage of
compensation of covered participants for each profit sharing plan,
stock bonus plan or other retirement plan to which the Company or any
of its Subsidiaries makes discretionary contributions.
(viii) Except as described on Schedule 5.2(ff),
neither the Company nor any of its Subsidiaries maintain any plan or
program, nor is any a party to any agreement providing post-retirement
medical benefits (other than benefits described in this Section 5.2(ff)
or those required by Law), death benefits or other post retirement
welfare benefits. A copy of any written description of post-retirement
welfare benefits that has been provided to employees is attached hereto
as a part of Schedule 5.2(ff). A list of each plan document, insurance
contract or other written instrument providing for post retirement
welfare benefits, together with a description of any advance funding
arrangement that has been established to fund post retirement welfare
benefits, are attached hereto as part of Schedule 5.2(ff). Schedule
5.2(ff) contains a list of those persons who are currently retired with
a right to future post-retirement welfare benefits and also contains a
list of employees who would be currently eligible for post retirement
welfare benefits if they retired and satisfied any waiting period
provided for under the applicable plan.
(ix) Neither the Company, its Subsidiaries, nor any
employer referred to in this Section 5.2 maintains, or has ever
contributed to or been required to contribute to, any multiemployer
plan within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
(x) Except as reflected on Schedule 5.2(ff) (i) all
Employee Plans have been operated and administered in all material
respects in accordance with their respective terms and no materially
inconsistent representation or interpretation has been made to any plan
participant, and (ii) no lawsuit or written complaint (including any
dispute of which the Company has received written notice that might
reasonably be expected to result in a lawsuit or complaint against, by
or relating to any Employee Plan or any fiduciary, as defined in
Section 3(21) of ERISA) respecting or concerning an Employee Plan has
been filed or is pending.
21
(xi) Prior to the Effective Time, the Company or its
Subsidiaries, as the case may be, [A] shall submit to the U.S.
Department of Labor the documents and penalty amount prescribed for
"top-hat" plans under the Delinquent Filer Voluntary Compliance Program
("DFVCP") described in 60 FR 20874 (April 27, 1995) for each employee
pension benefit plan, as defined in Section 3(2) of ERISA, which is
unfunded and maintained for a select group of management or highly
compensated employees, for which the Company or its Subsidiaries, as
the case may be, has not timely filed with the Department of Labor a
statement meeting the requirements of 29 C.F.R. 2520.104-23; and [B]
shall file with the Internal Revenue Service all late Form 5500s for
the severance/separation pay plan and any other Employee Plan which are
due for plan years beginning on or after January 1, 1988 and submit to
the U.S. Department of Labor the documents and penalty amount under the
Delinquent Filer Voluntary Compliance Program ("DFVCP") for each Form
5500 which is past due for plan years beginning on or after January 1,
1988. A true and correct copy of all Form 5500s and documents which are
submitted to the Internal Revenue Service and U.S. Department of Labor
under the DFVCP pursuant to this Section 5.2(ff)(xi) will be delivered
to Acquisition prior to the Effective Time.
(xii) Attached to Schedule 5.2(ff) is a list of all
employees of the Company and each of its Subsidiaries whose salary
exceeds $50,000 per year.
(xiii) Except as described on Schedule 5.2(ff), no
Employee Plan exists that could result in the payment to any present or
former employee of the Company or its Subsidiaries of any money or
other property or accelerate or provide any other rights or benefits to
any present or former employee of the Company or its Subsidiaries as a
result of the transactions contemplated by this Agreement, whether or
not such payment would constitute a parachute payment within the
meaning of Code Section 280G. No payment under any Employee Plan or
otherwise contemplated to be made by the Company or its Subsidiaries
constitutes a parachute payment within the meaning of Section 280G of
the Code.
(gg) Condemnation. There is no pending or, to the knowledge of
the Stockholders or the Company, threatened, condemnation, separation,
or eminent domain proceeding affecting all or any part of the Real
Property, and neither the Stockholders nor the Company have received
any written notice of the same.
(hh) Payment of Wages. Except as described on Schedule
5.2(hh), the Company and each of its Subsidiaries has paid or accrued
in full to all employees all wages, salaries, commissions, bonuses,
benefits and other compensation due to such employees irrespective of
the basis under which such obligation arose.
(ii) Full Disclosure. None of the representations and
warranties made by the Stockholders or the Company in this Agreement
(including the Exhibits and Schedules hereto) or made in any
certificate furnished by any Stockholder or the Company, contains any
untrue statement of a material fact, or, to the knowledge of the
Stockholders or the Company, omits to state any material fact the
omission of which would be misleading.
5.3 Representations and Warranties of Acquisition.
Acquisition hereby represents and warrants to the Company and the Stockholders
that:
22
(a) Existence and Qualification; Power; Compliance With Laws.
Acquisition is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Acquisition is
duly qualified to transact business, and is in good standing, in its
jurisdiction of organization and each other jurisdiction in which the
conduct of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure to so
qualify and to be in good standing will not act to materially impair
the enforceability of Acquisition's obligations, or Acquisition's
ability to perform its obligations under this Agreement. Acquisition
has all requisite corporate power and authority to conduct its
business, to own and lease its properties and, subject only to approval
of this Agreement by the Board of Directors of Acquisition, to execute
and deliver this Agreement and consummate the transactions contemplated
hereby.
(b) Compliance with Laws. Acquisition is in compliance with
all laws and other legal requirements applicable to its business, has
obtained all material authorizations, consents, approvals, orders,
licenses and permits from, and has accomplished all filings,
registrations and qualifications with, or has obtained exemptions from
any of the foregoing from, any governmental agency that are necessary
for the transaction of its business or the execution and delivery of
this Agreement and the performance of its obligations hereunder, except
where the failure so to comply, file, register, qualify or obtain
exemptions will not act to materially impair Acquisition's ability to
perform its obligations under this Agreement.
(c) Authority; Compliance With Other Agreements and
Instruments and Government Regulations. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby by Acquisition have been duly authorized by all necessary
corporate action, and do not:
(i) Except as set forth on Schedule 5.3(c), require any
consent or approval not heretofore obtained of any director,
stockholder, security holder or creditor of Acquisition or any other
entity;
(ii) Violate or conflict with any provision of
Acquisition's Certificate of Incorporation or By-Laws;
(iii) Except as set forth on Schedule 5.3(c) result in
or require the creation or imposition of any Encumbrance upon or with
respect to any property now owned or leased by Acquisition, except as
may relate to Acquisition's obtaining financing in connection with the
transactions contemplated by this Agreement;
(iv) Except as set forth on Schedule 5.3(c), or as
would not act to materially impair Acquisition's ability to perform its
obligations under this Agreement, violate any requirement of
Regulations applicable to Acquisition;
(v) Except as set forth on Schedule 5.3(c), or as would
not act to materially impair Acquisition's ability to perform its
obligations under this Agreement, result in a breach of, constitute a
default under, or cause or permit the acceleration of any obligation
owed under, any indenture or loan or credit agreement or any material
contract to which Acquisition is a party or by which Acquisition, or
any of its property is bound or affected. Acquisition is not in
violation of, or default under, any requirement of law or material
contract, or any
23
indenture, loan or credit agreement described on Section 5.3(c)(v), in
any respect that will act to materially impair Acquisition's ability to
perform its obligations under this Agreement.
(d) No Governmental Approvals Required. Other than the filings
provided for in Section 1.3 and those as set forth on Schedule 5.3(d)
(together, the Acquisition Regulatory Filings"), no authorization,
consent, approval, order, license or permit from, or filing,
registration or qualification with, any governmental agency is required
to authorize or permit under applicable laws the execution and delivery
of this Agreement by Acquisition and the consummation by Acquisition of
the transactions contemplated hereby.
(e) Brokers and Finders. Except as set forth on Schedule
5.3(e), Acquisition has not employed any broker or finder or incurred
any liability for any brokerage, finder's, or similar fees or
commissions in connection with the transactions contemplated herein.
(f) Actions. Except for those matters set forth on Schedule
5.3(k), (i) there are no Actions pending as to which Acquisition, or
any of its Subsidiaries have been served or have received written
notice or, to the knowledge of Acquisition, threatened in writing
against or affecting Acquisition or any of its property, and (ii) there
is no reasonable basis, to the knowledge of Acquisition, for any Action
against or affecting Acquisition or any of its property which in either
of (i) or (ii) above would have the effect of prohibiting, preventing
or impairing consummation of the transactions specified in this
Agreement by Acquisition.
(g) Binding Obligations. This Agreement will, when executed
and delivered by Acquisition, constitute the legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in
accordance with its terms, except as enforcement may be limited by
debtor relief laws or equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of
judicial discretion.
(h) Business Experience, Investigation and Access to Data.
(i) Acquisition acknowledges that an Affiliate of
Xxxxxx will be one of Acquisition's stockholders. Acquisition also
acknowledges that such Affiliate has the experience and ability
necessary to evaluate the merits and risks of its acquisition of the
Company.
(ii) It is expressly understood and agreed that none
of the Company or the Stockholders are making, and none have made, any
representation or warranty of any kind, express or implied, except for
those specifically provided in Sections 5.1 and 5.2 of this Agreement.
Except for the matters which are expressly covered by such
representations and warranties, and upon which Acquisition intends to
justifiably rely, Acquisition is relying on its own investigation and
analysis in entering into this Agreement and consummating the
transactions contemplated hereby. Nothing contained in the foregoing
provisions of this Section 5.3(h), however, shall limit or modify the
representations and warranties of the Company and/or the Stockholders
as contained in this Agreement.
(iii) At the time of the execution and delivery of
this Agreement, based solely upon the actual and direct knowledge of
Xxxxxxxx Xxxxxx, G. Xxxxx Xxxxxxx, Xxxx X. Xxxx and Xxxxxxx Xxxxxx,
after such inquiry and investigation as is reasonable under the
circumstances,
24
no breach of any representation or warranty made by the Stockholders
and/or the Company in this Agreement has occurred.
(i) Financing Letters. Acquisition has received letters
relating to equity and debt financing for the transactions subject to
this Agreement and has delivered copies of the letters to the Company
on the date of this Agreement. Acquisition has no reason to believe
that the financings referred to in such letters will not be available
to Acquisition at the Effective Time.
ARTICLE VI
COVENANTS
6.1 Interim Operations of the Company. The Company covenants
and agrees that, after the date hereof and prior to the Effective Time, unless
Acquisition shall have consented in writing thereto:
(a) except as set forth on Schedule 6.1(a), the business of
the Company and its Subsidiaries shall be conducted only in the
ordinary and usual course and substantially in accordance with past
custom and practice, and only to the extent consistent therewith, each
of the Company and its Subsidiaries shall use its reasonable best
efforts to preserve its business organization intact, keep available
the services of its officers and employees, and maintain its existing
relations with customers, suppliers and business associates;
(b) the Company shall not (i) amend its Certificate of
Incorporation or By-Laws or those of any of its Subsidiaries; (ii)
split, combine or reclassify the outstanding Shares or capital stock or
equity interest in any Subsidiary; or (iii) declare, set aside or pay
any dividend payable in cash, stock or property with respect to the
Shares or capital stock or equity interest in any Subsidiary;
(c) except as indicated on Schedule 6.1(c), neither the
Company nor any of its Subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any additional shares of, or securities
convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of Common
Stock of any class of the Company or capital stock or equity interest
in any Subsidiary, other than additional purchases of securities from
wholly-owned Subsidiaries of the Company and, in the case of the
Company; (ii) acquire directly or indirectly by redemption or otherwise
any shares of the Common Stock of the Company; or (iii) acquire or make
any material investment, whether by purchase, contributions to capital,
property transfers or otherwise, in any other entity;
(d) Except as set forth on Schedule 6.1(d), neither the
Company nor any of its Subsidiaries shall (i) grant any severance or
termination pay to (except in accordance with existing Company
policies), or enter into any employment or severance agreement with,
any director, officer or other employee of the Company or its
Subsidiaries, (ii) establish, adopt, enter into or amend any Employee
Plan, (iii) grant any general or uniform increase in the rates of pay
or benefits to officers, directors or employees (or a class thereof),
or (iv) grant any increase in the compensation or benefits of any
director, officer or employee not required by the terms of any Employee
Plan; and
25
(e) neither the Company nor any of its Subsidiaries shall
authorize or enter into an agreement to do any of the foregoing.
(f) neither the Company nor any of its Subsidiaries shall,
after the date hereof and prior to the Effective Time, effectuate a
"plant closing" or "mass layoff" as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN"),
affecting in whole or in part any site of employment facility,
operating unit or employee of the Company or any of its Subsidiaries.
6.2 Covenants of Acquisition. Acquisition covenants and agrees
that, after the date hereof and prior to the Effective Time, unless the Company
shall have consented in writing thereto, each of Acquisition and its Affiliates
shall use its reasonable best efforts to preserve its corporate organization
intact and keep available the services of its officers.
