UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
General Form For Registration of Securities
Pursuant to Section 12(b) or (g) of The Securities Act of 1934
THE NEPTUNE SOCIETY, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-2492929
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 N. First Street, Suite #205,
Burbank, California 91502
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (818) 953-9995
Securities to be registered pursuant to Section 12(b) of the Act:
None None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value of $0.001 per Share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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ITEM 1. BUSINESS..............................................................................................2
ITEM 2. SELECTED FINANCIAL INFORMATION.......................................................................16
ITEM 3. PROPERTIES...........................................................................................23
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................24
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.....................................................................25
ITEM 6. EXECUTIVE COMPENSATION...............................................................................28
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................30
ITEM 8. LEGAL PROCEEDINGS....................................................................................32
ITEM 9 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......32
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES..............................................................33
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED..............................................35
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................................35
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................36
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................36
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS....................................................................36
SIGNATURES....................................................................................................40
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FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements, including
without limitation, statements that include the words "anticipates," "believes,"
"estimates" and "expects" and similar expressions and statements relating to the
Company's strategic plans, capital expenditures, industry trends and the
Company's financial position. Such forward-looking statements reflect the
Company's current views with respect to future events and are subject to certain
risks, uncertainties and assumptions, including competition for and availability
of funeral home and crematory acquisitions, the ability of the Company to manage
an increasing number of funeral homes and crematories, the Company's ability to
retain key management personnel and to continue to attract and retain skilled
funeral home and crematory management personnel, state and federal regulations,
changes in the death rate or deceleration of the trend towards cremation,
availability and cost of capital and general industry and economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected. The Company does not intend
to update these forward-looking statements and information.
The Company's management has included projections and estimates in this
Registration Statement, which are based primarily on management's experience in
the industry, assessments of the Company's results of operations, discussions
and negotiations with third parties and a review of information filed by its
competitors with the Securities and Exchange Commission. Investors are cautioned
against attributing undue certainty to management's projections.
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GENERAL INFORMATION
Unless the context otherwise requires, (i) "Neptune Society" refers to The
Neptune Society, Inc., a Florida corporation, (ii) "Neptune of America" refers
to Neptune Society of America, Inc., a California corporation, and (iii) the
"Company" refers to Neptune Society, and its subsidiaries and associated
entities.
All dollar amounts are in United States dollars unless otherwise indicated.
ITEM 1. BUSINESS
Overview
Neptune Society, a Florida corporation, is the holding company for Neptune
of America. Neptune of America is the holding company for all operations of the
Company, which are contained in subsidiary entities. See "History of the Neptune
Society." Neptune Society's principal executive offices are located at 100 N.
First Street, Suite #205, Burbank California 91502, and it maintains corporate
offices at 102 N.E. 2nd Street, Suite 777, Boca Raton, Florida 33432.
The Company's primary business is marketing and administering Pre-Need and
At-Need cremation services in California, Florida and New York. The Company also
operates a crematory in Los Angeles, California to provide cremation services in
the Los Angeles area. The Company uses the services of third-party crematories
in other areas of the United States.
Death Care Industry
According to statistics provided by the National Funeral Directors'
Association, the number of deaths in North America has risen by 1% annually
between 1980 and 1998, and is expected to continue to grow at a similar rate
over the next 10-15 years. The growth in death rate results not only from an
increase in the overall population, but also from the demographics of an aging
population as the baby boomer generation matures.
According to the National Funeral Directors Association:
o There are more than 22,100 funeral homes in the United States
employing approximately 35,000 licensed funeral directors/embalmers
and 89,000 additional funeral service and crematory personnel.
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o There were 2,294,000 deaths in the United States during the 12-month
period ending December, 1997, or 8.6 deaths per thousand population.
(U.S. Department of Health & Human Services, 1997).
o Of more than 2.2 million deaths nationwide in 1997, nearly 76%
resulted in earth burial or entombment and approximately 24% resulted
in cremation.
o In 1997, the average cost of an adult funeral was approximately
$4,800.
The Company believes that the popularity of cremation services will
increase in the future as a result of the differences in costs between
traditional burial funerals and cremations. According to a comprehensive survey
of crematory operations conducted by Smith, Bucklin & Associates Market Research
and Statistics Division on behalf of the Cremation Association of North America:
o The popularity of cremation varies by geographic location.
o In 1997, cremation services were chosen for only approximately one
quarter of total deaths in the United States, representing
approximately 500,000 cremations.
o The average cost of a cremation in 1997 was $2,200.
o The cremation market size in the United States in 1997 was worth
approximately $1.1 billion.
A recent survey released by the Funeral and Memorial Information Council
determined that 24% of all American adults have prearranged at least some of the
details of their own funeral or burial. 80% of those interviewed for the survey
believe prearranging the details of their own funeral or burial is a "good
idea", and 39% indicated that they may be likely to do so within the next five
years.
Competition
The death care industry in general is fragmented, comprised of mostly
family owned businesses and small independently-owned chains of death care
service providers. Currently, there are four publicly traded companies in the
death care services industry that have pursued consolidation and aggressive
growth strategies. The major corporate competitors in the death care industry
now include Service Corporation International, Loewen Group Inc., Stewart
Enterprises, Inc., and Carriage Services, Inc.
The competitive factors in the death care service industry include, among
other things:
o inter-family loyalty to established, local death care service
providers;
o consumer price sensitivity for death care services;
o consumer demand for personalized service;
o demand for qualified personnel and management;
o consolidation in the industry;
o high fixed costs for facilities; and
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o regulatory compliance costs.
Generally, existing death care service providers may have competitive
advantages based on established local reputations, local ownership and
management, brand loyalty and existing capital facilities. The larger publicly
traded death care service providers generally compete on the basis of price and
service, and dedicate a significant amount of their resources on acquiring
established death care service providers in local and regional markets. They are
generally well capitalized and can achieve certain efficiencies through their
integrated marketing, management and administration structures.
The Company intends to compete by focusing on the Pre-Need cremation
segment of the death care industry. The Company believes that it can effectively
market cremation services on a Pre-Need basis by offering a lower cost
alternative to burial funerals. The Company does not intend to offer traditional
funeral services and, therefore, does not intend to compete with traditional
funeral service providers.
There can be no assurance that the Company will effectively compete against
local existing death care service providers or corporate consolidations. Many of
these competitors offer a full range of death care services, including cremation
services and Pre-Need service plans. Several of these competitors also have
significantly greater financial and other resources than the Company and have
long established reputations in the markets they serve.
The Neptune Society Business
The Company's business strategy is to pursue revenue and growth
opportunities in the cremation sector of the death care service industry. The
Company operates all locations under one nationally branded name, The Neptune
Society, and offers only cremation services and related products. The Company
does not intend to evolve into a traditional funeral services company and does
not intend to compete directly with the larger corporate consolidators in the
death care service industry.
Services
The Company's primary business is marketing and administering Pre-Need and
At-Need cremation services in California, Florida and New York. The Company also
operates a crematory in Los Angeles, California.
The Neptune Society Pre-Need Program
The Company started its Pre-Need program in 1988. The program allows
individuals to pre-arrange a cremation funeral service for a guaranteed fixed
price. The program is designed to eliminate as much of the emotional and
financial burden as possible for the members' heirs and successors.
At June 30, 1999, the Company had approximately 52,000 Pre-Need members.
Approximately 40% of the Pre-Need services paid by the members is spent by the
Company immediately to cover the cost of merchandise, which is either delivered
to the member or is stored by the Company until the member's death. The balance
of the payments collected on Pre-Need services paid by the member is deposited
in a trust fund and administered by the Company in accordance with applicable
state regulations. See "Industry Regulation - Pre-Need Trust Fund."
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The Neptune Society At-Need Programs
The Company also provides cremation services to non-members on an At-Need
basis. These services are generally less expensive than burials. The Company
provides a full range of cremation services and handles all aspects of the
deceased cremation needs according to the decisions and plans of the decedent's
heirs, including service planning, optional services for scattering remains and
delivery of remains to family members.
The Neptune Society Registration Service
The Company offers a registration service that allows individuals to record
and register their request to be cremated and maintain a record of information
necessary for the Company to provide cremation services at the time of death.
Crematory Services
The Company operates a crematory in Los Angeles, California for its members
and to facilitate its At-Need business in southern California.
Other Services and Products
The Company believes that it can increase the revenues of its existing
operations by offering premium services and products, including, for example,
higher quality urns and caskets, memorialization options, and chapel hire for
traditional memorial services. Based on the Company's experience, we believe
approximately 10-15% of individuals will purchase a premium urn if a selection
is available and displayed at the time of the purchase decision, and
approximately 75% of individuals will purchase a premium urn following
suggestion by a counselor.
With the exception of the office at Fort Lauderdale, the Company's current
offices do not have the facilities to offer premium or upgraded services and
products. The Company intends to offer the full range of premium services and
products by installing fixtures to display a selection of urns and caskets in
each office and to build chapels in each of its existing locations.
Pricing
The Company defines its pricing strategy as a simple, dignified and
economical alternative to traditionally more expensive and elaborate funerals
and burials. The Company's strategy is to maintain a simple product and pricing
structure to assist customer decision making. For example:
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o The Company's current membership fee for registration is $25.
o The Company's current basic cremation service costs approximately
$1,300.
o The Company currently charges 8% interest on outstanding amounts for
its extended payment plans.
o The Company offers a travel plan to Pre-Need members for $200, which
guarantees service coverage throughout the continental United States.
In addition, the Company offers competitive rates for additional services,
such as burial at sea, rose garden scattering and delivery of cremains to family
members.
Our cremation services are generally less expensive than traditional
funeral services.
Facilities
The Company's offices have been generally located in clusters within a
given geographic area. This provides opportunities to share personnel, vehicles
and other resources, effect operating and administrative cost reductions and
implement integrated marketing programs.
The Company currently has locations in the following locations:
California
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Burbank
San Pedro
Santa Barbara
Los Angeles
Ventura
San Bernardino
Florida
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Miami
Fort Lauderdale
St. Petersburg
New York
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Long Island
Westchester
The Company believes that it can acquire existing crematory service
providers with established market presence as an avenue of growth. The cremation
segment within the death care industry is highly fragmented, and there are many
small owner-manager operations throughout North America which are possible
acquisition targets.
The Company intends to acquire cremation services companies with existing
operational licenses and offices with At-Need operations in States with large
population centers where cremation rates are 25% to 50%. Based on the Company's
experience, the Company anticipates that very few acquisition targets will have
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established a prearranged sales program, thus enabling it to institute its
Pre-Need program.
The Company also intends to grow by establishing new offices. Specific
selection criteria are applied when determining new locations, including:
o areas with a higher than average death rate;
o forecasted growth in cremation rates; and
o favorable trust laws.
Management is currently investigating locations in Texas, Illinois,
Pennsylvania, Michigan, Indiana, Connecticut, New Jersey, Ohio and
Massachusetts. All of these States are highly populated and have current
cremation rates that range from 15% to 25%. The Company intends to review and
assess the need for the construction and operation of additional crematories
based on the demand for cremation services in a particular geographic region. It
is anticipated that the Company's crematories will have the capacity to service
the Company's own needs and the needs of other agencies, potentially increasing
the Company's operating efficiencies.
There can be no assurance that the Company will acquire any additional
death care service providers or that acquisitions, if any, will result in
increased operating efficiencies or revenues to the Company.
Marketing
The Company currently markets its services in all locations under the name
"The Neptune Society". The Company's marketing strategy is focused on
maintaining and further developing the strength of its brand name and creating
consumer awareness of its death care services and products. The Company promotes
its death care services and products using targeted advertising campaigns,
including, for example:
o Biweekly newspaper advertisements in the LA Times, Santa Barbara News,
San Luis Obispo News, Tampa Tribune, St. Petersburg Times, Ft.
Lauderdale Sun-Sentinel, Palm Beach Post, New York Post and New York
Newsday;
o Large advertisements in the Yellow Pages servicing the regions in
which the Company has operations;
o Local television and radio advertisements; and
o A Web site providing up-to-date, on-line information related to the
Company's death care services and products.
The Company markets its Pre-Need programs using a combination of sales and
direct marketing programs to generate sales.
Direct Mail: The Company uses a monthly direct mail campaign to generate
leads. The Company is planning to integrate and improve the performance of its
marketing strategy by introducing new automated systems to decrease mailing
costs and manage increased primary lead generation.
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The Company intends to increase its direct marketing sales force in Florida and
New York.
Telemarketing: The Company has established a telemarketing center in Tempe,
Arizona, which is anticipated to be operational in November 1999. The Company's
telemarketing program will initially target the unconverted primary leads
generated by the Company's direct mail campaigns. The Company anticipates that
telemarketing will become an integral part of increased lead conversions.
Personal Sales: The Company uses commissioned sales consultants to sell
Pre-Need contracts. Each of the Company's Pre-Need sales offices has a sales
manager who recruits, trains and engages sale consultants. These sales
consultants are provided leads generated from the Company's direct mail
campaigns, and they meet with potential clients individually to determine the
service needs of the individual. The sales consultants are paid on a commission
basis according to the type of plan sold and the method of payment selected by
the customer. A majority of the Company's sales consultants perform services in
California and have worked with the Company for over four years.
Internet Web Site: The Company retained the services of a New York based
consultancy and web development company that specializes in building
Internet-based businesses, to assist the Company in developing a fully
integrated and comprehensive web site targeted at the baby boomer generation.
The Company believes that the aging of the baby boomers, who have only recently
begun to turn 50, represent a significant opportunity to expand its business.
Baby boomers are one of the fasting growing segments of Internet users. The
Company launched its web site on September 30, 1999, and consumers may purchase
Pre-Need plans on-line. The Company plans to develop other services and content
for its web site to enhance its on-line offerings.
Industry Regulation
Death Care Service Industry Regulation
The funeral service industry is regulated primarily on a State by State
basis with all jurisdictions requiring licensing and supervision of individuals
who provide funeral-related services. All jurisdictions also regulate the sale
of Pre-Need services and the administration of any resulting trust funds or
insurance contracts. In addition, concerns regarding lack of competition have
led a few jurisdictions to enact legislation designed to encourage competition
by restricting the common ownership of funeral homes, cemeteries and related
operations within a specific geographic region.
The Company's operations must also comply with federal legislation,
including the laws administered by the Occupational Safety and Health
Administration, the Americans with Disabilities Act and the Federal Trade
Commission ("FTC") regulations. The FTC administers
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the Trade Regulation Rule on Funeral Industry Practices, the purpose of which is
to prevent unfair or deceptive acts or practices in connection with the
provision of funeral goods or services.
On February 25, 1998, the State of California issued an interim suspension
order against the operations of the Company's funeral and crematory business in
California pursuant to California's Business and Profession Code for failure to
comply with appropriate storage procedures. On May 6, 1998, the Company entered
into a Stipulation and Settlement and Decision which ordered that the Company's
then controlling shareholder, Emanuel Weintraub, would sell his interests in the
Company and cease all management or control, directly or indirectly, of any
funeral or cremation activities licensed by the State to the Company. In
addition, the Company was ordered to have its crematory facilities inspected and
not to accept any cases beyond its ability to handle appropriately. In
particular, the Company was ordered to demonstrate compliance with the
requirements for storage facilities pursuant to the State's Business and
Professions Code and to be subject to random inspections.
In compliance with the stipulation, Mr. Weintraub sold The Neptune Group of
Companies to Neptune of America and on April 9, 1999, the Company applied for an
assignment of licenses in connection with closing of the sale of the business.
California approved the assignment, subject to amending the Stipulation and
Settlement and Decision to incorporate a requirement for the Company to complete
audits of the Pre-Need trust funds pursuant to the Business and Profession Code,
to comply with all other requirements for licensure, and to be placed on
probation for a period of three years. If the Company fails to comply with the
terms and conditions of the Stipulation and Settlement Decisions and the
amendments thereto, the State of California retains the right to remove the stay
on the prosecution under the interim order rendered on February 25, 1998.
Pre-Need Trust Fund
Payments received by the Company for Pre-Need services are held in trust.
The trust funds are maintained by financial institutions in accordance with the
laws of the state in which the Pre-Need program is sold. At June 30, 1999, the
balance of the trust fund was approximately $3 million with over 50,000 active
members.
Although applicable laws vary from state to state, typically the Company
can retain a percentage of the proceeds from the sale of each Pre-Need contract
to defray costs related to the sale, and the balance of proceeds is deposited in
trust. In most states, the Company is not permitted to withdraw principal or
investment income from such trusts until the time the cremation service is
fulfilled. Earnings on the trust funds increase the amount of cash received by
the Company at the time the cremation service is performed and historically have
allowed the Company to adequately cover the inflationary increase in costs of
cremation services.
While direct marketing costs and commissions incurred with the sale of
Pre-Need programs are a current use of cash, such costs are deferred for
financial reporting purposes and recognized over the number of years that
approximates the expected time to fulfilment of
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contracts. Deferred proceeds from the sale of Pre-Need programs are not
recognized as revenue until the time the funeral service is performed.
Personnel
At September 30, 1999, the Company employed approximately 112 people
comprised of 60 commission sales people, 40 full time counselors and 12
administrative personnel at the Company's corporate offices. Management believes
that its relationship with employees is good. None of the Company's employees
are members of collective bargaining units.
History of The Neptune Society
Neptune of America was incorporated in the State of California in March
1999 to acquire Neptune Management Corp. and Heritage Alternatives, Inc. Neptune
acquired these companies on March 31, 1999. Neptune Management Corp. has
operated in the death care industry since 1973 and is primarily responsible for
the Company's Pre-Need and At-Need operations.
The Company operates, through its subsidiary Heritage Alternatives, Inc., a
crematory located in Los Angeles, California that facilitates the California
At-Need services. The Company acquired the business and operations of Heritage
Crematory located in Los Angeles, California, in March 1992. Pursuant to the
terms of the acquisition, the Company agreed to pay to the vendors of the
business an amount of $10 to $15 per cremation until March 1, 2003.
Effective April 1, 1999, Neptune of America acquired all of the issued and
outstanding shares in the capital of Neptune Management Corp., Neptune Pre-Need
Plan, Inc. and Heritage Alternatives, Inc. Immediately subsequent to this
acquisition, Neptune Management Corp. and Heritage Alternatives, Inc. acquired,
as general partners, all the limited partnership units in various limited
partnerships that conducted business as the "Neptune Society" in California,
Florida and New York (collectively, Neptune Management Corp., Neptune Pre-Need
Plan, Inc., Heritage Alternatives, Inc. and the various limited partnerships are
hereinafter referred to as the "Neptune Group of Companies").
In consideration for the acquisition of the Neptune Group of Companies, the
Neptune Society paid $1,000,000 in cash, issued 1,000,000 common shares in the
capital of the Neptune Society and Neptune of America issued two promissory
notes to the prior owners of the Neptune Group of Companies. The first
promissory note issued by Neptune of America, and guaranteed by the Neptune
Society, was in the amount of $19,000,000 (the "First Promissory Note"). The
second promissory note issued by Neptune of America, and also guaranteed by the
Neptune Society, was in the amount of $2,000,000 (the "Second Promissory Note").
Both the First and Second Promissory Notes are further secured by the assets and
business of Neptune Management Corp. and Heritage Alternatives, Inc. On August
11, 1999, the Company repaid $4,125,784 of the First Promissory Note.
As part of the acquistion, the Company entered into a three year consulting
agreement (the "Consulting Agreement") with Emanuel Weintraub, the founder and
former President and CEO of the Neptune Group of Companies. Pursuant to the
terms of the Consulting Agreement, Mr. Weintraub will be paid $1,000,000 over
the term of the Consulting Agreement. See "Certain Relationships and Related
Transactions."
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On August 1, 1999, the Company entered into agreements to amend the
repayment terms of both the First and Second Promissory Notes and the terms of
payment under the Consulting Agreement. In consideration for the amendment to
the terms of repayment, the Neptune Society issued 275,000 share purchase
warrants exercisable into 275,000 common shares in the capital of the Neptune
Society for $6.00 per share. The share purchase warrants expire on August 15,
2003 and to date, none have been exercised by the holders. Three of the
recipients of these share purchase warrants are the daughters of Mr. Weintraub.
See "Certain Relationships and Related Transactions."
The Company has subsequently operated its funeral and cremation business
through Neptune Management Corp. and Heritage Alternatives, Inc. With the
exception of Neptune Pre-Need Plan, Inc. which is not an active entity, the
Company is in the process of dissolving its remaining corporate entities and
limited partnerships.
RISK FACTORS
The Company has included information in this Registration Statement that
contains "forward looking statements." The Company's actual results may
materially differ from those projected in the forward looking statements as a
result of risks and uncertainties. Although the Company believes that the
assumptions made and expectations reflected in the forward looking statements
are reasonable, the Company cannot assure you that the underlying assumptions
will, in fact, prove to be correct or that actual future results will not be
different from the expectations expressed in this report. An investment in the
Company's securities is speculative in nature and involves a high degree of
risk. You should read this Registration Statement carefully and consider the
following risk factors.
The Company's growth is dependent on the availability of financing, the
acquisition and integration of business units and the ability to manage growth.