6.3 Filings; Consents; Other Action. Subject to the terms and
conditions herein provided, the Company and Acquisition shall (a) promptly make
their respective filings and thereafter make any other required submissions
under the HSR Act and other Company Regulatory Filings and Acquisition
Regulatory Filings, and (b) use their commercially reasonable best efforts to
promptly take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement as soon as
practicable, including using their reasonable best efforts to obtain the
consents referred to on Schedules 5.2(d) and 5.3(c) (provided that Acquisition
shall not be obligated to enter into any financing arrangement on terms not
acceptable to Acquisition). Each party shall promptly provide the other (or its
counsel) copies of all filings in connection with the Merger made by such party
under the HSR Act, Company Regulatory Filings and Acquisition Regulatory Filings
in connection with this Agreement and the transactions contemplated hereby and
thereby. In connection with proceedings under or relating to the HSR Act or any
other federal or state antitrust or fair trade law, all analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of Acquisition or the Company shall be subject to the
joint review of Acquisition and the Company, acting with the advice of their
respective counsel, it being the intent that the parties hereto will consult and
cooperate with each other, and consider in good faith the views of one another,
in connection with any such analysis, presentation, memorandum, brief, argument,
appearance, opinion or proposal; provided, however, that nothing herein shall
prevent Acquisition or the Company from (i) making or submitting any such
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal in response to a subpoena or other legal process or as otherwise
required by Regulation, or (ii) submitting factual information to the United
States Department of Justice, the Federal Trade Commission, any other
governmental agency or any court or administrative law judge in response to a
request therefor or as otherwise required by Regulation. The Company and
Acquisition each agrees to use its best efforts to litigate against the entry
of, or to obtain the lifting of, any temporary restraining order or preliminary
or permanent injunction or other governmental action in connection with the HSR
Act or any other applicable federal or state antitrust or fair trade law. The
existence of a temporary restraining order or the pendency of an action or
proceeding described in the preceding sentence will operate only to delay the
Effective Time until the thirtieth (30th) day following the lifting of such
temporary restraining order or the conclusion of such action or proceeding;
provided, however, that if such matter is not resolved by December 13, 1996,
then Acquisition or the Company shall have the right to terminate this
Agreement, as provided in Article VIII, and, in either case, the Letter of
Credit (or the LOC Payment, as the case may be) and
26
the No Shop Payment shall be returned to Acquisition, and no party hereto
(or any of its directors or officers) shall have any liability or further
obligation to any other party to this Agreement.
6.4 Access. Upon reasonable notice, the Company shall (and
shall cause each of its Subsidiaries to) afford Acquisition's Representatives
access, during normal business hours and upon reasonable request throughout the
period prior to the Effective Time, to its Business, Assets, Books, Contracts
and Records of itself and its Subsidiaries and to allow the conduct of such
examination of the condition of the Company and its Subsidiaries, as Acquisition
deems necessary or advisable to familiarize itself and its lenders with such
Business, Assets, Books, Records, condition and other matters, and to
investigate the accuracy and completeness of the representations and warranties
of the Company hereunder and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to Acquisition all
information concerning the Business, Assets and personnel of itself and its
Subsidiaries as Acquisition or its Representatives may reasonably request,
provided that such access shall not unreasonably interfere with the conduct by
the Company of the Business. Except as provided for in Sections 5.3(h) and 8.7,
no investigation pursuant to this Section 6.4 shall affect or be deemed to
modify any representation or warranty made by the Company or the Stockholders.
All information so obtained shall be subject to the Confidentiality Agreement.
6.5 Publicity. Neither Acquisition nor the Company shall issue
any press release after the date hereof or otherwise make any public statement
with respect to the transactions contemplated hereby without the consent of the
other (which shall not be unreasonably withheld, conditioned or delayed), except
to the extent that the disclosing party is advised by its counsel that such a
press release or statement is required by applicable Regulations, and then only
after consultation with the other party. The Company and Acquisition shall
consult with each other prior to making any filings with any federal or state
governmental or regulatory agency with respect to the Merger.
6.6 Further Assurances. Upon the terms and subject to the
conditions contained herein, the parties agree, both before and after the
Effective Time (a) to use all commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement (except that Acquisition shall not be required to
enter into any financing arrangements on terms not acceptable to Acquisition,
although any such determination shall not impact on the Company's rights to draw
on the Letter of Credit pursuant to Section 8.6(a)), (b) to execute any
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions contemplated
hereunder, and (c) to cooperate with each other in connection with the
foregoing. Without limiting the foregoing, the parties agree to use their
respective reasonable best efforts (i) to obtain all necessary waivers, consents
and approvals from other parties to the Contracts and Leases, (ii) to obtain all
necessary Permits as are required to be obtained under any Regulations, (iii) to
give all notices to, and make all registrations and filings with, third parties,
including without limitation submissions of information requested by
governmental authorities, and (iv) to fulfill all conditions to this Agreement.
As soon as practicable after the execution and delivery of this Agreement,
Acquisition and the Company shall make all filings required under the HSR Act.
6.7 Benefits.
(a) Employment Agreements. The employment agreements in effect
on the date hereof between the Company and the Persons set forth on
Schedule 6.7(a) shall be terminated
27
at and as of the Effective Time with no liability to the Company or
Acquisition and shall be replaced by the Employment and Consulting
Agreements provided for in Section 7.1(h).
(b) Indemnification. After the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless, each present and
former director and officer of the Company and each such person's
personal representative, estate, testator or intestate successors (the
"Indemnified Parties") against any and all losses, claims, damages,
liabilities, costs, expenses, judgments and amounts paid in settlement
with the approval of the Surviving Corporation (which approval shall
not be unreasonably withheld) in connection with any actual or
threatened claim, action, suit, proceeding or investigation arising out
of or pertaining to any act or omission occurring prior to the
Effective Time (including without limitation, any which arise out of or
relate to the transactions contemplated by this Agreement, other than
any which arise out of or relate to a breach of this Agreement),
whether asserted or claimed prior to, or on or after, the Effective
Time, to the full extent the Company would be permitted under
California Law to indemnify its own directors and officers. In
addition, the Surviving Corporation shall pay expenses incurred by an
Indemnified Party in advance of the final disposition of any such
action or proceeding upon receipt of an undertaking by or on behalf of
such Indemnified Party to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified. Without limiting
the foregoing, in the event any claim, action, suit, proceeding or
investigation is brought against any Indemnified Party, the Surviving
Corporation shall be entitled to assume the defense of any such action
or proceeding. Upon assumption by the Surviving Corporation of the
defense of any such action or proceeding, the Indemnified Party shall
have the right to participate in such action or proceeding and to
retain its own counsel, but the Surviving Corporation shall not be
liable for any legal fees or expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof unless (i)
Surviving Corporation has agreed to pay such fees and expenses, (ii)
representation of the Indemnified Party by counsel provided by the
Surviving Corporation would be inappropriate due to a conflict of
interest between the Surviving Corporation and the Indemnified Party,
or (iii) the Surviving Corporation shall have failed in a timely manner
to assume the defense of the matter. The Surviving Corporation shall
not be liable for any settlement of any claim effected without its
written consent, which consent shall not be unreasonably withheld. The
Surviving Corporation shall not, except with the written consent of the
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include, as an unconditional term, the
release by the claimant or plaintiff of such Indemnified Party from all
further liability in respect of such claim. Any Indemnified Party
wishing to claim indemnification under this Section 6.7(b), upon
learning of any such claim, action, suit, proceeding or investigation,
shall notify the Surviving Corporation (but the failure so to notify
the Surviving Corporation shall not relieve it from any liability which
it may have under this Section 6.7(b) except to the extent such failure
materially prejudices the Surviving Corporation). From and after the
Effective Time, the Surviving Corporation shall make no amendment(s) or
modification(s) to its Certificate of Incorporation and By-Laws which
would impair, lessen or reduce in any material manner the directors and
officers indemnification provisions contained in the Certificate of
Incorporation and By-Laws of the Company as of the Effective Time.
Acquisition shall cause to be maintained in effect for not less than
twenty-four (24) months from the Effective Time, policies of directors'
and officers' liability insurance to cover those persons who are or
were directors and/or officers of the Company with respect to matters
occurring prior to the Effective Time. Such insurance policies shall
provide coverage in the aggregate amount of not less than $10 million
and shall include terms
28
and conditions which are no less advantageous to such directors and
officers as those contained in the policies currently maintained by the
Company. This Section 6.7(b) shall survive the consummation of the
Merger and the Effective Time, is intended to benefit each present and
former director and officer of the Company and their respective heirs
and legal representatives (who shall be entitled to enforce the
provisions hereof),and shall be binding upon all successors and assigns
of Acquisition.
(c) Retention of Benefit Plan. Until December 31, 1997,
Acquisition shall maintain and keep in full force and effect that
certain 401(k) Savings Plan for Employees of Rose Hills Mortuary, Inc.,
adopted on September 23, 1987, as amended on December 22, 1989,
February 22, 1993, November 1, 1993, December 21, 1994 and December 5,
1995.
6.8 Phantom 401(K) Plan. The Partnership shall terminate its
Deferred Compensation Plan for Selected Executives of Rose Hills Mortuary, L.P.
(the "Phantom 401(k) Plan") prior to the Effective Time. In terminating the
Phantom 401(k) Plan the Partnership shall pay to the participants of such plan
an amount equal to, in the aggregate, approximately, $ , representing the sum
total of all the participants' account balances in the Phantom 401(k) Plan. Such
payments shall be made prior to the Effective Time, and each participant shall,
upon receiving such payment, grant a release from any and all liabilities
relating to the Phantom 401(k) Plan in favor of any person or entity who may
have any liability relating to the Phantom 401(k) Plan, including, but not
limited to, the Company, the Mortuary and the Partnership. The release shall be
in a form and content acceptable to Acquisition.
[6.9 Reserved.
6.10 Title Insurance.
(a) The Title Company has provided Acquisition with and
Acquisition has reviewed and approved the Title Commitment and Survey
for the Real Property, along with copies of all documents and
instruments reflecting items noted as exceptions to title. The Title
Commitment(s) have been appropriately annotated and initialled by the
parties to reflect such approvals and are accompanied by copies of all
endorsements which Acquisition requires and the Title Company has
agreed to provide.
(b) Any liens, encumbrances, security interests, easements,
restrictions, reservations, conditions, covenants, rights,
rights-of-way, and other matters affecting title to the Real Property
which are created or which may appear of record after the date of the
Title Commitment(s) and Survey(s), as applicable, but before the
Effective Time, and which are not reflected in the Title Commitment(s)
or Survey(s) (collectively, "Intervening Liens") shall be subject to
Acquisition's reasonable approval. Acquisition shall be deemed to have
approved each such Intervening Lien unless it delivers to the Company
written notice of disapproval specifically identifying grounds for such
disapproval (an "Objection") within fifteen (15) days after
Acquisition's receipt of written notice from the Title Company advising
of the existence of such Intervening Lien. Acquisition shall not have
the right to disapprove any Intervening Lien which has been previously
approved (or deemed approved) by Acquisition, or which has been caused
by Acquisition or any act of Acquisition, its agents, contractors,
employees or invitees. If Acquisition makes an Objection to an
Intervening Lien, then the Company and the Stockholders shall elect (i)
to cure such Objection prior to the Effective Time and have the
29
Title Commitment(s) and Survey(s) updated to reflect such cure (to the
extent applicable), whereupon it will be deemed that such Intervening
Lien is satisfactory to Acquisition, or (ii) to refuse to cure the
Objection, unless the Intervening Lien shall be subject to being
reduced to an ascertainable monetary amount, which the Company or the
Stockholders shall pay, but not greater than $1 million (when
aggregated with all amounts spent pursuant to Section 6.13 of this
Agreement and Sections 6.3 and 6.10(b) of the Association Asset
Purchase Agreement) as respects all Intervening Liens, in the
aggregate, and Acquisition, if the Company and the Stockholders are not
so required to cure, shall then have the right to either (x) waive the
Objection, in which case such Intervening Lien shall become an
additional Permitted Encumbrance for purposes of this Agreement, or (y)
terminate this Agreement (and the Association Asset Purchase Agreement)
by notifying the Company thereof within fifteen (15) days after the
Company notifies Acquisition of the Company's and the Stockholders'
inability or election not to cure the Objection and Acquisition shall
then be entitled to return of the Letter of Credit (or the LOC Payment,
as the case may be) and the No Shop Payment. If Acquisition does not so
timely elect to terminate this Agreement, then Acquisition shall be
deemed to have waived the Objection and such Intervening Lien shall
become an additional Permitted Encumbrance for purposes of this
Agreement. A commitment of the Title Company to insure over any
Intervening Lien constitutes cure by the Company and the Stockholders
of the Objection so long as the Company shall pay all additional title
and survey charges with respect thereto. Notwithstanding the foregoing,
the Company shall not cause, create, allow or permit the creation of
any Intervening Lien unless such Intervening Lien is required by law.