The Company's business strategy is to grow through acquisitions of
cremation service providers. Although the Company believes it has an adequate
infrastructure to implement its growth strategy, there can be no assurance that
the Company's current management, personnel and other corporate infrastructure
will be adequate to manage future growth, if any. In addition, to the extent the
success of the Company's strategy is contingent on making further acquisitions,
there can be no assurance that the Company will be able to identify and acquire
acceptable acquisition candidates on terms favorable to the Company or that the
Company will be able to integrate such acquisitions successfully into the
Company without substantial costs, delays or other operational or financial
problems. Further, acquisitions involve a number of special risks, including
possible adverse effects on the Company's operating results, diversion of
management's attention, failure to retain key acquired personnel, risks
associated with unanticipated events or liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Competition in the acquisition market is intense, and prices paid for death care
service providers have increased in recent years.
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There are several publicly held North American death care companies,
including Service Corporation International, Loewen Group Inc., Stewart
Enterprises, Inc. and Carriage Services, Inc., which are leaders in the
industry. Each of these competitors have greater financial and other resources
than the Company, are actively engaged in acquiring death care service providers
in a number of markets. These competitors generally target full service funeral
homes and cemeteries for acquisition. The Company seeks to acquire only
cremation service providers, which limits the number of potential acquisition
targets available to the Company. The larger death care companies' acquisition
strategies and entry into the markets may compete directly with the Company
acquisition strategy and may have a material adverse affect on the Company's
ability to expand its business.
In addition, to the extent the Company is required to write-down goodwill
associated with acquisitions due to a decline in the value of such acquired
businesses, such write down could have a material adverse effect on the
operating results of the Company.
The Company may finance future acquisitions through the incurrence of bank
indebtedness, the utilization of cash from operations, the issuance of common
stock or other securities, or any combination thereof. In the event that the
Company's common stock does not maintain a sufficient market value, or potential
acquisition candidates are otherwise unwilling to accept the Company's common
stock or other securities as part of the consideration for the sale of their
businesses, the Company may be required to use more of its cash resources or
incur substantial debt in order to finance future acquisitions. If the Company
does not have sufficient cash resources, its ability to make acquisitions could
be limited unless it is able to obtain additional capital through debt or equity
financings. There can be no assurance that the Company will be able to obtain
the financing it will need in the future on terms the Company deems acceptable,
if at all.
Fluctuations in operating results may affect the Company's results of
operations.
Results for any particular period are not necessarily indicative of the
results that the Company may achieve for any subsequent period. Quarterly or
yearly results may vary materially as a result of the timing and structure of
acquisitions, any write down of goodwill, the timing and magnitude of costs
related to such acquisitions and fluctuations in the death rate. General
economic conditions, technology related to health care that may prolong life
expectancy and trends in the death care services industry may also have a
material affect on of the markets in which the Company services and the
Company's business. Several of the causes for such fluctuations in operating
results are beyond the control of the Company and may adversely affect the
market price its common stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The loss of the company's key personnel, on which it depends, may have an
adverse affect on the Company's business.
The Company depends to a large extent upon the abilities and continued
efforts of Marco P. Markin, President and a director of the Company, Gary R.
Loffredo, a director of the Company and President of Heritage Alternatives Inc.,
and its other senior management. The loss
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of the services of the key members of the Company's senior management could have
a material adverse effect on the Company's continued ability to compete in the
death care industry. The Company's future success will also depend upon its
ability to attract and retain skilled funeral home and crematory management
personnel. See "Directors and Executive Officers."
The Company's business is subject to substantial regulation, which may affect
its business and results of operations.
The Company's operations are subject to regulation, supervision and
licensing under numerous federal, state and local laws, ordinances and
regulations, including extensive regulations concerning trust funds, Pre-Need
sales of cremation products and services and various other aspects of the
Company's business. The impact of such regulations varies depending on the
location of the Company's offices and facilities.
From time to time, states and other regulatory agencies have considered and
may enact additional legislation or regulations that could affect the death care
industry. For example, some states and regulatory agencies have considered or
are considering regulations that could require more liberal refund and
cancellation policies for Pre-Need sales of products and services, prohibit
door-to-door or telephone solicitation of potential customers, increase trust
requirements and prohibit the common ownership of funeral homes and crematoriums
in the same market. If adopted in the states in which the Company operates,
these and other possible proposals could have a material adverse effect on the
Company's results of operations. See "Business -- Trust Funds" and "--
Regulation."
The Company may be required to sell additional common stock or parties may
exercise options and warrants that cause dilution of your shares.
As of November 1, 1999, the Company had 12,889,999 shares of common stock
issued and outstanding. Any substantial sale of the Company's common stock or
even the possibility of such sales occurring may have an adverse effect on the
market price of the Company's common stock.
In addition, an aggregate of approximately 1,800,000 shares of the
Company's common stock are reserved for issuance to employees, directors and
consultants of the Company under the Company's option plan. Holders of the
options when granted are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable than those
provided by the options. However, there can be no assurance that such options
will be exercised. Further, while the Company's options are outstanding, the
Company's ability to obtain additional financing on favorable terms may be
adversely affected
13
<PAGE>
The Company does not intend to pay dividends, which may adversely affect the
value of the company's common shares.
The Company has never paid a dividend to its shareholders. The Company
intends to retain its cash for the continued development of its business and
currently does not intend to pay cash dividends on the Common Stock in the
foreseeable future. See "Dividend Policy."
Broker-dealers may be discouraged from effecting transactions in the Company's
shares if they are considered penny stocks and are subject to the penny stock
rules.
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales
practice and disclosure requirements on NASD brokers-dealers who make a market
in "a penny stock." A penny stock generally includes any non-NASDAQ equity
security that has a market price of less than $5.00 per share. The Company's
shares are quoted on the OTCBB and on September 30, 1999, the high and low price
quoted for its shares were $6.375 and $6.312 per share, respectively. Should the
price of the Company's shares decline below $5.00 per share, they will be deemed
penny stock for the purposes of the Exchange Act. The additional sales practice
and disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in the Company's shares, which could
severely limit the market liquidity of the shares and impede the sale of the
Company's shares in the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to
anyone other than an established customer or "accredited investor," generally,
an individual with net worth in excess of $1,000,000 or an annual income
exceeding $200,000, or $300,000 together with his or her spouse, must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt. In addition, the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Commission
relating to the penny stock market, unless the broker-dealer or the transaction
is otherwise exempt. A broker-dealer is also required to disclose commissions
payable to the broker-dealer and the registered representative and current
quotations for the securities. Finally, a broker-dealer is required to send
monthly statements disclosing recent price information with respect to the penny
stock held in a customer's account and information with respect to the limited
market in penny stocks.
The death care service industry is highly competitive, and the company cannot
assure you that it will be able to compete effectively.
The death care service industry is intensely competitive and rapidly
evolving with the consolidation efforts of the Company's competitors. The
Company's competitors are small independent death care service providers and
large publicly traded companies, including Loewen which owns or operates more
than 1,100 funeral homes and over 400 cemeteries in the United States, Canada
and the United Kingdom, Service Corporation International, which operates more
than 3,700 funeral service locations worldwide, and Stewart Enterprises, Inc.,
which owns and operates over 700 funeral homes and cemeteries worldwide. These
competitors also offer cremation services that compete directly with the
Company's services and products. The
14
<PAGE>
Company also competes on the local basis to provide services in each community
it serves with service providers that have established reputations and long
histories of operations.
The goal of the Company is to expand by acquiring additional cremation
service providers in North America. In some cases, the Company may compete
directly with Loewen, Service Corporation International and Stewart Enterprises
to acquire cremation service providers. Each of these competitors have
substantially greater financial and other resources than the Company, which may
make it extremely difficult for the Company to acquire operations in the markets
in which it intends to expand. The Company's inability to expand into new
markets or effectively compete in existing markets may have a material adverse
affect on the Company's business and results of operations.
The Company may encounter significant costs should its computer software and/or
hardware fail to meet year 2000 compliance requirements.
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. The
Company completed a review of the potential impact of Year 2000 issues and does
not anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant. The Company's failure or failure of its third
party suppliers, vendors or other service providers to adequately address the
Year 2000 issue could result in misstatement of reported financial information
or otherwise adversely affect the Company's business operations. See "Financial
Information - Year 2000 Compliance."
15
<PAGE>
ITEM 2. SELECTED FINANCIAL INFORMATION
Set forth below is certain selected combined financial and operating
information of the Company for six month period ended June 30, 1999 and June 30,
1998, and the three years ended December 31, 1998, 1997 and 1996. The selected
combined financial information is derived from the Company's combined financial
statements for such periods. The information set forth below should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Company's Combined Financial Statements and Notes
thereto.
The financial results for the years ended December 31, 1998, 1997 and 1996
include the acquisition by Neptune of America of its operating subsidiaries
effective March 31,1999. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" for additional information on the
acquisition.
<TABLE>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------------------------ -----------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(in thousands, except per (in thousands, except per share
share information) information)
<S> <C> <C> <C> <C> <C>
Revenue $ 5,247 $ 4,076 $ 8,438 $ 9,757 $ 9,043
Gross Profit $ 2,882 $ 1,918 $ 3,586 $ 5,095 $ 4,086
Net Income (Loss) $ 934 $ (710) $ (929) $ 1,424 $ 1,651
Net Income (Loss) per share, $ 0.08 $ (0.06) $ (0.08) $ 0.12 $ 0.14
basic and diluted
</TABLE>
<TABLE>
AT JUNE 30 AT DECEMBER 31
1999 1998 1997
--------------------------------- ---------------------------------
(in thousands) (in thousands)
--------------------------------- ---------------------------------
<S> <C> <C> <C>
Working Capital $ (9,890) $ 187 $ 1,517
Total Current Assets $ 1,010 $ 835 $ 2,008
Total Property and Equipment $ 289 $ 218 $ 267
Prearranged Cremation Contracts $ 32,710 $ 32,055 $ 30,172
Total Current Liabilities $ 10,901 $ 647 $ 491
Deferred Prearranged Cremations $ 32,710 $ 32,055 $ 30,172
Stockholders' equity $ 10,209 $ 8,201 $ 9,290
</TABLE>
16
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Company sells prearranged cremation services and merchandise under
contracts that provide for the delivery of the services at the time of death.
Approximately 40% of the contract price is recognized as revenue by the Company
at the time of entering into the contract to cover the cost of delivered
merchandise and the contract procurement costs. The remaining 60% is recorded as
deferred revenue on the Balance Sheet and recognized as income at the time of
death or fulfillment.
The portion of the revenue that is deferred, is placed in a trust fund to
be administered by the Company and released at the time of death. This revenue
plus trust earnings covers the cost of performing the services provided for in
the contract. The market value of the amounts held in trust is disclosed as
prearranged cremation contracts on the Balance Sheet.
Commissions and direct marketing costs relating to the prearranged
cremation services and merchandise sales are accounted for in the same manner as
the revenue to which they relate. Where revenue is deferred, the same proportion
of the commissions and direct marketing costs are deferred and disclosed as
deferred contract procurement costs on the Balance Sheet. The costs are expensed
in the period when the contract is fulfilled.
In addition the Company performs cremations services for non-members on an
At-Need basis. This revenue is recorded at the time of performing the service.
Additional revenue earned by the Company includes a management fee up to a
maximum of 4% of the trust funds on prearranged cremation contracts in
California and an 8% finance charge on prearranged contracts purchased on an
installments plan in California.
The Company provides a full range of cremation services. In the State of
California it operates the Heritage Crematorium located in Los Angeles which
handles all of its cases in southern California. In Florida and New York
cremations are contracted out to third party cremations. Volume and contracting
costs dictate when it becomes economically feasible for the Company to establish
its own crematorium in any given location.
Six Month Period Ended June 30, 1999 Compared to the Six Month Period Ended June
30, 1998:
Results of Operations
Revenues
Cremations services revenues were $4,091,433 for the 6 month period ended
June 30, 1999, compared to $3,523,889 for the same period in 1998, a 16%
increase. The increase in revenues was primarily due to the California locations
being fully operational in 1999. The Department of Consumer Affairs, Funeral and
Cemetery Division closed these locations during March and April of 1998 pending
an administrative proceeding. See Item 1 "Death Care Service
17
<PAGE>
Industry Regulation." Revenue of $525,224 resulting from the liquidation of a
merchandise trust fund included in the 1999 results is a non-recurring item.
In California, the Company earns a management fee up to a maximum of 4% of
the trust funds on Prearranged Cremations Contracts. In addition, the Company
earns an 8% finance charge on Pre-Need contracts purchased on an installment
plan. Revenues earned from these sources were $629,924 in 1999 compared to
$551,877 in 1998, a 14% increase. The increase is attributable to a higher
percentage of contracts sold on an installment basis and the increase in the
value of the trust funds.
Costs and Expenses, and Gross Profit
Direct costs and expenses were $2,364,817 for the 6 month period ended June
30, 1999, compared to $2,158,242 for the same period in 1998, a 9.6% increase.
The Gross profit percentage (excluding the non-recurring item) in 1999 is
49.9%, compared to 47.1% in 1998. The reduced margin in 1998 was a result of
higher than normal direct costs due to the effect of contracting third party
mortuaries for the fulfillment of its Pre-Need contracts during the period of
closure in California.
Other expenses
General and administrative expenses were $838,248 for the 6 month period
ended June 30, 1999, compared to $667,355 for the same period in 1998. The
primary reasons for the increase in costs were reduced costs in 1998 when
California operations were shut down and an increase in 1999 costs during the
restructuring period.
Depreciation and amortization has increased to $157,652 in 1999 from
$26,565 in 1998 due to a charge of $144,187 to amortization of goodwill arising
from The Neptune Society, Inc. acquiring the various limited partnership's and
private corporations operating as the Neptune Society.
Professional fees of $240,089 in the 6 month period ended June 30, 1999 and
$368,635 in 1998 are not considered indicative of the Company's ongoing costs.
The Company defending itself against proceedings by the Department of Consumer
Affairs, Funeral and Cemetery Division incurred unusually high legal fees. All
such proceedings and actions by the Department have now been settled. See Item 1
"Death Care Service Industry Regulation."
During the period up to March 31, 1999 the business of the Neptune Society
was operated as private companies and partnerships. As such the compensation of
the principal shareholder and partner was discretionary. In the 3 month period
to March 31, 1999 these costs amounted to $513,091 and in the 6 month period to
June 30, 1998 $1,565,418. As of April 1, 1999 the consulting fee of the former
principal shareholder is $333,333 per annum for three years. This cost is
included in general and administrative expenses.
18
<PAGE>
Net Income
Net income for the 6 month period ended June 30, 1999 was $933,641,
compared to a loss of $710,449 for the corresponding period in 1998.
Fiscal 1998 Compared to Fiscal 1997
Results of Operations
Revenues
Cremation services revenues were $7,468,853 for the year ended December 31,
1998 compared to $8,838,854 in 1997, a 15.5% reduction. The reduction in
revenues was primarily due to the California locations being closed by The
Department of Consumer Affairs, Funeral and Cemetery Division during March and
April of 1998 pending an administrative proceeding. See Item 1 "Death Care
Service Industry Regulation." Revenues earned from Trust Fund management fees
was $969,300 in 1998 compared to $918,000 in 1998, a 5.6% increase. The increase
is attributable to the increase in the value of the trust funds.
Costs and Expenses, and Gross Profit
Direct costs and expenses were $4,851,956 for the year ended December 31,
1998, compared to $4,661,966 for the same period in 1997, a 4% increase. The
gross profit percentage in 1998 is 42.5%, compared to 52.2% in 1997. The 1998
result is not considered a true representation of ongoing operations since the
Company incurred an unusually high level of costs in honoring its Pre-Need
contract fulfillment's by contracting the services out to third party mortuaries
during the period of closure in California.
Other expenses
General and administrative expenses were $1,645,450 for the year ended
December 31, 1998, compared to $1,584,750 for the same period in 1997, a 3.8%
increase. Professional fees and penalties were $668,894 in the year ended
December 31, 1998 and $245,033 the year ended December 31, 1997. The Company was
forced to defend itself against proceedings by the Department of Consumer
Affairs, Funeral and Cemetery Division in 1998 and incurred unusually high legal
fees and penalties. All such proceedings and actions by the Department have now
been settled. See Item 1 "Death Care Service Industry Regulation."
During the years ended December 31, 1998 and 1997 the business of the
Neptune Society was operated as private companies and partnerships. As such the
compensation of the principal shareholder and partner was discretionary. In the
year ended December 31, 1998 these costs amounted to $2,200,473 and in the year
ended December 31, 1997 to $1,840,984.
Net Income
The loss for the year ended December 31, 1998 was $928,620, compared to net
income of $1,424,121 for the year ended December 31, 1997.
19
<PAGE>
Fiscal 1997 Compared to Fiscal 1996
Results of Operations
Revenues
Cremations services revenues were $8,838,854 for the year ended December
31, 1997 compared to $8,257,161 in 1996, a 7% increase. The increase in revenues
was primarily due to increasing sales volume. Revenues earned from Trust Fund
management fees was $918,000 in 1997 compared to $786,000 in 1997, a 16.8%
increase. The increase is attributable to the increase in the value of the trust
funds.
Costs and Expenses, and Gross Profit
Direct costs and expenses were $4,661,966 for the year ended December 31,
1997, compared to $4,957,001 for the same period in 1997. The gross profit
percentage in 1997 is 52.2%, compared to 45.2% in 1996. The high level of direct
costs adversely effected the 1996 gross margin.
Other expenses
General and administrative expenses were $1,584,750 for the year ended
December 31, 1997, compared to $1,524,484 for the same period in 1996, a 3.9%
increase. Professional fees and penalties were $245,033 in the year ended
December 31, 1997 and $172,619 the year ended December 31, 1996. During the
years ended December 31, 1997 and 1996 the business of the Neptune Society was
operated as private companies and partnerships. As such the compensation of the
principal shareholder and partner was discretionary. In the year ended December
31, 1997 these costs amounted to $1,840,984 and in the year ended December 31,
1996 to $737,556.
Net Income
The net income for the year ended December 31, 1997 was $1,424,121,
compared to net income of $1,651,501 for the year ended December 31, 1996.
Liquidity and Capital Resources
Equity Financings
On January 19, 1999, the Neptune Society issued, on a private placement
2,000,000 common shares at a price of $0.10 per share. Attached to each share
was four share purchase warrant for an aggregate issue of 8,000,000 share
purchase warrants. Each share purchase warrant was exercisable into one common
share in the capital of the Neptune Society at a price of $0.10 per share. These
share purchase warrants were exercised on April 7, 1999. Total gross proceeds to
the Neptune Society from the issue of the shares and the exercise of the share
purchase warrants was $1,000,000.
On July 22, 1999, the Neptune Society entered into a private placement
Agency Agreement with Standard Securities Capital Corporation for the sale of
1,166,667 common
20
<PAGE>
shares in the capital of the Neptune Society at a price of $6.00 per share. On
August 9, 1999, the Company issued 666,666 common shares pursuant to those
certain subscription agreements (the "Subscription Agreements") for gross
proceeds to the Neptune Society of $4,000,000. On October 12, 1999, the Company
issued 223,333 common shares pursuant to the Subscription Agreements for gross
proceeds to the Neptune Society of $1,340,000. The final 276,668 of the common
shares subscribed for by the purchasers will be issued by the Neptune Society on
or before January 31, 2000 for gross proceeds to the Neptune Society of
$1,660,000. Standard Securities Capital Corporation was paid $140,000 on October
12, 1999 in connection with the transaction and will be paid a further $560,000
commission for the transaction on receipt of payment for the final issue by the
Company from the subscribers. The Company initially agreed to provide the
subscribers with certain rights with respect to these securities, including
registration and reset rights, which were subsequently waived by the
subscribers.
The Company used $4,000,000 of the gross proceeds of the July 22, 1999
private placement to repay part of its promissory notes on August 11, 1999.
Other Financings
In consideration for the acquisition of the Neptune Group of Companies, the
Company issued two promissory notes totaling $21,000,000, the terms of repayment
of which is disclosed in the notes to the financial statements. Subsequent to
June 30, 1999 the debt was reduced by $4,125,784. The Company is obligated to
make a payment of $4,874,216 on January 3, 2000 and a payment of $10,000,000 on
July 31, 2000 in connection with the promissory notes. The Company intends to
procure the funds required to make the two payments by issuance of convertible
debt and equity financing.
On October 20, 1999, the Company executed a term sheet for the issuance of
$5,000,000 Convertible Debenture at an interest rate of 6.5%. The debenture
shall be convertible into 833,333 common shares of the Company upon the election
of the investor at any time after nine months from issuance to five years. The
financing is subject to due diligence and a fee of $100,000. The proceeds of the
financings will be used to make the payment due on the promissory notes of
$4,874,216 due on January 3, 2000.
Cash flows from operating activities was $951,250 for the six month period
ended June 30, 1999. The principal adjustments to net income in arriving at cash
flow from operations is to add back depreciation and amortization of $157,652
and a deduction of $304,468 for the net increase in deferred contract
procurement costs.
Cash flows from financing activities were $22,318,195 for the six month
period ended June 30, 1999. In 1999 financing was provided by way of Promissory
Notes for $21,000,000 in relation to the purchase of the Neptune Group of
Companies. Also, $1,000,000 was raised through the issuance of capital stock.
Also, unsecured loans amounted to $509,520 at June 30, 1999.
The Company expects adequate sources of funds to be available to finance
its future operations through internally generated funds. Acquisitions will be
financed by issuance of equity securities.