6.11 Preneed Contracts and Trust Funds. The Stockholders will,
upon receipt of written notice from Acquisition, reimburse Acquisition for the
cost of fulfilling all Preneed Contracts, funded by trust funds that are not
properly funded in accordance with Section 5.2(r). Upon receipt of written
notice from Acquisition, the Stockholders shall pay to Acquisition, and
indemnify Acquisition for, the amount of any shortfall without limit as to
amount. "Shortfall" means the difference as of the Effective Time between all
amounts legally or contractually required to be placed in trust by the Company
with respect to the Preneed Contracts and the amounts placed in trust by the
Company with respect to the Preneed Contracts. The Company will not withdraw or
permit the withdrawal of any monies from the Funds before the Effective Time
other than in accordance with Regulations and the terms of the Preneed
Contracts. At the Effective Time, the Company will take all such action as may
be required by applicable Regulations and otherwise in order for Acquisition to
replace the trustees and other fiduciaries of the Funds and any other trust
funds and accounts relating to the Preneed Contracts, and will execute all
necessary documentation that Acquisition may require with respect thereto.
6.12 Resignation/Election of Trustees. The Company and
Acquisition shall arrange for replacement of all persons presently serving as
trustees or other fiduciaries of funeral service and other similar type trusts
and plans currently maintained by the Company, with persons selected by
Acquisition, which shall be effective at the Closing.
6.13 Notification of Certain Matters. From the date hereof
through the Effective Date, the Company and the Stockholders shall give prompt
notice to Acquisition , and Acquisition shall give prompt notice to the Company
and the Stockholders, of (a) the occurrence, or failure to occur, of any event,
which would be likely to cause any representation or warranty contained in this
Agreement, or in any exhibit or schedule hereto, and made by such party, to be
untrue or inaccurate in any respect, and (b) any failure of the Company and the
Stockholders or Acquisition, as the case may
30
be, or any of their respective Affiliates or Representatives, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition. The Company and the
Stockholders shall promptly notify Acquisition of any Default by such party, the
written threat or commencement of any Action, or any development that occurs
before the Effective Time that could in any way affect the Company and the
Stockholders, the Assets or the Business. Further, if at any time prior to the
Effective Time, Acquisition shall learn (which, for the purposes of this Section
6.13, consists of the actual and direct knowledge of any of Xxxxxxxx Xxxxxx,
Xxxx X. Xxxx, Xxxxxxx Xxxxxx and G. Xxxxx Xxxxxxx) that any representation or
warranty contained in this Agreement or in any exhibit or schedule hereto and
made by the Company or the Stockholders is untrue or inaccurate in any respect,
Acquisition shall notify the Company and the Stockholders thereof and, if
Acquisition has not waived such untruth or inaccuracy, the Company and the
Stockholders shall cure the untruth or inaccuracy, without any obligation so to
do, except that if the untruth or inaccuracy can be cured by the payment of a
monetary amount, then the Company and the Stockholders shall so do, but the
Company and the Stockholders shall not be obligated to expend more than $1
million (when aggregated with all amounts spent pursuant to Section 6.10 of this
Agreement and Sections 6.3 and 6.10(b) of the Association Asset Purchase
Agreement) to cure all such untruths or inaccuracies. If the Company or the
Stockholders are not required to cure the untruth or inaccuracy as set forth in
the preceding sentence, Acquisition may (a) waive such untruth or inaccuracy, or
(b) to terminate this Agreement (and the Association Asset Purchase Agreement)
and, in the later instance, the Letter of Credit (or the LOC Payment, as the
case may be) and the No Shop Payment shall be returned to Acquisition and no
party hereto or any of its directors or officers shall have any liability or
further obligation to any other party to this Agreement, other than as provided
for in Article XII.
6.14 Supplemental Employee Retirement Plan. The Company,
Acquisition and the Persons identified on Schedule 6.7(a), shall arrange for the
transfer of the whole life insurance policies described on Schedule 5.2(dd),
relating to the Rose Hills Mortuary, LP Supplemental Employee Retirement Plan
(the "SERP") to a Rabbi Trust, having terms acceptable to all of them and
becoming effective at the Closing.
6.15 Assistance in Financing. The Company acknowledges that
Acquisition currently intends that payment of the Cash Consideration pursuant to
Section 4.1 will be financed, in part, by an offering of securities and the
arranging of senior bank debt financing. The Company will provide customary
assistance in connection with Acquisition's efforts to raise such financing,
including, without limitation, making senior management reasonably available for
meetings with prospective lenders and investors and cooperating in the
preparation of offering documents and necessary financial and business
information to enable documents, including the financial statements of the
Company, to comply with the rules and regulations of the Securities and Exchange
Commission, it being recognized that (a) neither the Company (prior to Closing)
nor the Stockholders will have any responsibility with respect to such
compliance, (b) the Company and the Stockholders and members of the Company's
management will be appropriately indemnified by Acquisition and/or Xxxxxx in
connection therewith, and (c) Acquisition and/or Xxxxxx will pay any travel
expenses incurred by the Company's executive officers in connection therewith.
6.16 Restrictions on Transfer.
31
(a) Each Stockholder (i) acknowledges that the Xxxxxx Shares
are not registered under the Securities Act and that the Xxxxxx Shares
to be acquired by such Stockholder must be held indefinitely by such
Stockholder unless they are subsequently registered under the
Securities Act or an exemption from registration is available, (ii) is
aware that any routine sales under Rule 144 under the Securities Act of
Xxxxxx Shares may be made only in limited amounts and in accordance
with the terms and conditions of Rule 144 and that in such cases where
Rule 144 is not applicable, compliance with some other registration
exemption will be required, (iii) is aware that Rule 144 may not
presently be available for use by such Stockholder for resale of any
Xxxxxx Shares, and (iv) is aware that, except as provided in the Share
Insurance and Registration Rights Agreement, Xxxxxx is not obligated to
register under the Securities Act any sale, transfer or other
disposition of the Xxxxxx Shares..
(b) Each Stockholder acknowledges that Xxxxxx is not required
to register the transfer of the Xxxxxx Shares on the books of Xxxxxx
unless Xxxxxx shall have been provided with an opinion of counsel
reasonably satisfactory to it prior to such transfer to the effect that
registration under the Securities Act or any applicable state
securities law is not required in connection with the transaction
resulting in such transfer. Each certificate for the Xxxxxx Shares
issued upon any transfer as above provided shall bear the restrictive
legend set forth in Section 6.17, except that such restrictive legend
shall not be required if the opinion of counsel reasonably satisfactory
to Xxxxxx referred to above is to the further effect that such legend
is not required in order to establish compliance with the provisions of
the Securities Act and any applicable state securities law.
6.17 Restrictive Legend. Each certificate representing the
Xxxxxx Shares shall be stamped or otherwise imprinted with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM, AND ANY SALE OR OTHER TRANSFER
IS FURTHER SUBJECT TO THE RESTRICTIONS SET FORTH IN THE
CERTAIN AGREEMENT AND PLAN OF MERGER DATED SEPTEMBER , 1996
BETWEEN ROSES, INC. AND ITS STOCKHOLDERS AND TUDOR ACQUISITION
CORP.]"
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
LISTED ON THE TORONTO STOCK EXCHANGE AND THE MONTREAL
EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED
THROUGH THE FACILITIES OF SUCH EXCHANGES SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE
REPRESENTING SUCH SECURITIES IS NOT "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK EXCHANGE OR
THE MONTREAL EXCHANGE."
32
Each share certificate to be delivered must be accompanied by a letter from The
Xxxxxx Group Inc. stating that:
(a) The securities represented by this certificate cannot be
traded through the facilities of The Toronto Stock Exchange or
on The Montreal Exchange since the certificate is not freely
transferrable and consequently is not "good delivery" in
settlement of transactions on The Toronto Stock Exchange or on
The Montreal Exchange; and
(b) The Toronto Stock Exchange and The Montreal Exchange would
deem the security holder to be responsible for any loss
incurred on a sale made by such holder in such securities.
6.18 Termination of Restrictions on Transferability. The
conditions imposed by Section 6.16 upon transferability of the Xxxxxx Shares
shall cease and terminate as to any of the Xxxxxx Shares when (i) such
securities shall have been registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller thereof set forth in the registration statement covering such
securities, or (ii) at such time as an opinion of counsel satisfactory to Xxxxxx
shall have been rendered as required pursuant to the second sentence of Section
6.16(b) to the effect that the restrictive legend on such securities is no
longer required, but in any event not prior to one year from the Effective Time,
or (iii) when such securities are transferable in accordance with the provisions
of Rule 144 promulgated under the Securities Act and Section 6.16(b) above.
Whenever the conditions imposed by Section 6.16 shall terminate as hereinabove
provided with respect to any of the Xxxxxx Shares, the holder of any such
securities bearing the legend set forth Section 6.17 as to which such conditions
shall have terminated shall be entitled to receive from Xxxxxx, without expense
(except for the payment of any applicable transfer tax) and as expeditiously as
possible, new stock certificates not bearing such legend.
6.19 Rights of First Refusal. Each Stockholder hereby waives
any and all rights it may have pursuant to any written or oral agreement or
otherwise to purchase or restrict the transfer of the stock, assets or any other
interest in the Company (or any of its Affiliates) or the Association (or any of
its Affiliates) as may arise due to the execution and delivery of this Agreement
by the Company and Stockholders.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Acquisition. The obligation
of Acquisition to consummate the Merger is subject to the fulfillment of each of
the following conditions, any or all of which may be waived in whole or in part
by Acquisition, as the case may be, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly
approved by (i) the requisite number of stockholders and the Board of
Directors of Acquisition and (ii) the requisite number of the
Stockholders and the Board of Directors of the Company, in each case in
accordance with the charter and by-laws provisions of such entity and,
in the case of (ii),
33
the Company, so as to make the transactions contemplated by this
Agreement binding on Acquisition, the Company and the Stockholders.
(b) Governmental and Regulatory Consents. The waiting period
applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated. Except for the filings provided for in
Section 1.3, the Company Regulatory Filings, Acquisition Regulatory
Filings and all other filings required to be made prior to the
Effective Time by Acquisition or the Company with, and all consents,
approvals, orders, registrations and authorizations required to be
obtained prior to the Effective Time by Acquisition or the Company
from, governmental and regulatory authorities in connection with the
execution and delivery of this Agreement by the Company or Acquisition
and the consummation of the transactions contemplated hereby by the
Company and Acquisition shall have been made or obtained (as the case
may be), except where the failure to have obtained or made such
consent, filing, authorization, order, approvals or registration would
not have a Material Adverse Effect or Material Adverse Change or
materially impair the ability of Acquisition to perform its obligations
under this Agreement.
(c) Actions. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent)
(collectively, an "Order") which is in effect and makes illegal or
prohibits consummation of the transactions contemplated by this
Agreement; provided that Acquisition shall have used reasonable efforts
to obtain the removal of any Order.
(d) Continuing Warranties; Certificate. The representations
and warranties of the Stockholders and the Company contained in Section
5.2 shall be true and correct in all respects on and as of the
Effective Time as though made on and as of the Effective Time, except
for (i) changes contemplated by this Agreement or in the Disclosure
Schedule, or (ii) where such untruth or incorrectness would not have a
Material Adverse Effect or result in a Material Adverse Change, and the
Company shall have performed in all material respects all of its
obligations hereunder theretofore to be performed, and Acquisition
shall have received at the Effective Time certificates to the foregoing
effect, dated the Effective Time, and executed by the Stockholders and
on behalf of the Company by an executive officer of the Company.
(e) Certain Authorizations and Consents. All Consents,
including, without limitation, those items referred to in Schedule
5.2(d), shall have been obtained by (i) the Company or (ii)
Acquisition, as the case may be, (or, if such consent relates to
indebtedness of the Company and such consent has not been obtained,
provision for the discharge of such indebtedness has been made), except
where the failure to obtain any such consent would not have a Material
Adverse Effect or result in a Material Adverse Change or materially
impair the ability of Acquisition to perform its obligations under this
Agreement.
(f) No Material Adverse Change. From and including the date
hereof, there shall not have occurred any event which has had a
Material Adverse Effect or Material Adverse Change.
34
(g) Opinion of Counsel to the Company. The Company shall have
delivered to Acquisition an Opinion of O'Melveny & Xxxxx LLP, counsel
to the Company, dated the Effective Time, in form and substance
acceptable to Acquisition and its counsel.
(h) Employment and Consulting Agreements. Each of the Persons
identified on Schedule 6.7(a), shall have executed and delivered
employment or consulting agreements with the Company, effective at the
Effective Time, substantially in the form appended hereto as Exhibit E.
(i) Resignations, etc. Resignations executed by each officer
and director of the Company and each of its Subsidiaries effective as
of the Effective Time, except as contemplated by the Employment
Agreements, and the resignations of those trustees and other
fiduciaries as contemplated by Section 6.12, shall have been delivered
to Acquisition.