21
<PAGE>
YEAR 2000 DISCLOSURE
The terms "Year 2000 issue" and "Y2K issue" are general terms used to refer
to the business implications of the arrival of the new millennium on operating
and information systems and equipment. The Year 2000 issue arises with the
change in century and the potential inability of information systems to
correctly "rollover" dates to the new century. To save on computer storage
space, many systems were programmed with a two-digit century (i.e. December 31,
1999 would appear as 12/31/99) assuming that all years would be part of the 20th
century. On January 1, 2000, systems with this programming may default to
01/01/1900 instead of 01/01/2000, and calculations using or reporting the date
may not be correct and errors may arise. To prevent this from occurring,
information systems need to be updated to ensure they recognize the Year 2000.
Not only can the millennium bug affect computers - it can also affect
countless microprocessors that control systems, operations and equipment of
other types, such as telecommunications equipment. A non-compliant system - in
other words, a system that will be unable to correctly store, process and
retrieve data after the Year 2000 - may shut down, confuse commands or, if it
continues running, may make continual latent errors in data entry and
organization.
The Year 2000 problem generally includes any problem caused by (i) computer
software incorrectly reading the date "01/01/00" as the year 1900 or another
incorrect year; (ii) computer software incorrectly identifying a date in the
year 1999 or any year after that; (iii) computer software failing to detect that
the Year 2000 is a leap year; and (iv) any other computer software error that is
directly or indirectly caused by the problems set forth in (i), (ii) or (iii)
above.
At the present stage of the Company's development and after reviewing the
Company's dependence upon and the complexity of the Company's operating and
information systems and equipment, management of the Company is of the view that
the Y2K issue will not materially affect the Company's internal operations or
information systems or equipment. The Company is unable to assess the Company's
vulnerability to the state of readiness or the Y2K issue of third parties who
are dealing or who may in the future deal with the Company, including suppliers,
contractors and lenders. However, management of the Company is of the view that
the Y2K issue will not prevent the Company from achieving its business
objectives in the long term.
To the date of this registration statement, the Company has prepared an
inventory of its computer hardware, software and other electronic systems with a
view to identifying those which may fail as a result of the change of the date,
at midnight on December 31, 1999, to January 1, 2000 or as a result of the Year
2000 being a leap year. The Company has received oral and, in some cases,
written notification from its engineers, consultants and third party service
providers, that they have taken or are taking steps to ensure the integrity of
their systems and of their ability to function on and after January 1, 2000. The
Company believes these assurances to be accurate.
The Company's ability to function normally would be most seriously impacted
in the event of failure of its accounting and financial reporting system. To
reduce the probability of such failure, the Company has recently (May 1999)
upgraded its accounting hardware and software to the most recent version which,
according to the manufacturer's latest Y2K disclosure, if fully Year 2000
compliant. The primary computer on which this software is lodged
22
<PAGE>
has also been upgraded and has been tested to ensure that it will not fail due
to date changes. Results of in-house testing have satisfied management of the
Company that its accounting and reporting system will not fail due to the date
change either to January 1, 2000 or to February 29, 2000. As well, the Company's
routine data back-up procedures will provide an additional margin of protection
against such failure. Other computer systems upon which the Company relies for
its day-to-day operations and reporting provide word processing and Internet
access capabilities. Both the software utilized for these functions and the
computers on which the software operates are relatively new and problems with
them are not anticipated.
The Company completed tests of each of its systems to ensure that they will
not fail due to either of the above-noted date changes and has completed its
Year 2000 review. The Company has also taken remedial action to ensure that all
of its refrigeration units in its holding facilities will maintain working order
in the event that there is a power outage on January 1, 2000 due to Year 2000
issues. The cost of Year 2000 compliance has been less than $10,000 to date as
the Company currently maintains a majority of its records manually. The Company
believes that its incremental costs to date and its anticipated future costs to
upgrade systems to ensure that they will function normally in the year 2000 and
beyond are not considered to be material. The Company anticipates that the
maximum cost of upgrading or replacing its computer hardware and software, and
of replacing telephone systems, so that all systems are Year 2000 compliant,
would be less than $50,000. Management of the Company expects that the actual
costs will be much lower than the maximum if such replacement is required.
The Company will take such remedial action as is necessary to ensure that
its systems and those of any suppliers upon which it relies meet the
requirements for continued and uninterrupted operation into the year 2000 and
thereafter. In the event of a worst case scenario, a complete failure of the
Company's internal computer system and the failure of third party vendor
systems, the Company intends to replace its internal systems and locate vendors
who are Year 2000 compliant. The Company does not believe that a worst case
scenario will have a material adverse affect on its business.
ITEM 3. PROPERTIES
The Company leases properties in eleven locations in California, Florida
and New York. There are three sales offices in California, three in Florida, and
two in New York. Two of the offices in Florida have adjoining chapels for
funeral services. The Company also leases two properties for holding facilities,
one of which also stores merchandise inventory and the other has the crematory.
The Company also leases its corporate offices in Florida and Los Angeles. All of
the Company's leases are on standard terms and conditions and the Company does
not rely on any one lease for its continuing operations.
23
<PAGE>
The operations are currently concentrated at the following locations:
Summary of operational locations of Company
Location Operation
- -------- ---------
California
- ----------
Burbank -Corporate Administration and operations headquarters
Burbank At-Need sales and administrative office
San Pedro Pre-Need/At Need sales and administrative office
Santa Barbara Pre-Need/At-Need sales and administrative office
Los Angeles - Heritage Holding facility, crematory and viewing room
Ventura Holding facility and inventory warehouse
San Bernardino Inventory warehouse
Florida
- -------
Miami Pre-Need/At-Need sales and administrative office
and chapel
Fort Lauderdale Pre-Need/At-Need sales and administrative office
and chapel
St. Petersburg Pre-Need/At-Need sales and administrative office
New York
- --------
Long Island Westchester At-Need sales and administrative office
Westchester At-Need sales and administrative office
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is not, to the best of its knowledge, directly or indirectly
owned or controlled by another corporation or foreign government.
The following table sets forth the Company's principal (more than 5%)
stockholders as of November 1, 1999:
<TABLE>
Title of Class Identity of Person Number of Shares Owned Percent of Class(1)
or Group
- -------------- ------------------ ---------------------- -------------------
<S> <C> <C> <C>
Common CCD Commerce Consulting 990,000 7.8%
Common Officers and Directors 935,027 (2)(3) 13.8%
</TABLE>
(1) Based on 12,889,999 issued and outstanding shares.
(2) Directors and named executive officers, as a group, as of November 1, 1999.
(3) Includes 62,500 common shares issuable upon exercise of warrants.
24
<PAGE>
The following table sets forth the stockholdings, direct and indirect, of the
Company's directors and named executive officers as of November 1, 1999:
Name of Director/Officer
or Key Employee Number of Common Shares Owned
- ------------------------ -----------------------------
Suzanne L. Wood 15,000
Gary R. Loffredo None
Gary I. Harris None
Marco P. Markin 250,000
Peter Campbell None
Emanuel Weintraub(1) 588,424
Jill Schulman 81,603(2)
Larry Miller None
(1) Former CEO and President of the Neptune Group of Companies prior to the
acquisition by The Neptune Society. Mr. Weintraub is now a consultant for
the Company.
(2) This includes 62,500 common shares issuable on exercise of warrants. See
"Certain Relationships and Related Transactions."
The Company has no knowledge of any arrangements, including any pledge by
any person of securities of the Neptune Society, the operation of which may at a
subsequent date result in a change in control of the Company.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table set forth certain information with respect to the
current directors, executive officers and key employees of the Company. The term
for each director and officer expires in October 2000. The ages of the
directors, executive officers and key employees are shown as of November 1,
1999.
<TABLE>
Director/
Name Position with the Company Officer Since Age
- ---- ------------------------- ------------- ---
<S> <C> <C> <C>
Marco P. Markin President, CEO and Director of each of June 1999 35
The Neptune Society, Inc.,
The Neptune Society of America, Inc.
(since October 1999) and Neptune
Management Corp. (since June 1999)
Suzanne L. Wood Secretary, Treasurer and Director of each December 1998 42
of The Neptune Society, Inc. (since
December 1998) and The Neptune Society
of America, Inc. (since October 1999)
Gary R. Loffredo Director of both The Neptune Society, Inc. October 1999 38
(since October 1999) and Neptune Management
Corp. (since April 1999); President and
Director of Heritage Alternatives Inc.
(since April 1999)
Gary I. Harris Director of The Neptune Society, Inc. October 1999 58
</TABLE>
25
<PAGE>
<TABLE>
Director/
Name Position with the Company Officer Since Age
- ---- ------------------------- ------------- ---
<S> <C> <C> <C>
Peter Campbell Chief Financial Officer of The Neptune June 1999 43
Society, Inc. (since June 1999), The
Neptune Society of America, Inc.
(since October 1999) and Neptune
Management Corp. (since June 1999)
Jill Schulman Vice President (since February 1991), February 1991 50
Secretary (since February 1996) and
Director (since February 1992) of
Neptune Management Corp.
Larry Miller Senior Vice President of Sales of Neptune June 1999 53
Management Corp.
Karen Melius Vice President of Neptune Management Corp. April 1999 62
Hara Ahrens Vice President of Neptune Management Corp. February 1990 41
Reginald Duran Secretary and Director of Heritage June 1999 58
Alternatives, Inc.
</TABLE>
Marco P. Markin - Mr. Markin joined the Company full time as the Company's
President and CEO in September 1999. From November 1995 to September 1999 Mr.
Markin was the Executive Vice President of TPP Management Inc., a Vancouver,
Canada based private investment company focusing on merchant banking, securities
and real estate holdings. Prior to that time, from January 1987 to October 1992
Mr. Markin founder and the CEO of Markin Development Group, a real estate
development company of multi family apartment buildings and commercial offices.
In September 1992, Mr. Markin co-founded a direct marketing company in Canada
that was sold to the Financial Post, one of Canada's national financial
newsmagazines.
Suzanne L. Wood - Since 1986, Ms. Wood has been the founder and President
of Wood & Associate, a Vancouver, Canada based business that provides corporate
management services to private and public companies. After graduating with a
Masters of Arts degree from the University of British Columbia in Vancouver,
Canada in 1980, Ms. Wood joined Revenue Canada Taxation and worked primarily in
the Business Audit Division. Ms. Wood is currently a director of Genetronics
Biomedical Ltd., a company listed on The American Stock Exchange and the Toronto
Stock Exchange.
Gary R. Loffredo - Since November 1998, Mr. Loffredo has been Vice
President of Investment Banking for Banking for BG Capital Group. BG Capital
Group is a venture capital and merchant banking firm with offices in Florida and
Canada. Prior to joining BG Capital, Mr. Loffredo began his career at Lehman
Brothers in New York and Miami where he worked for 12 years. In April 1997, he
founded and served as President for a construction company based in Florida. Mr.