(j) Other Agreements. The Stockholders and Company shall have
executed and delivered any and all other agreements as may reasonably
be necessary, appropriate and/or desirable in order to consummate the
transaction subject of this Agreement, including, without limitation,
all documents necessary to cancel and terminate, effective as of the
Effective Time, the following agreements: Shareholders Agreement dated
December 30, 1994, Option Agreement dated May 2, 1990, Operation and
Management Agreement dated October 1, 1989, Shared Facilities Contract
dated May 2, 1990, Tax Matters Agreement dated May 2, 1990, Murrieta
Management Agreement dated December 30, 1992, Assignment, Assumption
and Amendment Agreement dated May 2, 1990 and any other agreements
between the Stockholders, the Company or its Subsidiaries and the
Association.
(k) Outstanding Checks. Funds shall remain on deposit at the
Effective Time in each checking account maintained by the Company and
each of its Subsidiaries sufficient in amount to cover all outstanding
checks or drafts drawn against such accounts.
(l) Satisfaction of Indebtedness. At or prior to the Effective
Time, Acquisition shall have received reasonable assurances from Xxxxx
Fargo Bank, N.A. ("Xxxxx Fargo") that promptly following repayment of
the indebtedness owed by the Company or any of its Subsidiaries to
Xxxxx Fargo at or after the Effective Time, Xxxxx Fargo will release
all Encumbrances collateralizing such indebtedness.
(m) Title Policy. Acquisition shall have received the ALTA
Extended Owner's Policy of Title Insurance contemplated by the Title
Commitment, or, in substitution therefor,the Title Commitment and all
endorsements as "marked", initialed and dated by the Title Company,
having the same affect as if the actual policy was then being
delivered.
(n) Association Asset Purchase Agreement. The transactions
contemplated by the Association Asset Purchase Agreement shall be
consummated concurrently with consummation of the transactions
contemplated by this Agreement.
(o) Financing. Acquisition shall have secured the equity and
debt financing on terms and conditions acceptable to Acquisition
necessary to provide sufficient funds in order to allow consummation of
the transactions specified in this Agreement, the Association Asset
35
Purchase Agreement and repayment of the Company's indebtedness to Xxxxx
Fargo and to the Association.
(p) [Reserved]
(q) Nine Months Financial Statements. The Stockholders and the
Company shall have delivered the unaudited Balance Sheet, Statement of
Income and Statement of Cash Flow of the Partnership for the nine (9)
month period ending September 30, 1996, which shall fairly present in
all material respects in accordance with GAAP, the financial condition,
results of operations and cash flows of the Partnership as of such date
and for the period covered thereby, subject to normal year end accruals
and audit adjustments, none of which are expected to be material, and
the absence of footnotes.
(r) Title to Assets Other than Real Property. The Company and
its Subsidiaries shall have title to all of the Assets consisting of
tangible and intangible personal property which are necessary or
required for the conduct of the Business, in each case free and clear
of any and all Encumbrances, except Permitted Encumbrances.
(s) Preneed Contracts. The Company and its Subsidiaries shall
have deposited in trust in respect of all Preneed Contracts arising on
or before the Effective Date all amounts as are required by all
applicable Regulations and/or the underlying Preneed Contracts in
accordance with their respective terms.
(t) Covenants Not to Compete. Each of the Persons identified
in Schedule 6.7(a) shall have executed and delivered a Covenant Not to
Compete in favor of Acquisition and Parent at the Effective Time in the
form appended hereto as Exhibit F.
(u) No Indebtedness. At the Effective Time, there shall be no
items of indebtedness (i) owing by the Company or any of its
Subsidiaries to the Association or any subsidiary of the Association or
by the Association or any subsidiary of the Association to the Company
or any of its Subsidiaries and the Company shall have received a
Release from the Association, effective as of the Effective Time, with
respect to all liabilities or claims relating to matters occurring
prior to the Effective Date, or (ii) owing by the Company or any of its
Subsidiaries to the Stockholders or any of them.
7.2 Conditions to Obligations of the Stockholders and the
Company. The obligations of the Company to consummate the Merger and the
obligations of the Stockholders hereunder, are subject to the fulfillment of
each of the following conditions, any or all of which may be waived in whole or
in part by the Company or the Stockholders to the extent permitted by applicable
law:
(a) Stockholder Approval. This Agreement shall have been duly
approved by the requisite number of stockholders and the Board of
Directors of Acquisition and the requisite number of the Stockholders
and the Board of Directors of the Company, in each case in accordance
with applicable law and the charter and by-laws provisions of
Acquisition and the Company necessary in order to make the transactions
contemplated herein binding on the Company and the Stockholders and
Acquisition.
36
(b) Governmental and Regulatory Consents. (i) The waiting
period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated and, (ii) except for the filings
provided for in Section 1.3, the Company Regulatory Filings,
Acquisition Regulatory Filings and all other filings required to be
made prior to the Effective Time by Acquisition or the Company with,
and all consents, approvals, orders, registrations and authorizations
required to be obtained prior to the Effective Time by Acquisition or
the Company from governmental and regulatory authorities in connection
with the execution and delivery of this Agreement by Acquisition or the
Company and the consummation of the transactions contemplated hereby by
the Company and Acquisition shall have been made or obtained (as the
case may be), except where the failure to have obtained or made such
consent, filing, authorization, order, approvals or registration would
not have a Material Adverse Effect or Material Adverse Change.
(c) Order. There shall be in effect no Order which makes
illegal or prohibits consummation of the transactions contemplated by
this Agreement; provided, however, that the Company shall have used its
reasonable efforts to obtain the removal of any Order.
(d) Continuing Warranties; Certificate. The representations
and warranties of Acquisition contained in Section 5.2 shall be true
and correct in all material respects on and as of the Effective Time as
though made on and as of the Effective Time, except for the changes
contemplated by this Agreement, and Acquisition shall have performed in
all material respects all of its obligations hereunder theretofore to
be performed, and the Company shall have received at the Effective Time
certificates to the foregoing effect, dated the Effective Time, and
executed on behalf of Acquisition by an executive officer of
Acquisition.
(e) Certain Authorizations and Consents. All Consents referred
to in Schedule 5.3(d) shall have been obtained by Acquisition, except
to the extent that the failure to obtain such consents would not act to
materially impair Acquisition's ability to perform its obligations
under this Agreement.
(f) No Material Adverse Effect. From and including the date
hereof, there shall not have occurred any event which has had a
material adverse effect on the ability of Acquisition to perform its
obligations under this Agreement.
(g) Opinion of Counsel to Acquisition. Acquisition shall have
delivered to the Company and the Stockholders an Opinion of Stradley,
Ronon, Xxxxxxx & Young, counsel to Acquisition, dated the Effective
Time, in form and substance acceptable to the Company and its counsel.
(h) Employment and Consulting Agreements. Acquisition shall
have executed and delivered to each of the Persons identified on
Schedule 6.7(a) and each such Persons shall have entered into, an
Employment or Consulting Agreement with Acquisition in the form
appended hereto as Exhibit E.
(i) Other Agreements. Acquisition shall have executed and
delivered any and all other agreements as may be necessary, appropriate
and/or desirable in order to consummate the transaction subject of this
Agreement.
37
(j) Association Asset Purchase Agreement. The Association
Asset Purchase Agreement shall be consummated concurrently with
consummation of the transactions contemplated by this Agreement.
(k) Due Diligence Certificate. Acquisition shall deliver to
the Stockholders a certificate based solely upon the actual and direct
knowledge of Xxxxxxxx Xxxxxx, Xxxx X. Xxxx, Xxxxxxx Xxxxxx and G. Xxxxx
Xxxxxxx (after such inquiry and investigation as is reasonable under
the circumstances), indicating that, at the Effective Time, no breach
of any representation or warranty by the Stockholders and/or the
Company has occurred.
(l) Share Issuance and Registration Rights Agreement. Xxxxxx
shall execute and deliver to the Stockholders the Share Issuance and
Registration Rights Agreement.
(m) Guaranty of SERP and Employment and Consulting Agreements.
Xxxxxx shall have issued its written guaranty of the obligations of
Acquisition under and pursuant to the SERP and the Employment and
Consulting Agreements referred to in Section 7.1(h), in form and
substance reasonably acceptable to the Persons described in Section
6.7(a).
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by holders of Acquisition's Common Stock or
the Shares, by the mutual written consent of Acquisition and the Company by
action of their respective Boards of Directors.
8.2 Termination by Either Acquisition or the Company. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Acquisition or the Company (and by written notice
to the other party) if the Merger shall not have been consummated by December
13, 1996, provided that the terminating party shall not have breached its
obligations hereunder in any manner that shall have contributed materially to
the failure to consummate the Merger.
8.3 Termination by Acquisition. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the Board of Directors of Acquisition (with written notice to
the Stockholders and the Company), if (i) the Company or any of the Stockholders
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by the
Company or any of the Stockholders at the time of such termination and such
failure has not been cured within fifteen (15) days of notice to the Company and
the Stockholders from Acquisition, provided that such time shall not extend
beyond December 13, 1996, or (ii) any representation or warranty by the Company
or any of the Stockholders contained in this Agreement shall be incorrect or
untrue except where such incorrectness or untruth would not have a Material
Adverse Effect or result in a Material Adverse Change.
38
8.4 Termination by the Company or the Stockholders. This
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time by action of the Board of Directors of the Company or by
unanimous action of the Stockholders, acting as a whole (with written notice to
Acquisition), if (i) Acquisition shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to
be complied with or performed by Acquisition at the time of such termination and
such failure has not been cured within fifteen (15) days of notice to
Acquisition from the Company, provided that such time shall not extend beyond
December 13, 1996 or (ii) any representation or warranty by Acquisition
contained in this Agreement shall be incorrect or untrue, except where such
incorrectness or untruth would not have a material adverse effect on
Acquisition's ability to perform its obligations under this Agreement.
8.5 Effect of Termination and Abandonment. Subject to the
provisions of Section 8.6(c), in the event of termination of this Agreement and
abandonment of the Merger pursuant to this Article VIII, no party hereto (or any
of its directors or officers) shall have any liability or further obligation to
any other party to this Agreement except for such obligations as are set forth
in Article XII hereof.
8.6 Deposits.
(a) Concurrently with the execution of this Agreement,
Acquisition has delivered to the Company and/ or the Stockholders an
irrevocable letter of credit drawn on Bank of Montreal ("Bank") in the
amount of $6.9 million having a maturity date of December 12, 1996 (the
"Letter of Credit"). At the Effective Time, the Letter of Credit shall
be returned to Acquisition as against delivery by Acquisition of the
amount represented thereby; provided, however, that if the Effective
Time occurs after November 26, 1996, but prior to December 13, 1996,
and the Company has drawn against the Letter of Credit, the proceeds of
the Letter of Credit shall be applied as provided in Section 4.1(a)(i).
In the event that the Stockholders and the Company shall commit a
breach of this Agreement, and, as a consequence thereof, Acquisition
has elected to terminate this Agreement pursuant to Section 8.3, the
Letter of Credit or, if the Letter of Credit has been drawn against,
the proceeds of the Letter of Credit, shall be returned or paid to
Acquisition. The Company and/or the Stockholders may draw upon the
Letter of Credit upon delivery to the Bank of a certificate executed by
a duly authorized officer of the Company which states as follows:
(i) I am duly sworn according to law; (ii) I
am the duly elected and incumbent [officer] of the Company;
(iii) as of November 26, 1996, no Closing (as defined in that
certain Agreement and Plan of Merger dated September , 1996,
as to which Roses, Inc., the Stockholders of Roses, Inc., and
Tudor Acquisition Corp. are parties [the "Agreement"]) has
occurred; (iv) all conditions to Acquisition's obligations to
close (other than the conditions specified in Section
7.1(a)(i), the second sentence of Section 7.1(b) and Sections
7.1(e)(ii), 7.1(g), 7.1(j), 7.1(k), 7.1(l), 7.1(m), 7.1(n),
7.1(o) and 7.1(u) of the Agreement) have been fulfilled; the
Company has delivered to Acquisition not later than three (3)
days prior to the Company's draw on the Letter of Credit a
notice stating that with respect to those conditions set forth
in Sections 7.1(e)(ii), 7.1(g), 7.1(j), 7.1(k), 7.1(m) and
7.1(u) of the Agreement, none of the Company nor the
Stockholders has any reason to believe that such conditions
would not be satisfied if the Effective Time had
39
occurred on the date of the draw of this Letter of Credit; and
(vi) the Association has delivered to the Bank its certificate
pursuant to Section 6.12 of the Association Asset Purchase
Agreement.
(b) Pursuant to that certain No Solicitation Agreement dated
July 15, 1996 between LGII, the Association, the Company and the
Stockholders (the "No Shop Agreement"), the sum of $1.0 million has
been paid to the Company (the "No Shop Payment") (the Letter of Credit,
or proceeds thereof, and the No Shop Payment are sometimes collectively
referred to herein as the "Deposits").
(c) If this Agreement shall be terminated by the Company
pursuant to Section 8.2 (so long as the Company is in compliance with
the proviso of that Section) or by the Company or the Stockholders
pursuant to Section 8.4, then the Company and the Stockholders shall be
entitled to retain the Deposits as liquidated damages which shall be
their sole and exclusive remedy; otherwise, the Deposits shall be paid
to Acquisition.
8.7 Effect of Closing Over Known Unsatisfied Conditions. If,
with actual knowledge of the failure of any condition, any of the Company, the
Stockholders or Acquisition elects to proceed with the Closing, the condition
that is unsatisfied at the Closing Date shall be deemed to be waived and, if
required by the other parties, the electing party shall so acknowledge by a
writing delivered at the Closing.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses. Irrespective of whether or not the
Merger shall be consummated, each party hereto shall pay its own legal,
accounting, investment banking, consulting, valuation and other advisory fees
and out of pocket expenses incident to preparing for, entering into and carrying
out this Agreement. Notwithstanding the foregoing sentence, nevertheless, except
to the extent otherwise provided for in Section 6.10, the Stockholders and
Acquisition shall each bear one-half (1/2) of (a) the costs, expenses and
premium for the ALTA Extended Coverage Owner's Policy of Title Insurance to be
issued by the Title Company at the Effective Time in accordance with the Title
Commitment and the cost of zoning, subdivision and map act, non-imputation and
comprehensive affirmative coverage endorsements relating to the Real Property;
provided, however, that the cost of all other affirmative coverage endorsements
to be issued in connection therewith shall be the sole responsibility of
Acquisition, and (b) the costs, expenses, or other charges of the Exchange Agent
and under the Exchange Agreement. In addition, Acquisition shall pay for the
costs and expenses connected with preparation of the Survey, except as otherwise
provided for in Section 6.10.
9.2 Modification or Amendment. Subject to the applicable
provisions of both the DGCL and the CGCL, at any time prior to the Effective
Time, the parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other parties thereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. Prior to the Effective Time, this
Agreement may be amended only with the written consent of all of the parties
hereto.
40
9.3 Waiver of Conditions. The conditions to each party's
obligation to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4 Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute one and the same agreement.
9.5 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without giving effect to conflicts of law principles.
9.6 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received, if
personally delivered; when transmitted, if transmitted by telecopy, electronic
or digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized a overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested.
In each case notice shall be sent to:
if to Acquisition:
Tudor Acquisition Company
c/x Xxxxxx Group International, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx
By Fax: (000) 000-0000
with copies to:
Xxxx Xxxx, Esquire
The Xxxxxx Group, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
By Fax: (000) 000-0000
Stradley, Ronon, Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, III, Esquire
By Fax: (000) 000-0000
The Blackstone Group
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
By Fax: (000) 000-0000
41
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
By Fax: (000) 000-0000
if to the Company
Roses, Inc.
0000 Xxxxx Xxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Executive Vice President and
Chief Financial Officer
By Fax: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
O'Melveny & Xxxxx LLP
000 X. Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
By Fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 Entire Agreement. This Agreement (including all schedules
and any exhibits or annexes hereto), (a) constitutes the entire agreement, and
supersedes all other prior agreements, understandings, representations and
warranties, both written and oral, among the parties, with respect to the
subject matter hereof, including, in particular but without limitation, the
Confidentiality Agreement and the No Shop Agreement, and (b) shall not be
assignable by operation of law or otherwise; provided, however, that (i)
Acquisition may assign its rights under this Agreement to one or more third
parties (and any such third party transferrees may further so assign) provided
that any such assignee or reassignee is Blackstone Capital Partners II Merchant
Banking Fund L.P. ("Blackstone") or Xxxxxx or an Affiliate of Blackstone or
Xxxxxx, provided that the assignee shall execute a counterpart of this Agreement
agreeing to be bound by the terms hereof as "Acquisition" and provided further
that any such assignment shall not impair the Company's and/or the Stockholders'
rights or ability to draw on the Letter of Credit in accordance with its terms.
Except for the provisions contained in Sections 6.14 and 7.2(h), nothing in this
Agreement express or implied, is intended to confer upon any person (including,
in particular, but without limitation, the employees of the Company) other than
the parties hereto any rights or remedies under or by reason of this Agreement.
9.9 Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
9.10 Knowledge. As used in this Agreement, "knowledge" and
terms of similar import shall mean (a) with respect to the Company and its
Subsidiaries, the actual and direct
42
knowledge of Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxx, after
such inquiry and investigation as is reasonable under the circumstances, and (b)
with respect to each of the Stockholders, the actual and direct knowledge of
such Stockholder, after such inquiry and investigation as is reasonable under
the circumstances, except that the knowledge of each Stockholder may be imputed
one to the other among them.
9.11 Representation By Counsel, Interpretation. The parties
acknowledge that each party to this Agreement has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law, including but not limited to Section
1654 of the California Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it, has no application and is expressly waived.
9.12 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any governmental entity,
the remaining provisions of this Agreement, to the extent permitted by law,
shall remain in full force and effect provided that the essential terms and
conditions of this Agreement for all parties remain valid, binding and
enforceable.
ARTICLE X
DEFINITIONS
As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, litigation,
proceeding, arbitration, or governmental audit, inquiry, or investigation.
"Affiliate" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Assets" shall mean all of the right, title and interest in
and to the properties, assets and rights of any kind, wheresoever located and
whether or not reflected in the Books and Records, whether tangible or
intangible, real or personal, used in connection with, or related to, the
Business owned by the Company and each of its Subsidiaries or, in which the
Company and each of its Subsidiaries has any interest.
"Association" shall mean Rose Hills Memorial Park Association,
a California non-profit mutual benefit corporation.
"Association Asset Purchase Agreement" shall mean that certain
Asset Purchase Agreement dated of even date herewith, between Acquisition and
the Association.
"Books and Records" shall mean (a) all records and lists of
the Company and each of its Subsidiaries pertaining to the Assets, (b) all
records and lists pertaining to the Business, customers, suppliers or personnel
of the Company and each of its Subsidiaries, (c) all product, business and
43
marketing plans of the Company and each of its Subsidiaries pertaining to the
Business and (d) all books, ledgers, files, reports, plans, drawings and
operating records of the Company and each of its Subsidiaries pertaining to the
Business, but excluding the originals of the Company's and all of each of its
Subsidiaries minute books, stock books and tax returns.
"Business" shall mean the Company's and each of its
Subsidiary's business of the ownership, management and operation of the Mortuary
and the management of the Cemetery (including, without limitation, the sale as
agent of insurance relating to Preneed Contracts).
"Cemetery" shall mean Rose Hills Memorial Park in the County
of Los Angeles, California.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
"Confidentiality Agreement" shall mean that certain
Confidentiality Agreement dated July 25, 1995, as amended January 1, 1996 by and
among the Company, Xxxxxx and the Association.
"Consent" shall mean any consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
governmental authority or other Person.
"Contract" shall mean any agreement, contract, note, loan,
evidence of indebtedness, purchase order, letter of credit, indenture, security
or pledge agreement, franchise agreement, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company
and each of its Subsidiaries is a party or by which the Company and each of its
Subsidiaries is bound and which relates to the Business or the Assets, whether
oral or written, but excluding all Leases.
"Contract Rights" shall mean all of the rights and obligations
of the Company and each of its Subsidiaries under the Contracts listed on
Schedule 5.2(k).
"Copyrights" shall mean registered copyrights, copyright
applications and unregistered copyrights.
"Court Order" shall mean any judgment, decision, consent
decree, injunction, ruling or order of any federal, state or local court or
governmental agency, department or authority that is binding on any person or
its property under applicable law.
"Default" shall mean a breach of or default under any Contract
or Lease.
"Disclosure Schedule" shall mean the collection of schedules
executed and delivered by the Company and Acquisition as of the date hereof
which sets forth the exceptions to the representations and warranties and
covenants contained in this Agreement and certain other information called for
by this Agreement. Unless otherwise specified, each reference in this Agreement
to any numbered schedule is a reference to that numbered schedule which is
included in the Disclosure Schedule, and disclosure on any Schedule attached to
this Agreement or to the Association Asset Purchase Agreement shall constitute
disclosure on all Schedules for purposes of this Agreement.
44
"Employee Plans" shall mean all employee benefit plans as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA") and all severance, bonus, employment, stock option, stock purchase,
change-in-control, collective bargaining, incentive, retirement, pension, profit
sharing and deferred compensation plans and other similar fringe or employee
benefit plans, programs or arrangements, and all employment or compensation
agreements, written or otherwise, for the benefit of or relating to any employee
or former employee of, and related to employment by, the Company and each of its
Subsidiaries whether or not subject to ERISA.
"Encumbrance" shall mean any claim, lien, pledge, option,
charge, easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Environmental Damages" shall mean any and all losses which
are incurred at any time as a result of the existence at or prior to the
Effective Time of Hazardous Materials upon, about or beneath the Real Property
or migrating to or from the Real Property, or the existence of a violation of
Environmental Requirements pertaining to the Real Property, regardless of
whether the existence of such Hazardous Materials or the violation of
Environmental Requirements arose prior to the present ownership or operation of
the Real Property. Notwithstanding the foregoing, Environmental Damages shall
not include consequential damages or damages comprised of lost income or
profits.
"Environmental Requirements" shall mean all applicable
Regulations of any governmental authority in effect on the date of this
Agreement relating to the protection of human health or the environment,
including (a) all requirements pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases or threatened
releases of Hazardous Materials, or (b) all requirements pertaining to the
protection of the health and safety of employees or the public.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the Rules and Regulations thereunder.
"Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery, automobiles, trucks, equipment, molds,
patterns, and other tangible personal property owned by the Company and each of
its Subsidiaries and used in connection with the Business, wherever located, and
including any such Fixtures and Equipment in the possession of any of the
Company's suppliers, including all warranty rights with respect thereto, all as
are described on Schedule 5.2(m).
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"Hazardous Materials" shall mean (a) any substances classified
as of the date of this Agreement as "hazardous" pursuant to (i) the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC
9601, et seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, 42 USC 6901 et seq., the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 USC
45
1251 et seq., the Clean Air Act of 1966, as amended, 42 USC 7401 et seq., the
Toxic Substances Control Act of 1976, 15 USC 2601 et seq., or the Hazardous
Materials Transportation Act, 49 USC 5101 et seq., and (ii) the California
Health and Safety Code, ss.25100, et seq. and ss.3900, et seq.; (b)
asbestos-containing construction material; (c) polychorinated biphenls; and (d)
petroleum, including crude oil or any fracture thereof, natural gas, natural gas
liquids, liquified natural gas or synthetic gas usable for fuel.
"Inventory" shall mean all caskets, funeral commodities and
other inventory used in the conduct of the Business and owned by the Company and
its Subsidiaries.
"LGII" shall mean Xxxxxx Group International, Inc., a Delaware
corporation.
"Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency or guaranty of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"LOC Payment" shall mean the proceeds of a drawing on the
Letter of Credit as defined in Section 8.6.
"Xxxxxx" shall mean The Xxxxxx Group, Inc., a British Columbia
corporation, whose stock is presently quoted on the NASDAQ National Market
System.
"Xxxxxx Shares" shall mean the shares of the common capital
stock of Xxxxxx provided for in Section 4.1 hereof.
"Material Adverse Effect or "Material Adverse Change" shall
mean, individually or in the aggregate, any material adverse effect upon or
material adverse change in the following items, in either case with respect to
the Company and each of its Subsidiaries and the Association taken as a whole:
(a) the financial condition or results of operations of the Company and/or each
of its Subsidiaries and the Association; or (b) the condition or going concern
value of (i) the Business and the Assets of the Company and/or its Subsidiaries,
and (ii) the Business and the Assets (other than the Excluded Assets) of the
Association to be purchased by Acquisition pursuant to the Association Asset
Purchase Agreement.
"Operating Capital" shall mean, as of any date, the difference
between (a) the sum of Customer Accounts Receivable less Allowance for Doubtful
Accounts, plus Other Receivables (but excluding any (i) Accounts Receivable or
Accounts Payable from the Association or any of its Affiliates or any affiliates
of the Company and (ii) any Accounts Receivable from Xxxxxx & Xxxxxxx) plus
Casket and Other Inventories, and (b) the sum of Accounts Payable, Accrued
Expenses and Accrued Compensation, all as reflected on the balance sheet of the
Partnership.
"Ordinary Course of Business" or "Ordinary Course" or any
similar phrase shall mean the ordinary course of the Business and consistent
with the past custom and practice of the Company and each of its Subsidiaries.
"Parent" shall mean Tudor Acquisition Holding Corp., a
Delaware corporation.
46
"Permits" shall mean all licenses, permits, franchises,
approvals, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, or any other
person, necessary for the past or present conduct of, or relating to the
operation of the Business.