Loffredo majored in finance, graduating from the University of South Carolina
with a Bachelor of Science Degree in 1984.
Gary I. Harris - Since December 1985, Mr. Harris has been Senior
Vice-President in charge of the print division at T.V. Fanfare Publication, an
international advertising company. He attended both the University of Toledo and
New York University.
26
<PAGE>
Peter Campbell - In 1978, Mr. Campbell obtained his Bachelor of Commerce
from N.S.W. Institute of Technology in Sydney, Australia. He was admitted as an
Associate Member of the Canadian Institute of Chartered Accountants in 1990.
Since August 1996, Mr. Campbell has operated a private practice providing
accounting, managerial and administrative services to a variety of public and
private corporations. Prior to that and from August 1993 to July 1996, He was
the Corporate Controller for John Fluevog Shoes Ltd., a manufacturer wholesaler
and retailer of fashion footwear.
Emanuel Weintraub - Mr. Weintraub holds a Bachelor of Science Degree from
the University of New York and in 1973, he founded the Neptune Society. Since
that time has been in the funeral and cremation services business. Mr. Weintraub
is a former President and CEO of the Neptune Group of Companies prior to the
acquisition by The Neptune Society. Mr. Weintraub is now a consultant to the
Company.
Jill Schulman - Ms. Schulman joined the Neptune Society in May 1992 and in
January 1993 obtained her California Funeral Director's license. She has a
Bachelor of Arts degree from U.C.L.A. Ms. Schulman is responsible for the
administrative aspects of the Company's business.
Larry Miller - Mr. Miller was appointed to Senior Vice President of Sales
of Neptune Management Corp. in January 1992. Mr. Miller holds a Bachelor of Arts
degree form Rice University in Houston, Texas and a California Funeral
Director's License.
Karen Melius - Mrs. Melius is the Vice President Operations, New York. She
joined the Neptune Group of Companies in June 1982. Mrs. Melius has a Mortuary
of Science degree from the State University of New York at Farmingdale and has a
New York State Funeral Director's License.
Hara Ahrens - Mr. Ahrens is the Company's Vice-President of Operations,
Florida. He has been with the Neptune Group of Companies since September 1982.
Mr. Ahrens has a Bachelor of Arts degree from St. Thomas University in Miami,
post graduate education from Miami-Dade School of Mortuary Science, Funeral
Director and Embalmer License in Florida and National Board Certification
through the Funeral Service Examining Board of United States, Inc. Mr. Ahrens is
a member of both the Broward County Funeral Directors Association and the
National Funeral Directors Association.
Reginald Duran - Mr. Duran is the Company's Vice President of Operations,
California. Mr. Duran currently is the Executive Officer of the Association of
California Cremationists and Oversight Manager at the Heritage Crematorium. He
has been with the Company since March 1998. Mr. Duran is also the owner and
President of D&B Provisions, Inc., company that sells cremation products to
mortuaries and crematorium. Mr. Duran received certification for the State of
California as Crematorium Manager and holds a California Funeral Director's
License.
No executive officers or key employees of the Company who are related by
blood, marriage or adoption to any director or other executive officers of
Neptune Society except for Jill Schulman whose father is Emanuel Weintraub.
There are no arrangements or understanding between any executive officer of
Neptune Society and any other person pursuant to which the executive officer was
selected to serve as an executive officer of Neptune Society.
27
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation paid to each of the individuals
who were the Chief Executive Officer and the four other most highly compensated
executive officers of the Company (the "named executives officers") for the
fiscal year ended December 31, 1998 and the estimated compensation to be paid to
such named executive officers for the fiscal year ended December 31, 1999. The
determination as to which executive officers were most highly compensated was
made with reference to the amounts required to be disclosed under the "Salary"
and "Bonus" columns in the table.
<TABLE>
Name and Principal Other Annual
Position Year Salary Bonus Compensation
- ---------------------------- --------------- --------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Marco Markin 1999(4) $40,000 nil nil
President, CEO and
Director of The Neptune
Society, Inc.,
Neptune Society of
America, Inc. and Neptune
Management Corp.
Suzanne Wood 1999(3) nil nil nil
Former CEO, President, and
Director of The Neptune
Society, Inc.
Emanuel Weintraub, 1999(1)(2) nil nil $771,467
Consultant to Neptune 1998(1)(2) nil nil $2,208,849
Society of America, Inc.
Jill Schulman 1999 $92,000 nil nil
Vice President, Secretary 1998 $92,000 nil nil
and Director Neptune
Management Corp.
Larry Miller 1999 $144,000 nil nil
Senior Vice President of 1998 $136,000 nil nil
Sales Neptune Management
Corp.
</TABLE>
(1) Mr. Weintraub is a former President and CEO of the Neptune Group of
Companies prior to the acquisition by the Neptune Society (see Item 1
"History of the Neptune Society").
(2) In 1998, Mr. Weintraub received, directly or indirectly, $2,128,473 for
management fees, $72,000 in payment of legal fees for personal business and
$8,376 for personal use of automobile. In 1999, the Company expects to pay
Mr. Weintraub, directly or indirectly, $513,091 for management fees,
$250,000 for consulting services and $8,376 for personal use of automobile.
28
<PAGE>
(3) Ms. Wood was appointed President and Director on December 28, 1998 and was
paid no compensation for 1998 and is not expected to be paid any
compensation in 1999.
(4) Mr. Markin was appointed as an Officer and Director of Neptune Society's
subsidiary companies in April 1999. He was appointed as the Neptune
Society's President and CEO in October 1999 at an annual salary of $120,000
per year.
Options and Stock Appreciation Rights ("SARs")
The Company did not grant any stock options or SARs during the most
recently completed fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year- and Fiscal Year-End
Option/SAR Values
There were no stock options or SARs exercised during the last fiscal
year-end and there were no unexercised options or SARs at December 31, 1998.
Long Term Incentive Plans
The Company did not make any long-term incentive awards during the most
recently completed fiscal year.
Defined Benefit or Actuarial Plan Disclosure
The Company does not provide retirement benefits for the directors or
officers.
Compensation of Directors
The Directors of the Company received no compensation for the fiscal year
ended December 31, 1998 and are not expected to receive any compensation for the
fiscal year ended December 31, 1999.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
The Company does not have any employment contracts with any of the named
executive officers.
Report on Repricing of Options/SARs
The Company did not have any options or SARs outstanding during the most
recently completed fiscal year.
Compensation Committee
The Company had no compensation committee (or other board committee
performing equivalent functions) during the last completed fiscal year. Emanuel
Weintraub, the former
29
<PAGE>
President and CEO of the Neptune Group of Companies, solely determined the
compensation of the directors and executive officers during the last completed
fiscal year.
The entire board of directors, elected in October 1999, will act as the
compensation committee for the fiscal year 1999.
Incentive Stock Option Plan
On October 8, 1999, the Company's shareholders approved the 1999 Stock
Option Plan (the "Option Plan") as approved by the Board of Directors on June 1,
1999. The Option Plan provides for the grant of incentive and non-qualified
options to purchase up to one million, eight hundred thousand (1,800,000) shares
of Common Stock to employees of the Company and such other persons as the Plan
Administrator (which currently is the Board of Directors) may select. The Plan
is intended to help attract and retain key Company employees and such other
persons as the Plan Administrator may select and to give such persons an equity
incentive to achieve the objectives of the Company's shareholders.
Incentive stock options may be granted to any individual who, at the time
the option is granted, is an employee of the Company or any related corporation.
Non-qualified stock options may be granted to employees and to such other
persons as the Plan Administrator may select. The Plan Administrator fixes the
exercise price for options in the exercise of its sole discretion, subject to
certain minimum exercise prices in the case of Incentive Stock Options. The
exercise price may be paid in cash, certified check or cashier's check. Options
will not be exercisable until they vest according to a vesting schedule
specified by the Plan Administrator at the time of grant of the option.
Options are non-transferable except by will or the laws of descent and
distribution. With certain exceptions, vested but unexercised options terminate
upon the earlier of: (i) the expiration of the option term specified by the Plan
Administrator at the date of grant (generally ten years; or, with respect to
Incentive Stock options granted to greater-than ten percent shareholders, a
maximum of five years); or (ii) the expiration of ninety (90) days from the date
of an employee optionee's termination of employment with the Company or any
related corporation for any reason whatsoever. Unless accelerated in accordance
with the Plan, unvested options terminate immediately upon termination of
employment of the optionee by the Company for any reason whatsoever, including
death or disability.
As of November 1, 1999, the Company has not granted any stock options under
the Option Plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the transactions described below, none of the directors, senior
officers or principal shareholders of the Company, nor any associate or
affiliate of the foregoing have any interest, direct or indirect, in any
transaction, from January 1, 1998 to date of this Form 10, or in any proposed
transactions which has materially affected or will materially affect the
Company.
30
<PAGE>
Reginald Duran, Secretary and Director of Heritage Alternatives, Inc. is
the owner of D&B Provisions, Inc., a company that is in the business of selling
cremation products to mortuaries and crematoriums. From January 1, 1999 to
November 1, 1999, the Company made purchases of $2,886 from D&B Provisions, Inc.
($nil in 1998). Further, the Company has purchased from January 1, 1999 to
November 1, 1999, a total of $17,384 ($nil in 1998) in maintenance services from
All Furnace Corporation, a company controlled by Mr. Duran's brother.
On January 19, 1999, Suzanne Wood, one of the Company's directors and a
former President of the Company, purchased on a private placement basis, a total
of 15,000 common shares and 60,000 share purchase warrants in the capital of the
Neptune Society for $1,500. Ms. Wood subsequently disposed of the 60,000 share
purchase warrants.
Also on January 19, 1999, Gary Loffredo, one of the Company's directors and
the President of Heritage Alternatives Corp., purchased on a private placement
basis, as total of 100,000 shares and 400,000 share purchase warrants in the
capital of the Neptune Society for $10,000. Mr. Loffredo subsequently disposed
of all of the 100,000 common shares and all of the 400,000 share purchase
warrants.
On January 19, 1999, Marko Markin, the Company's President, CEO and a
director, purchased, directly or indirectly, on a private placement basis, a
total of 250,000 common shares and 1,000,000 share purchase warrants in the
capital of the Neptune Society for $25,000. Mr. Markin subsequently disposed of
the 1,000,000 share purchase warrants.
Effective March 31, 1999, the Company acquired, indirectly, from Emanuel
Weintraub the Neptune Group of Companies. In connection with the acquisition,
Mr. Weintraub received, directly and indirectly, a total of $583,132; 588,426
common shares in the capital of the Neptune Society and $11,079,514 by way of
promissory note of which $656,531 was paid on August 7, 1999.
In addition, Mr. Weintraub was paid a further $2,000,000 by promissory note
on March 31, 1999 of which $55,555.55 was paid monthly from and including August
to October 1999. The Company will continue to pay Mr. Weintraub $40,000 per
month with a balloon payment of $497,777.60 plus interest at the rate of 9% per
annum calculated as simple interest to accrue monthly from and after August 31,
1999 on March 31, 2002.
Ms. Jill Schulman, Mr. Weintraub's daughter and Vice President of Neptune
Management Corp. received, in connection with the Company's acquisition of the
Neptune Group of Companies, a total of $19,652; 19,103 common shares in the
capital of the Neptune Society and $373,391 by way of promissory note of which
$176,865 was paid on August 7, 1999.
On August 1, 1999, the Company issued 275,000 share purchase warrants in
consideration for, amongst others, Emanuel Weintraub renegotiating the terms of
repayment of the promissory notes issued in consideration for the acquisition of
the Neptune Group of Companies. A total of 250,000 of the share purchase
warrants were issued to Mr. Weintraub's
31
<PAGE>
daughter's and in particular, Ms. Jill Schulman, the Vice President of Neptune
Management Corp., received 62,500 share purchase warrants. See "History of the
Neptune Society."
Also in connection with the acquisition of the Neptune Group of Companies
from, amongst others, Mr. Weintraub, the Company entered into a consulting
agreement with Mr. Weintraub for three years and at $333,333 per year. See
"History of the Neptune Society."
ITEM 8. LEGAL PROCEEDINGS
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company's policies are designed to control
environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to acquisition. The Company believes
environmental liabilities to be immaterial individually and in the aggregate.
The Company is party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any of other proceedings,
individually or in the aggregate, to have a material adverse effect on the
Company's financial position, results of operations or liquidity.
ITEM 9 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
On August 26, 1998, the common shares of the Neptune Society were listed
under its former name Lari Corp. on the NASD OTC Bulletin Board under the symbol
"LREE". On May 3, 1999, Lari Corp. changed its name to The Neptune Society, Inc.
and on May 4, 1999, the symbol was changed to "NPTN".
The high and low bid quotations of the Company's common stock on the NASDAQ
OTC Bulletin Board for each of the quarterly periods since August 26, 1998 were
as follows:
Period High Low
- ------ ---- ---
1998
Third Quarter - -
Fourth Quarter 6.14 6.14
1999
First Quarter 6.0625 6.0625
Second Quarter 6.75 6.437
Third Quarter 6.375 6.312
32
<PAGE>
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
As of September 30, 1999, the high and low bid quotation for the Company's
common shares was $6.375 and $6.312, respectively.
As at September 10, 1999, the Company had 61 registered shareholders.
The declaration of dividends on the shares of the Company is within the
discretion of the Company's board of directors and will depend upon the
assessment of, among other factors, earnings, capital requirements and the
operating and financial condition of the Company. At the present time, the
Company anticipates that all available funds will be invested to finance the
growth of its business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On January 19, 1999, the Company issued 2,000,000 shares of the Company's
common stock and 8,000,000 share purchase warrants for $0.10 per share to raise
$200,000. Each share purchase warrant was exercisable to acquire one share of
the Company's common stock at $0.10 per share. The shares were issued to the
following private investors: BG International Capital Group Inc., Muir Woods
Investments Group IBC, Suzanne L. Wood, Robert D. Genovese, Vancouver
International Polo Inc., Rodney L. Lozinski, Michele N. Marrandino, Gary
Loffredo, Igor J. Otetchestvennyi, Carolyn D. Keene, Bang Mui Tran, Richard A.
Achron, J. Keith Thompson, Coreena L. Hansen, Janis D. Douville, Gloria M.
Lozinski, Cynthia F. Clagget, TPP Management Inc., Michael A. Kirsh, Michael W.
Robison, Brian D. Gruson, Columbia Pacific Ventures Inc., and KM Lifestyles
Enterprise Inc. These warrants were exercised on April 7, 1999. The offering was
not underwritten. This sale was exempt from registration in reliance upon Rule
504 under Regulation D promulgated under the Securities Act. The aggregate
offering price did not exceed $1,000,000, and the offering was otherwise in
compliance with Rules 501 and 502 promulgated under the Securities Act.
On April 7, 1999, the Company issued 8,000,000 shares of the Company's
common stock for $0.10 per share to raise $800,000 pursuant to the exercise of
the 8,000,000 share purchase warrants issued by the Company on January 19, 1999.
Each share purchase warrant was exercisable to acquire one share of the
Company's common stock at $0.10 per share. These warrants were exercised on
April 7, 1999. The shares were issued to the following private investors: Swiss
Overseas Finance Company Ltd., Turf Holdings Ltd., CCD Commerce Consulting, Hapi
Handels-und, Partner Marketing AG, Seloz Gestion & Finance SA, Otto Zimmerli,
Noreldin Siam, UK Menon, and Muir Woods Investment Group IBC. The offering was
not underwritten. This sale was exempt from registration in reliance upon Rule
504 under Regulation D promulgated under the Securities Act. The offering was
made in compliance with the definitions set forth in Rule 501 and certain
applicable general conditions set forth in Rule 502, including (i) limiting the
aggregate amount of all offerings made within six months before the start of the
offering and six months after the completion of the offering to $1,000,000 and
(ii) taking reasonable measures to assure the that purchasers were not
underwriters by making reasonable inquiry to determine that the investor was
acquiring the securities for his or her own
33
<PAGE>
account without a view towards distribution. The Company filed a Form D notice
of sale with the Securities and Exchange Commission within 15 days after the
first sale.
On May 7, 1999, the Company issued 1,000,000 shares of the Company's common
stock. The shares were issued in consideration of all the issued and outstanding
shares and limited partnership units of the Neptune Group of Companies. See
"Item 1. Description of Business - History of the Neptune Society." The shares
were issued in reliance upon an exempt from registration under Rule 506 of
Regulation D promulgated under the Securities Act. The offering was made in
compliance with the definitions set forth in Rule 501 and certain applicable
general conditions set forth in Rule 502. The Company filed a Form D notice of
sale with the Securities and Exchange Commission within 15 days after the first
sale.
On May 7, 1999, the Company issued a promissory note in the amount of
$2,000,000 to Emanuel Weintraub Inter Vivos Trust. The promissory note was
issued in consideration of all the issued and outstanding shares of the Neptune
Group of Companies. See "Item 1. Description of Business - History of the
Neptune Society." The promissory note was issued in reliance upon an exempt from
registration under Rule 506 of Regulation D promulgated under the Securities
Act. The offering was made in compliance with the definitions set forth in Rule
501 and certain applicable general conditions set forth in Rule 502. The Company
filed a Form D notice of sale with the Securities and Exchange Commission within
15 days after the first sale.
On May 7, 1999, the Company issued a promissory note in the amount of
$19,000,000. The promissory note was issued in consideration of all the issued
and outstanding shares and limited partnership units of the Neptune Group of
Companies. See "Item 1. Description of Business - History of the Neptune
Society." The shares were issued in reliance upon an exempt from registration
under Rule 506 of Regulation D promulgated under the Securities Act. The
offering was made in compliance with the definitions set forth in Rule 501 and
certain applicable general conditions set forth in Rule 502. The Company filed a
Form D notice of sale with the Securities and Exchange Commission within 15 days
after the first sale.
Pursuant to an agency Agreement dated July 22, 1999, the Company issued
666,666 shares of the Company's common stock at $6.00 per share to raise
$4,000,000 on August 9, 1999 and 223,333 shares at $6.00 per share for gross
proceeds of $1,340,000 on October 12, 1999. This offering was made to the
following non-U.S. Persons, outside the United States: Private Investments
Company Ltd., Turf Holding Ltd., CCD Commerce Consulting, Partner Marketing AG,
Otto Zimmerli, and UK Menon. The shares were issued in reliance upon an exempt
from registration pursuant to Regulation S promulgated under the Securities Act.
The Company paid Standard Securities Capital Corporation an agency fee of
$140,000 on October 12, 1999, and will pay a further fee of $560,000 upon the
final issuance of 276,668 shares at $6.00 per share on or before January 31,
2000.
On August 18, 1999, the Company issued warrants exercisable to acquire
275,000 shares of the Company's common stock at $6.00 per share. The Company
issued the warrants to certain debt holders in consideration for amending the
terms of repayment of debt and interest. The Company issued the warrants to the
following accredited investors: Jill Schulman, Linda Stark, Nancy Leferman and
Stanley Zicklin. The warrants were issued in reliance upon an exempt from
registration under Rule 506 of Regulation D promulgated under the Securities
Act. The
34
<PAGE>
offering was made in compliance with the definitions set forth in Rule 501 and
certain applicable general conditions set forth in Rule 502. The Company filed a
Form D notice of sale with the Securities and Exchange Commission within 15 days
after the first sale.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company's authorized capital consists of 50,000,000 common shares with
par value of $0.001 per share of which 12,889,999 common shares were issued as
of November 1, 1999.
All shares of common stock are of the same class and have the same rights,
preferences and limitations. Holders of shares of common stock are entitled to
receive dividends in cash, property or shares when and if dividends are declared
by the Company's Board of Directors out of funds legally available therefor.
There are no limitations on the payment of dividends. A quorum for a general
meeting of shareholders is one shareholder entitled to attend and vote at the
meeting who may be represented by proxy and other proper authority, holding at
least a 33-1/3% of the outstanding shares of common stock. Holders of shares of
common stock are entitled to one vote per share of common stock. Upon any
liquidation, dissolution or winding up of the Company's business, if any, after
payment or provision for payment of all of the Company's debts, obligations or
liabilities shall be distributed to the holders of shares of common stock. There
are no pre-emptive rights, subscription rights, conversion rights and redemption
provisions relating to the shares of common stock and none of the shares of
common stock carry any liability for further calls.
The rights of holders of shares of common stock may not be modified other
than by vote of majority of the shares of common stock voting on such
modification. Because a quorum for a general meeting of shareholders can exist
with one shareholder (proxy-holder) personally present, the rights of holders of
shares of common stock may be modified by less than a majority of the issued
shares of common stock.
The declaration of dividends on the shares of the Company is within the
discretion of the Company's board of directors and will depend upon the
assessment of, among other factors, earnings, capital requirements and the
operating and financial condition of the Company. At the present time, the
Company anticipates that all available funds will be invested to finance the
growth of its business.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the bylaws of the Neptune Society, the Company shall indemnify
all officers and directors of the Company for such expenses and liabilities, in
such manner, under such circumstances to such extent as permitted by the Florida
Business Corporation Act, Section 607.0850, as now enacted or hereafter amended.