"Permitted Encumbrances" shall mean (a) with respect to the
Real Property, (i) those exceptions shown on the Title Commitment and the
Survey, and (ii) all other exceptions approved or deemed approved by Acquisition
pursuant to Section 6.10, and (b) with respect to all other Assets (i.e. other
than the Real Property), minor liens which in the aggregate are not substantial
in amount, do not materially detract from the value or transferability of the
property or assets subject thereto or interfere with the present use thereof.
"Person" shall mean any individual, firm, corporation,
partnership, trust, estate, association or other entity.
"Preneed Contracts" shall mean all written contracts and
commitments relating to the provision or sale of preneed funeral merchandise,
properties or services and any debenture, insurance policy, plan, deposit,
prepaid amount, trust fund or trust agreement relating to such contracts and
commitments, and any similar items entered into or obtained by the Company or
any of its Subsidiaries in the ordinary and usual course of the conduct of the
Business.
"Proprietary Rights" shall mean all of the Company and each of
its Subsidiary's Copyrights, Trademarks, technology rights and licenses,
computer software (including without limitation any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, designs, specifications, plans, drawings and intellectual
property rights.
"Real Property" shall mean that real property of the Company
and its Subsidiaries as described on Schedule 5.2(n) hereto.
"Share Issuance and Registration Rights Agreement" shall mean
that certain agreement between Xxxxxx and the Stockholders relating to the
Xxxxxx Shares attached hereto as Exhibit D.
"Regulations" shall mean any laws, statutes, codes,
ordinances, regulations, rules, court decisions, and orders of any federal,
state or local government and any other governmental department or agency,
including without limitation, those governing the use, operation and disposition
of mortuaries and the withholding of funds to be placed in trust with respect to
Preneed Contracts.
"Representative" shall mean any officer, director, trustee,
principal, attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the general Rules and Regulations thereunder.
"Survey" shall mean that certain survey with respect to the
Real Property dated , 1996, and prepared by Xxxxx and Associates
in compliance with all applicable ALTA requirements and as may otherwise be
required to enable the Title Company to issue the Title Commitment without the
so-called standard printed exceptions for matters disclosed by an accurate 47
survey.
"Tax" shall mean any federal, state, local, foreign or other
tax, levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Tax Returns" shall mean all returns, reports, declarations,
and information returns and statements relating to Taxes, including any
amendments thereto.
"Title Company" shall mean First American Title Company of Los
Angeles or such other title insurance company as may hereafter be acceptable to
both the Stockholders and Acquisition.
"Title Commitment" shall mean that certain binding commitment
from the Title Company in the form attached hereto as Exhibit C, pursuant to
which Title Company agrees to issue to Acquisition at the Effective Time an ALTA
Extended Coverage Owner's Policy of Title Insurance (in current form), insuring
that fee simple title to the Real Property is vested in Acquisition in the full
amount of the Merger Consideration allocated to the Real Property.
"Trademarks" shall mean all trademarks, service marks, trade
names, service names, corporate names, logos, trade dress, and other words,
designations, labels, symbols or designs, together with the goodwill of the
Company's business appertaining thereto.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Stockholders. Each Stockholder,
severally and not jointly, agrees to indemnify, defend and hold Acquisition and
its Affiliates harmless from and against any and all claims, liabilities, losses
and expenses, including reasonable attorney's fees, on an after tax basis
(collectively, "Losses and Expenses") actually incurred by Acquisition or its
Affiliates in connection with or arising from:
(a) any material breach by such Stockholder and/or the Company
of any covenant in this Agreement or in any agreement or instrument
referenced in this Agreement or contemplated hereby to which such
Stockholder and/or the Company is a party;
(b) any material failure by such Stockholder and/or the
Company to perform any of its obligations in this Agreement or in any
agreement or instrument referenced in this Agreement or contemplated
hereby to which such Stockholder and/or the Company is a party and;
48
(c) any breach of any warranty or the inaccuracy of any
representation of such Stockholder and/or the Company contained in this
Agreement or referred to in this Agreement or any certificate delivered
by such Stockholder and/or the Company pursuant hereto.
provided, however, that except as set forth in Section 11.4 of this Agreement,
with respect to (i) any breach or failure to perform specified in this Section
11.1 on the part of the Company or (ii) any breach by the Stockholders of any
representation or warranty contained in Section 5.2 hereof; the liability of
each Stockholder under this Section 11.1 shall be several in proportion to its
respective Ownership Percentage and provided further, that the Stockholders
shall be required to indemnify and hold Acquisition and its Affiliates harmless
under this Section 11.1 with respect to any Losses and Expenses incurred by
Acquisition or its Affiliates only to the extent that the aggregate amount of
such Losses and Expenses for which Acquisition or any such Affiliate is entitled
to indemnification under the preceding provisions of this Section 11.1, when
combined with the aggregate amount of Losses and Expenses for which Acquisition
or any such Affiliate is entitled to indemnification under Section 10.4 of the
Association Asset Purchase Agreement, taken together, exceeds $1 million (the
"Basket"), and then only with respect to the amount in excess of the Basket. In
determining the Basket, all of the Losses and Expenses for which Acquisition or
any such Affiliate would otherwise be entitled, but for the Basket, to receive
indemnification pursuant to this Section 11.1 and Section 10.4 of the
Association Asset Purchase Agreement shall be aggregated, irrespective of
whether such Losses and Expenses or any individual component thereof is less
than $1 million. Notwithstanding the foregoing, [A] the maximum liability of any
Stockholder to Acquisition and its Affiliates under this Section 11.1 shall not
exceed the amount of Merger Consideration received by such Stockholder on the
Closing Date, [B] the maximum liability of all of the Stockholders as a group to
Acquisition and its Affiliates under this Section 11.1 shall not exceed $15
million in the aggregate (the limitations contained in clauses [A] and [B] are
collectively referred to herein as the "Cap"), and [C] the Stockholders shall
not be required to indemnify Acquisition and its Affiliates under this Section
11.1 for any Losses and Expenses resulting or arising from or based upon any
inaccuracy or breach of any representation or warranty of the Stockholders or of
the Company contained in this Agreement to the extent that such inaccuracy or
breach was actually known to Acquisition on or as of the Closing Date.
11.2 Indemnification by Acquisition. Acquisition agrees to
indemnify, defend and hold the Stockholders and their respective Affiliates and
beneficiaries harmless from and against any and all Losses and Expenses actually
incurred by them in connection with or arising from:
(i) any material breach by Acquisition of any of its
covenants or agreements in this Agreement or in any other document to
which Acquisition is a party;
(ii) any material failure by Acquisition to perform any
of its obligations in this Agreement or in any other document to which
Acquisition is a party; or
(iii) any breach of any warranty or the inaccuracy of
any representation of Acquisition contained or referred to in this
Agreement or in any certificate delivered by or on behalf of the
Acquisition pursuant hereto.
11.3 Insurance and Tax Benefits.
(a) Nothwithstanding the foregoing, in no event shall an
Indemnified Party be entitled to indemnification hereunder to the
extent any Losses and Expenses are covered by and actually
49
paid by insurance maintained by the Indemnified Party or any of its
Affiliates (an "Insurance Benefit").
(b) The amount of any indemnity payment otherwise required to
be made pursuant to this Agreement shall be reduced by the amount of
any directly corresponding federal, state or local income tax benefit
actually realized by the Indemnified Party or an Affiliate thereof from
payment of the liability upon which the claim for indemnity is based,
but only to the extent that such income tax benefit results in an
actual reduction of income taxes due in the year of payment of the
claim for indemnity or in a refund of taxes already paid.
11.4 Basket, Cap, Time Limitation Not Applicable.
Notwithstanding anything to the contrary contained in this Agreement, in no
event shall the Basket, the Cap or the time limitations (as provided for in
Section 11.11) be applicable to Losses and Expenses (a) arising as a result of a
breach of the representations and warranties set forth in Sections 5.1(a),
5.1(b), 5.1(d), 5.1(e), 5.2(a), 5.2(b), 5.2(h) or 5.2(l), (b) which relate to a
payment of Taxes as set forth in Article XIV of this Agreement, or (c) which may
ultimately be determined pursuant to Section 11.10 to be due to the actual fraud
by the Company. For purposes of this Section 11.4, the term "actual fraud" shall
require actual (not constructive) intent to defraud and actual reliance on the
part of Acquisition.
11.5 Notice of Claims. Either of Acquisition or a Stockholder,
(the "Indemnified Party") seeking indemnification hereunder shall give to the
party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim (and, if applicable, the Basket), and a reference to
the provision of this Agreement or any other agreement, document or instrument
executed hereunder or in connection herewith upon which such claim is based;
provided, however, that a Claim Notice in respect of any claim, action at law or
suit in equity by or against a Third Person, as defined in Section 11.7 below,
as to which indemnification will be sought shall be given promptly after the
claim, action or suit is commenced; provided, further, that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been materially prejudiced by such failure.
11.6 Sole Remedies of the Parties; Limit on Indemnifiable
Claims.
(a) The sole and exclusive remedy of the parties hereto for
any claim resulting in a breach by any of the parties hereto of their
respective representations, warranties, covenants or agreements made
hereby or the failure by any party to perform their respective
obligations under this Agreement shall be a claim under Article XI of
this Agreement. The parties hereby waive any provision of law,
including, without limitation, any provision of Section 1542 of the
California Civil Code, to the extent that it would limit or restrict
the agreement contained in this Section.
(b) Any indemnifiable claim with respect to any breach or
nonperformance by any party of a representation, warranty, covenant or
agreement shall be limited to the amount of actual damages sustained by
the Indemnified Party by reason of such breach or nonperformance.
Notwithstanding anything to the contrary elsewhere in this Agreement,
no party or its Affiliates shall in any event be liable to any other
party or its Affiliates for any consequential damages, including, but
not limited to, loss of future revenue or income, cost of
50
capital, or loss of business reputation or opportunity. Each party
further agrees that it shall not seek punitive damages as to any matter
relating to this Agreement or the transactions contemplated by it.
(c) U.S. Trust Company of California, N.A. is executing this
Agreement solely in its capacity as Trustee of the Trusts whose names
appear as parties hereto and not in its individual or corporate
capacity. U.S. Trust Company of California, N.A. shall have no
individual or corporate liability or financial responsibility, and only
the assets that are owned by those Trusts, respectively, shall be
available to respond to claims of breach of warranty or for
indemnification or otherwise.
11.7 Third Person Claims.
(a) Subject to Section 11.7(b), the Indemnified Party shall
have the right to conduct and control, through counsel of its choosing,
the defense, compromise or settlement of any Third Person claim, action
or suit against such Indemnified Party as to which indemnification will
be sought by any Indemnified Party from any Indemnitor hereunder, and
in any such case the Indemnitor shall cooperate in connection therewith
and shall furnish such records, information and testimony and attend
such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnified Party in connection
therewith; provided, however, that the Indemnitor may participate,
through counsel chosen by it and at its own expense, in the defense of
any such claim, action or suit as to which the Indemnified Party has so
elected to conduct and control the defense thereof; and provided,
further, that the Indemnified Party shall not, without the written
consent of the Indemnitor (which written consent shall not be
unreasonably withheld, conditioned or delayed), pay, compromise or
settle any such claim, action or suit, except that no such consent
shall be required if, following a written request from the Indemnified
Party, the Indemnitor shall fail, within 14 days after the making of
such request, to acknowledge and agree in writing that, if such claim,
action or suit shall be adversely determined, such Indemnitor has an
obligation to provide indemnification hereunder to such Indemnified
Party. Notwithstanding the foregoing, the Indemnified Party shall have
the right to pay, settle or compromise any such claim, action or suit
without such consent, provided, however, that in such event the
Indemnified Party shall waive any right to indemnity therefor hereunder
unless such consent is unreasonably withheld.
(b) If any Third Person claim, action or suit against any
Indemnified Party is solely for money damages or, where a Stockholder
is the Indemnitor, will have no continuing effect in any material
respect on the Stockholder, the Indemnified Party, the Business or the
Assets, then the Indemnitor shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise or
settlement of any such Third Person claim, action or suit against such
Indemnified Party as to which indemnification will be sought by any
Indemnified Party from any Indemnitor hereunder if the Indemnitor has
acknowledged and agreed in writing that, if the same is adversely
determined, Indemnitor has an obligation to provide indemnification to
the Indemnified Party in respect thereof, and in any such case the
Indemnified Party shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may
be reasonably requested by Indemnitor in connection therewith;
provided, however, that the Indemnified Party may participate, through
counsel chosen by it and at its own expense, in the defense of any such
claim, action or suit, as to which Indemnitor has so
51
elected to conduct and control the defense thereof. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay, settle or
compromise any such claim, action or suit, provided, further, that in
such event the Indemnified Party shall waive any right to indemnity
therefor hereunder unless the Indemnified Party shall have sought the
consent of Indemnitor to such payment, settlement or compromise and
such consent was unreasonably withheld, conditioned or delayed in which
event no claim for indemnity therefor hereunder shall be waived.
11.8 Interest, Costs and Attorneys' Fees. If any of Acquisition or the
Stockholders shall be in breach of any of its respective representations or
warranties or in default of its respective covenants, agreements or other
obligations hereunder, then in addition to any and all other rights and remedies
which the non-defaulting party may have against such defaulting party, the
defaulting party shall be liable to and shall, upon demand, pay the
non-defaulting party for all reasonable court costs and attorneys' fees incurred
or sustained by the non-defaulting party by reason thereof or in enforcing the
terms and conditions of this Agreement. Such defaulting party shall also pay to
the non-defaulting party interest, from the date of notice of the claim upon any
sums owing by such defaulting party to the non-defaulting party, at a rate equal
to three (3) percentage points in excess of the prime or base rate of interest
announced, from time to time, by Citibank, N.A.; the term "prime or base rate"
means the rate of interest announced, from time to time, by said bank as its
prime or base rate of interest. For purposes of convenience, and at the election
of such non-defaulting party, interest for a calendar month, or portion thereof,
shall be calculated as if the prime or base rate in effect on the first banking
business day for such month was in effect for the entire month.
11.9 Payment and Right of Offset. Upon the final determination of a
liability under Section 11.1 or 11.2 hereof, whether reached by written
agreement of the parties or pursuant to arbitration pursuant to Section 11.10
hereto, the appropriate party or parties shall pay to the other, within ten (10)
days after such determination, the amount so determined by agreement or by
arbitration, as the case may be. In the event that Acquisition is not paid in
full pursuant to the foregoing provisions promptly after Stockholders'
obligation to indemnify has been determined in accordance herewith, it shall
have the right, notwithstanding any other rights that it may have against any
other person, firm or corporation, to set-off the unpaid amount of any such
claim against any amounts owed by it under this Agreement to the person so
determined to be liable to Acquisition. Upon the payment in full of any claim,
either by set-off or otherwise, the entity making payment shall be subrogated to
the rights of the Indemnified Party, if any, against any Third-Party, firm or
corporation with respect to the subject matter of such claim.
11.10 Binding Arbitration. All disputes under this Agreement shall be
settled in Los Angeles, California, before a single arbitrator pursuant to the
rules of practice administered by the Judicial Arbitration & Mediation Services,
Inc. ("JAMS"). Arbitration may be commenced at any time by any party hereto
giving written notice to the other party to the dispute that such dispute has
been referred to arbitration under this Agreement. The arbitrator shall be
selected by the joint agreement of the Stockholder and Acquisition, but if they
do not so agree within twenty (20) days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by such JAMS. The arbitrator shall render his decision
within 120 days of appointment. Any award rendered by the arbitrator shall be
final, conclusive and binding upon the parties hereto; provided, however, that
any such award shall be accompanied by a written opinion of the arbitrator
giving the reasons for the award. This provision for arbitration shall be
specifically enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final,
52
binding and conclusive and there shall be no right of appeal therefrom. The
costs and expenses of arbitration, including attorney's fees and expenses of the
arbitrator, shall be paid entirely by the non-prevailing party unless the
arbitrator determines that the costs, expenses and attorney' fees should be
apportioned between the parties, then as the arbitrator may assess. The
arbitrator shall not be permitted to award punitive damages under any
circumstances.
11.11 Survival of Representations. Except as otherwise
provided for in Sections 5.3(h), 8.7, 11.1, and 11.4 and except for the
representation and warranty contained in the third sentence of Section 5.2(n) of
the Agreement (with respect to title to the Real Property), which shall expire
at the Effective Time, notwithstanding any investigations or inquiries made by
Acquisition, (a) the representations and warranties of the Stockholders and the
Company shall survive the Closing and shall continue in full force and effect
(i) with respect to any representation or warranty contained in Section 5.2(y)
relating to tax issues, for the applicable statute of limitations, (ii) with
respect to any representation or warranty contained in Section 5.2(r) relating
to any insurance, trust or fund relating to preneed funeral merchandise or
services, for a period of fifteen (15) months from the Effective Time, (iii)
with respect to any representation or warranty contained in Section 5.2(q)
relating to environmental issues, for a period of twenty-four (24) months from
the Effective Time, and (iv) with respect to any other representation or
warranty, for a period of fifteen (15) months from the Effective Time, and (b)
the covenants and agreements of the Stockholders and the Company shall survive
the Closing.
11.12 Maintenance of Existence and Liquid Assets. From and after the
Effective Time, each of the Stockholders agrees as follows:
(a) If such Stockholder is a trust, it shall maintain its
existence in accordance with its organizational documents for a period
of not less than 48 months after the Effective Time;
(b) For a period of 36 months from the Effective Time, each
Stockholder shall maintain aggregate liquid assets (as defined below)
as follows:
(i) for the period from the Effective Time until
12 months after the Effective Date, liquid
assets of not less than such Stockholder's
pro rata share (determined on the basis of
its Ownership Percentage immediately prior
to the Effective Time) of $15 million;
(ii) for the period from 12 months after the
Effective Time to 24 months after the
Effective Date, liquid assets of not less
than such Stockholder's pro rata share
(determined on the basis of its Ownership
Percentage immediately prior to the
Effective Time) of $10 million; and
(iii) for the period from 24 months after the
Effective Time until 36 months after the
Effective Date, liquid assets of not less
than such Stockholder's pro rata share
(determined on the basis of its Ownership
Percentage immediately prior to the
Effective Time) of $5 million.
provided, however, that in the event that a claim or claims are made by
Acquisition pursuant to Section 11.1 of this Agreement, there shall be
no further diminution in the aggregate liquid
53
assets required pursuant to subparagraphs (b)(i), (ii) and (iii) above
until such claim has been resolved and paid in full or withdrawn;
(c) For purposes of this Section 11.12, the term "liquid
assets" means one or more of the following obligations, securities or
investments;
(i) direct obligations of, and obligations fully
guaranteed by, the United States of America
or any agency or instrumentality of the
United States of America, the obligations of
which are backed by the full faith and
credit of the United States of America,
other than obligations of the Federal Home
Loan Mortgage Corporation; provided,
however, that in the case of obligations
that are rated, each such obligation shall
have a credit rating of "Aa3" or better or
"P-1" or better, as applicable, by the
rating agency;
(ii) demand and time deposits in, certificates of
deposit of, or money market accounts in any
depository institution or trust company
incorporated under the laws of the United
States of America or any state thereof and
subject to supervision and examination by
federal and/or state banking authorities so
long as the commercial paper and/or the debt
obligations of such depository institution
or trust company (or, in the case of the
principal depository institution in a
holding company system, the commercial paper
or debt obligations of such holding company)
at the time of such investment or
contractual commitment providing for such
investment have a credit rating of "Aa3" or
better, in the case of debt obligations, or
"P-1" or better, in the case of commercial
paper, by the rating agency
(iii) commercial paper having at the time of such
investment a credit rating of "P-1" or
better by the rating agency and that either
is registered or that is sold at a discount
from the face amount thereof and has a
maturity of not more than 183 days from its
date of issuance;
(iv) money market funds or money market mutual
funds (other than closed-end funds) which
(A) maintain a constant net asset value, (B)
have at the time of such investment a rating
by the rating agency of "P-1", if such fund
invests in securities that mature more than
183 days from the date of issuance thereof,
or "Aa3" or better if such fund invests in
securities that mature not more than 91 days
from the date of issuance thereof, (C)
invest primarily in the types of securities
described in clauses (i) and (ii) above, and
(D) are not obligations of an investment
company registered under Section 8 of the
Investment Company Act;
(v) shares of the Common Stock of The Xxxxxx
Group, Inc. or any successor thereto; and
(vi) any other debt, equity or derivative
security (including without limit mutual
fund shares) which is listed or otherwise
authorized for trading
54
on any national, local or foreign exchange
or is quoted on the NASDAQ National Market
System and for which quotations are
routinely available in the Wall Street
Journal and the London Financial Times.
(d) For so long as the requirements of this Section 11.12
shall be in effect, to provide a certificate to Acquisition no later
than February 15 and August 15 of each calendar year following the
Effective Time to the effect that such Stockholder is and continues to
be in compliance with the requirements of this Section 11.12 in all
respects.
ARTICLE XII
CONFIDENTIALITY
12.1 Confidential Information.
(a) No Disclosure. The parties acknowledge that the
transactions described herein is of a confidential nature and shall not
be disclosed except to consultants, advisors and Affiliates, or as
required by law, until such time as the parties make a public
announcement regarding the transaction as provided in Section 6.5.
(b) Preservation of Confidentiality. In connection with the
negotiation of this Agreement, the preparation for the consummation of
the transactions contemplated hereby, and the performance of
obligations hereunder, Acquisition acknowledges that it will have
access to confidential information relating to the Company, including
technical, manufacturing or marketing information, ideas, methods,
developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or
other proprietary information relating thereto, which confidential
information, together with all analyses, compilations, studies or other
documents, records or data prepared by the Company or Acquisition or
their respective Representatives which contain or otherwise reflect or
are generated from such information shall be deemed "Confidential
Information" for purposes of this Agreement. Notwithstanding anything
to the contrary herein contained, nevertheless, "Confidential
Information" shall not include information which (i) at the time of
disclosure to a party is generally available to the public, (ii) at the
time of disclosure to a party is already in that party's possession,
provided that such information is not subject to another
confidentiality agreement with, or other legal obligation of secrecy or
confidentiality to, the provider of such information, or (iii) becomes
available to a party on a nonconfidential basis from a person other
than the provider of the information, so long as such source is not
otherwise subject to a confidentiality agreement with, or other legal
obligation of secrecy or confidentiality to, the provider of the
information.
(c) Disclosure of Confidential Information. Acquisition shall
treat all Confidential Information as confidential, preserve the
confidentiality thereof and not disclose any Confidential Information,
except to its Representatives and Affiliates who need to know such
Confidential Information in connection with the transactions
contemplated hereby. Acquisition
55
shall use all reasonable efforts to cause its Representatives to treat
all Confidential Information as confidential, preserve the
confidentiality thereof and not disclose any Confidential Information.
Acquisition shall be responsible for any breach of this Agreement by
any of its Representatives. If, however, Confidential Information is
disclosed, Acquisition shall immediately notify the Company in writing
and take all reasonable steps required to prevent further disclosure.
(d) Ownership. Until the Effective Time or the termination of
this Agreement, all Confidential Information shall remain the property
of the party who originally possessed such information. In the event of
the termination of this Agreement for any reason whatsoever,
Acquisition shall, and shall cause its Representatives to, return to
the Company all Confidential Information (including all copies,
summaries and extracts thereof) furnished to Acquisition by the Company
in connection with the transactions contemplated hereby.
(e) Legal Process. If Acquisition or any of its
Representatives or Affiliates is requested or required (by oral
questions, interrogatories, requests for information or documents in
legal proceedings, subpoena, civil investigative demand or other
similar process) or is required by operation of law to disclose any
Confidential Information, Acquisition shall provide the Company with
prompt written notice of such request or requirement, which notice
shall, if practicable, be at least 48 hours prior to making such
disclosure, so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or
the receipt of such a waiver, Acquisition or any of its Representatives
are nonetheless, in the opinion of counsel, legally compelled to
disclose Confidential Information, then Acquisition may disclose that
portion of the Confidential Information which such counsel advises is
legally required to be disclosed, provided that Acquisition uses its
reasonable efforts to preserve the confidentiality of the Confidential
Information, whereupon such disclosure shall not constitute a breach of
this Agreement.
(f) Notwithstanding anything to the contrary herein contained,
nevertheless, the provisions of this Article XII shall survive any
termination of this Agreement.
ARTICLE XIII
NO SOLICITATION
13.1 No-Shop Exclusivity. From and after the date hereof,
until the termination or expiration of this Agreement as provided for in Article
VIII hereof, neither the Company nor any of the Stockholders, will directly or
indirectly through any trustee, director, officer, agent, or otherwise,
initiate, solicit or deliberately encourage submission of proposals or offers
from any person or entity relating to any acquisition or purchase of all or
(other than funeral commodities in the ordinary course of business) a material
amount of the assets or the shares of the Company, or any merger, consolidation
or business combination with the Company; provided, however, that as may be
required by the Company's fiduciary duties under applicable law as advised by
counsel, the Company may participate in any discussions or negotiations
regarding, and may furnish to any other person information with respect to any
of the foregoing. The Company shall promptly notify Acquisition if
56
any such proposal or offer, or any inquiry or contact with respect thereto, is
made as well as the terms and conditions of any such proposal or offer.
13.2 Exercise of Fiduciary Duty. Nothing contained in this
Agreement shall prevent the Board of Directors of the Company, from approving a
transaction with another person or entity if the Board determines that, under
applicable law on the advice of counsel, such action is required in the exercise
of the fiduciary duties of the Board. The Company may terminate this Agreement,
without any further obligation, except for (i) return of the No-Shop Payment and
(ii) the payment required by Section 13.3. Except for the right of termination
set forth in this Section 13.2, nothing shall relieve the Company and its
Affiliates, from complying with all other terms of this Agreement.
13.3 Compensatory Fee. If the Company exercises its duty under
Section 13.2 and causes termination of this Agreement, then within five (5)
business days following Acquisition's written request therefor, the Company
shall pay to Acquisition, as liquidated damages, the sum of $7.5 Million (the
"Compensatory Fee"), by wire transfer of immediately available funds to an
account designated by Acquisition. Furthermore, if (i) the Association shall
have exercised its fiduciary duty pursuant to Section 11.15(b) of the
Association Asset Purchase Agreement (the "Exercise"), and (ii) the transactions
contemplated by this Agreement are not consummated, and (iii) the Company shall
have entered into an agreement, or procured an option to sell, transfer or
otherwise dispose of substantially all of its stock, Assets or Business to, or
merge with or into, the same person ("Purchaser") that purchases substantially
all of the cemetery related assets or business of, or merges with or into, the
Association (or an Affiliate of the Association) (or an Affiliate of such
Purchaser or any other person with any option, arrangement or understanding with
Purchaser with respect thereto) within one year from the date of the Exercise,
then the Company shall pay Acquisition the Compensatory Fee within five (5) days
of entering into such agreement or procuring such option.
The Company acknowledges that this fee is reasonable and equitable
given the time, effort and expense undertaken and incurred by Acquisition in
connection with the transactions contemplated by this Agreement as well as the
significant benefit accorded the Company by the price negotiated for the
transactions subject to this Agreement.
ARTICLE XIV
TAX MATTERS
14.1 Tax Matters.
(a) Parent shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and its Subsidiaries
for all periods ending on or prior to the Closing Date which are due
after the Closing Date. The Stockholders shall reimburse Parent for
Taxes of the Company and its Subsidiaries with respect to such periods
within fifteen (15) days after payment by Parent or the Company of such
Taxes.
(b) Parent shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company and its Subsidiaries
for Tax periods which begin before the Closing Date and end after the
Closing Date. The Stockholders shall pay to Parent within fifteen (15)
days after the date on which Taxes are paid with respect to such
periods an
57
amount equal to the portion of such Taxes which relates to the portion
of such Tax period ending on the Closing Date. To the extent that
Parent receives a refund(s) of Taxes paid with respect to a Tax period
described in the preceding sentence, then within fifteen (15) days of
Parent's receipt of such refund, the refund shall be paid over to the
Stockholders. For purposes of this Section, in the case of any Taxes
that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the portion of such taxable period
ending on the Closing Date shall (x) in the case of any Taxes other
than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire taxable period multiplied by a
fraction of the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any
Tax based upon or related to income or receipts, be deemed equal to the
amount which would be payable if the relevant taxable period ended on
the Closing Date. Any credits relating to a taxable period that begins
before and ends after the Closing Date shall be taken into account as
though the relevant taxable period ended on the Closing Date. All
determinations necessary to given effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Company
and its Subsidiaries.
(c) Parent, the Company and its Subsidiaries and the
Stockholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. In the event of any disagreement
concerning matters subject of this subsection (c), each party shall
make available to the other such books and records as are relevant to
such disagreement and are in the possession of such party, and the
parties shall work together in good faith to resolve such disagreement.
Those matters as to which the parties are unable to agree after sixty
(60) days shall be referred for resolution to a nationally recognized
accounting firm, mutually and reasonably acceptable to both parties.
The determination of such third party, whose costs and expenses shall
be borne equally by Parent and the Stockholders, shall be final and
determinative.
(d) All Tax sharing agreements or similar agreements with
respect to or involving the Company and its Subsidiaries or the
Association shall be terminated as of the Closing
Date and, after the Closing Date, the Company and its Subsidiaries
shall not be bound thereby or have any liability thereunder.
(e) All documentary and Transfer Taxes and Fees (including any
penalties and interests) incurred in connection with this Agreement
shall be paid for by the Stockholders when due, and the Stockholders
will, at their cost and expense, file all necessary Tax Returns and
other documentation with respect to all such documentary and Transfer
Taxes and fees, and, if required by applicable law, Parent will, and
will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
58
Each of the parties has duly executed and delivered this
Agreement on the date first hereinabove written.
Tudor Acquisition Corp.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
By: /s/ Xxxxx Xxx
-----------------------------------
Name: Xxxxx Xxx
Title: Secretary
ROSES, INC.
By: /s/ Xxxxxx x. Xxxxxxx
-----------------------------------
Name: Xxxxxx x. Xxxxxxx
Title:
By: /s/ Xxxxxxx X. Nusgensser
-----------------------------------
Name: Xxxxxxx X. Nusgensser
Title:
STOCKHOLDERS:
Xxxxxx X. and Xxxxxxx X. Xxxxxxx Living Trust
V/D/T
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Trustee
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Trustee
Xxxxx X. Xxxxx Family Trust V/D/T
By: /s/ Xxxxx X. Xxxxx
-------------------------
Name: Xxxxx X. Xxxxx
Title: Trustee
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Name: Xxxxxx X. Xxxxx
Title: Trustee
/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxxx
BT Capital Partners, Inc.
By: /s/ Xxxxxx Xxxxxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxxxxx
Title:
STOCKHOLDERS:
Cinco Pinos Unitrust
Rose and Elephant Unitrust
JANSU Unitrust
Xxxxx Charitable Remainder Unitrust #1
Xxxxx Charitable Remainder Unitrust #2
Xxxxx Charitable Remainder Unitrust #3
Xxxxx Charitable Remainder Unitrust for "'Lil Dirk"
Xxxxx X. Xxxxx Charitable Remainder Unitrust for "The
Kids"
Xxxxx X. Xxxxx Charitable Remainder Unitrust for "T"
KAN Family Partnership Unitrust
Xxxxxx X. Xxxxxxxxx Unitrust
Xxxxxxx X. Xxxxxxxxx Unitrust
K/A Xxxxxxxxx Charitable Remainder Unitrust
Ponderay Partners Unitrust
By: U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee for each of the above-referenced trusts:
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Senior Vice President
By: /s/ Xxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
ROSES, INC.
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME................. 2
1.1 The Merger............................................... 2
1.2 Closing.................................................. 3
1.3 Effective Time........................................... 3
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION..................... 3
2.1 Certificate of Incorporation............................. 3
2.2 By-Laws.................................................. 3
ARTICLE III
DIRECTORS.............................. 4
3.1 Board of Directors of the Surviving Corporation.......... 4
3.2 Officers of the Surviving Corporation.................... 4
ARTICLE IV
CONVERSION AND CANCELLATION OF SHARES IN THE MERGER......... 4
4.1 Conversion and Cancellation of Shares.................... 4
4.2 Payment for Shares....................................... 6
4.3 Transfer of Shares After the Effective Time.............. 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES.................... 8
5.1 Representations and Warranties of the Stockholders....... 8
5.2 Representations and Warranties of the Stockholders
and the Company........................................ 9
5.3 Representations and Warranties of Acquisition............ 22
ARTICLE VI
COVENANTS.............................. 24
6.1 Interim Operations of the Company........................ 24
6.2 Covenants of Acquisition................................. 25
6.3 Filings; Consents; Other Action.......................... 25
6.4 Access................................................... 26
6.5 Publicity................................................ 26
6.6 Further Assurances....................................... 27
6.7 Benefits................................................. 27
i
6.8 Phantom 401(K) Plan...................................... 28
6.9 Reserved................................................. 29
6.10 Title Insurance.......................................... 29
6.11 Preneed Contracts and Trust Funds........................ 30
6.12 Resignation/Election of Trustees......................... 30
6.13 Notification of Certain Matters.......................... 30
6.14 Supplemental Employee Retirement Plan.................... 31
6.15 Assistance in Financing.................................. 31
6.16 Restrictions on Transfer................................. 31
6.17 Restrictive Legend....................................... 32
6.18 Termination of Restrictions on Transferability........... 32
6.19 Rights of First Refusal.................................. 33
ARTICLE VII................................................................ 33
CONDITIONS................................................................. 33
7.1 Conditions to Obligations of Acquisition................. 33
7.2 Conditions to Obligations of the Stockholders and
the Company............................................ 36
ARTICLE VIII
TERMINATION............................. 38
8.1 Termination by Mutual Consent............................ 38
8.2 Termination by Either Acquisition or the Company......... 38
8.3 Termination by Acquisition............................... 38
8.4 Termination by the Company or the Stockholders........... 38
8.5 Effect of Termination and Abandonment.................... 38
8.6 Deposits................................................. 38
8.7 Effect of Closing Over Known Unsatisfied Conditions...... 39
ARTICLE IX
MISCELLANEOUS AND GENERAL...................... 40
9.1 Payment of Expenses...................................... 40
9.2 Modification or Amendment................................ 40
9.3 Waiver of Conditions..................................... 40
9.4 Counterparts............................................. 40
9.5 Governing Law............................................ 40
9.6 Notices.................................................. 40
9.8 Entire Agreement......................................... 42
9.9 Captions................................................. 42
9.10 Knowledge................................................ 42
9.11 Representation By Counsel, Interpretation................ 42
9.12 Severability............................................. 42
ARTICLE X
DEFINITIONS............................. 43
ii
ARTICLE XI
INDEMNIFICATION........................... 48
11.1 Indemnification by the Stockholders...................... 48
11.2 Indemnification by Acquisition........................... 49
11.3 Insurance and Tax Benefits............................... 49
11.4 Basket, Cap, Time Limitation Not Applicable.............. 49
11.5 Notice of Claims......................................... 49
11.6 Sole Remedies of the Parties; Limit on Indemnifiable
Claims................................................. 50
11.7 Third Person Claims...................................... 50
11.8 Reserved................................................. 51
11.9 Payment and Right of Offset.............................. 51
11.10 Binding Arbitration...................................... 52
11.11 Survival of Representations.............................. 52
11.12 Maintenance of Existence and Liquid Assets............... 52
ARTICLE XII
CONFIDENTIALITY
12.1 Confidential Information................................. 54
ARTICLE XIII
NO SOLICITATION........................... 55
13.1 No-Shop Exclusivity...................................... 55
13.2 Exercise of Fiduciary Duty............................... 55
13.3 Compensatory Fee......................................... 56
ARTICLE XIV
TAX MATTERS............................. 56
14.1 Tax Matters.............................................. 56
iii
SCHEDULES
Schedule 3.1 Acquisition Directors
Schedule 5.1(a) Encumbrances on Shares
Schedule 5.1(b) Power, Authorization and Enforceability of Agreement
Schedule 5.1(c) Compliance with Other Instruments and Regulations
Schedule 5.1(d) No Third Party Options
Schedule 5.1(f) Pre-Existing Entity
Schedule 5.1(g) Acquisition Without View to Distribute
Schedule 5.1(h) Additional Representations of the Stockholders
Schedule 5.2(b) Company Subsidiaries
Schedule 5.2(c) Company Capital Stock
Schedule 5.2(d) Company Consents, Breaches, Defaults, Violations and Liens
Schedule 5.2(e) Company Governmental Approvals
Schedule 5.2(f) Exceptions to Book and Records; GAAP
Schedule 5.2(g) Material Changes
Schedule 5.2(h) Company Brokers and Finders
Schedule 5.2(i) Company Actions
Schedule 5.2(k) Company Material Contracts, Including Employment Agreements
Schedule 5.2(l) Company Agreements to Sell Shares or Assets
Schedule 5.2(m) Fixtures and Equipment
Schedule 5.2(n) Company Real Property
Schedule 5.2(o) Trademarks and Tradenames
Schedule 5.2(q) Environmental Matters
Schedule 5.2(r) Funeral or Cemetery Contracts
iv
Schedule 5.2(s) Permits
Schedule 5.2(u) Compliance with Regulations
Schedule 5.2(v) OSHA, ADA and FTC
Schedule 5.2(y) Tax Matters
Schedule 5.2(aa) Accounts Receivable
Schedule 5.2(cc) Labor Relations
Schedule 5.2(dd) Insurance
Schedule 5.2(ee) Bank Accounts
Schedule 5.2(ff) Employee Benefits and Plans
Schedule 5.3(c) Acquisition Consents, Breaches, Defaults, Violations and Liens
Schedule 5.3(d) Acquisition Governmental Approvals
Schedule 5.3(e) Acquisition Brokers and Finders
Schedule 5.3(f) Acquisition Actions
Schedule 6.1(a) Changes Regarding Conduct of Company Business
Schedule 6.1(c) Encumbrances on Shares owned by Company
Schedule 6.1(d) Actions Regarding Company Stocks
Schedule 6.7(a) Company Employment Agreements
v
EXHIBITS
Exhibit A List of Stockholders
Exhibit B Certificate of Merger
Exhibit C Title Commitment(s)
Exhibit D Registration Rights Agreements
Exhibit E Employment and Consulting Agreements
Exhibit F Covenants Not to Compete
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