Unless otherwise approved by the board of directors of the Company, the Company
shall not indemnify any employee of the Company who is not otherwise entitled to
indemnification pursuant to the Company's bylaws.
Florida law permits a corporation, under specified circumstances, to
indemnify its directors, officers, employees or agents against expenses
(including attorney's fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection
35
<PAGE>
with any action, suit or proceeding brought by third parties by reason of the
fact that they were or are directors, officers, employees or agents of the
corporation, if such directors, officers, employees or agents acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. In a derivative
action, that is, one by or in the right of the corporation, indemnification may
be made only for expenses actually and reasonably incurred by directors,
officers, employees or agents in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made if such person shall have been adjudged liable to the corporation,
unless and only to the extent that the court in which the action or suit was
brought shall determine upon application that the defendant directors, officers,
employees or agents are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
The Company's Articles of Incorporation and Bylaws also contain provisions
stating that no director shall be liable to us or any of the Company's
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Florida law (for unlawful payment of dividends, or unlawful
stock purchases or redemptions) or (4) a transaction from which the director
derived an improper personal benefit. The intention of the foregoing provisions
is to eliminate the liability of the Company's directors or the Company's
stockholders to the fullest extent permitted by Florida law.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Not Applicable.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the two most recent fiscal years or the subsequent interim period,
the Company has had no changes in or disagreements with its accountants on
accounting and financial disclosure.
36
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements and related schedules are included in
this Item:
Consolidated Balance Sheet for 6 month period ended June 30, 1999
Consolidated Statement of Income for 6 month period ended June 30,
1999 and 1998
Consolidated Statement of Cash Flows for 6 month period ended June 30,
1999 and 1998
Consolidated Statement of Stockholders' Equity for 6 month period
ended June 30, 1999
Report of Independent Auditors
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Income (Operations) for years ended December
31, 1998, 1997 and 1996
Combined Statements of Stockholders' Equity for years ended December
31, 1998, 1997 and 1996
Combined Statements of Cash Flows Increase (Decrease) in Cash and Cash
Equivalents for years ended December 31, 1998, 1997 and 1996
Notes to Combined Financial Statements Years Ended December 31, 1998
and 1997
(b) Exhibits
Exhibit
Number Description
- ------- -----------
3.1 Articles of Incorporation of L R Associates, Inc., filed January
4, 1985
3.2 Articles of Amendment of L R Associates, Inc. changing name to
Lari Corp., filed August 3, 1998
3.3 Articles of Amendment of Lari Corp. changing name to The Neptune
Society, Inc., filed April 26, 1999
3.4 Bylaws of The Neptune Society, Inc.
10.1 Form of Stock Option Plan
37
<PAGE>
Exhibit
Number Description
- ------- -----------
10.2 Share Purchase Agreement dated for reference March 26, 1999 by
and between Lari Acquisition Company, Inc., Emanuel Weintraub
Inter Vivos Trust, Emanuel Weintraub, Neptune Management Corp.,
Heritage Alternatives, Inc., Neptune Pre-Need Plan, Inc. and Lari
Corp.
10.3 Share Purchase Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc., Lari Corp. and Stanley Zicklin
10.4 Share Purchase Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc., Lari Corp. and Jill Schulman
10.5 Agreement dated August 1, 1999 by and between Lari Acquisition
Company, Inc., The Neptune Society, Inc. and Stanley Zicklin
10.6 Agreement dated August 1, 1999 by and between Lari Acquisition
Company, Inc., The Neptune Society, Inc., Emanuel Weintraub and
Emmanuel Weintraub Inter Vivos Trust
10.7 Interest Purchase Agreement dated for reference March 31, 1999 by
and between Neptune Management Corp. Lari Corp., Lari Acquisition
Company, Inc. and the limited partners of Neptune-Los Angeles,
Ltd., Neptune-Santa Barbara, Ltd., Neptune-Miami, Ltd.,
Neptune-St. Petersburg, Ltd., Neptune-Ft. Lauderdale, Ltd.,
Neptune-Nassau, Ltd., Neptune-Westchester, Ltd.
10.8 Interest Purchase Agreement dated for reference March 31, 1999 by
and between Heritage Alternatives, Inc., Lari Corp., Lari
Acquisition Company, Inc. and the limited partners of Heritage
Alternatives, L.P.
10.9 Consulting Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc. and Emanuel Weintraub
10.10 Amendment to Consulting Agreement dated August 1, 1999 by and
between Lari Acquisition Company, Inc. and Emanuel Weintraub
10.11 $19,000,000 Promissory Note dated March 31, 1999 by Lari
Acquisition Company, Inc.
10.12 Amendment to $19,000,000 Promissory Note dated August 1, 1999 by
Lari Acquisition Company, Inc. in favor of Emanuel Weintraub
Inter Vivos Trust
38
<PAGE>
Exhibit
Number Description
- ------- -----------
10.13 $2,000,000 Promissory Note dated March 31, 1999 by Lari
Acquisition Company, Inc.
10.14 Amendment to $2,000,000 Promissory Note dated August 1, 1999 by
Lari Acquisition Company, Inc. in favor of Emanuel Weintraub
Inter Vivos Trust
10.15 Pre-Need Trust Agreement dated October 1, 1993 by and between
Neptune Management Corp. and Sunbank/South Florida, N.A.
10.16 Asset Purchase Agreement dated March 31, 1992 by and between
Heritage Cremation Services, Inc., Joseph Estephan, Elie Estephan
and Emanuel Weintraub
10.17 Form of Commissioned Contractor Agreement
10.18 Agency Agreement dated for reference July 22, 1999 by and between
The Neptune Society, Inc. and Standard Securities Capital
Corporation
10.19 Amendment to Agency Agreement dated August 5, 1999 by and between
The Neptune Society, Inc. and Standard Securities Capital
Corporation
10.20 Form of Subscription Agreement
10.21 Form of Registration Rights Agreement
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
39
<PAGE>
The Neptune Society, Inc.
Consolidated Financial Statements -
For the 6 Month Period Ended June 30, 1999 and 1998
(Unaudited)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Stockholders' Equity
Notes to Consolidated Statements
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
- ------------------------------------------------------------------------------------------------------------
June 30, December 31,
1999 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 818,221 $ 612,370
Accounts receivable 156,372 217,265
Other 35,475 4,924
- ------------------------------------------------------------------------------------------------------------
Total current assets 1,010,068 834,559
- ------------------------------------------------------------------------------------------------------------
Prearranged cremation contracts 32,710,084 32,055,280
Property and equipment, at cost (net) 289,157 218,450
Deferred contract procurement costs 8,059,197 7,754,729
Goodwill and other intangibles (net) 22,975,789 40,554
- ------------------------------------------------------------------------------------------------------------
$ 65,044,295 $ 40,903,572
- ------------------------------------------------------------------------------------------------------------
Liabilities & Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 582,508 $ 647,468
Due to former owner 335,787 -
Income taxes payable 141,842 -
Loans payable 173,733 -
Current portion of long-term debt 9,666,667 -
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 10,900,537 647,468
- ------------------------------------------------------------------------------------------------------------
Long-term debt 11,167,008 -
Deferred income taxes 57,200 -
Deferred prearranged cremation contract revenues 32,710,084 32,055,280
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares
authorized, 12,000,000 shares issued and outstanding 24,200 13,200
Capital in excess of par value 1,089,000 -
Retained earnings 9,096,265 8,187,624
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 10,209,465 8,200,824
- ------------------------------------------------------------------------------------------------------------
$ 65,044,295 $ 40,903,572
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Six Months Ended June 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues;
Services $ 4,091,433 $ 3,523,889
Liquidation of trust fund 525,224 -
Management and finance fees 629,924 551,877
- ------------------------------------------------------------------------------------------------------------
Total revenues 5,246,581 4,075,766
Costs and expenses 2,364,817 2,158,242
- ------------------------------------------------------------------------------------------------------------
Gross profit 2,881,764 1,917,524
- ------------------------------------------------------------------------------------------------------------
General & administrative expenses 838,248 667,355
Depreciation & amortization 157,652 26,565
Professional fees 240,089 368,635
- ------------------------------------------------------------------------------------------------------------
1,235,989 1,062,555
- ------------------------------------------------------------------------------------------------------------
Income before compensation of principal shareholder and partner 1,645,775 854,969
Compensation of principal shareholder and partner 513,091 1,565,418
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 1,132,684 (710,449)
Provision for income taxes 199,042 -
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 933,641 $ (710,449)
- ------------------------------------------------------------------------------------------------------------
Net income per share, basic and diluted: $ 0.08 $ (0.06)
Weighted average number of shares outstanding,
basic and diluted 12,000,000 12,000,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
- ------------------------------------------------------------------------------------------------------------
June 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities: $ 933,641 $ (710,449)
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 157,652 26,565
Changes in assets and liabilities:
Accounts receivable 60,893 1,496,673
Other current assets (30,551) 2,705
Increase in deferred procurement costs (304,468) (182,913)
Accounts payable and accrued liabilities (64,960) (194,656)
Provision for income tax 199,042 -
- ------------------------------------------------------------------------------------------------------------
Total adjustments 17,609 1,148,374
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 951,250 437,925
- ------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) investing activities:
Purchase of property and equipment (84,172) (350)
Purchase of subsidiary (22,979,422) -
Intangibles and other assets - 92,042
- ------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (23,063,594) 91,692
- ------------------------------------------------------------------------------------------------------------
Cash flows provided by financing activities:
Due to former owner 335,787 -
Loans payable 173,733 -
Promissory notes 20,833,675 -
Issuance of capital stock 1,000,000 -
Distribution to owners (25,000) (110,500)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,318,195 (110,500)
- ------------------------------------------------------------------------------------------------------------
Net increase in cash 205,851 419,117
Cash at beginning of period 612,370 601,767
- ------------------------------------------------------------------------------------------------------------
Cash at end of period $ 818,221 $ 1,020,884
- ------------------------------------------------------------------------------------------------------------
Non-cash investing and financing transactions:
Common stock issued in acquisitions $ 100,000 $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
Capital in
Common excess of Par Retained
Stock Value Earnings Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 13,200 $ - $ 8,187,624 $ 8,200,824
Net income for the period ended
June 30, 1999 933,641 933,641
Distribution to owners (25,000) (25,000)
Common stock issued:
Issued for cash 10,000 990,000 1,000,000
Acquisitions 1,000 99,000 100,000
- ----------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 $ 24,200 $ 1,089,000 $ 9,096,265 $ 10,209,465
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Neptune Society, Inc.
Notes to the Consolidated Financial Statements
Periods Ended June 30, 1999 and 1998
1. Organization and Basis of Presentation:
The accompanying financial statements present the combined financial
position and results of operations of the following companies:
o The Neptune Society, Inc. (formerly Lari Corporation)
o The Neptune Society of America, Inc. (formerly Lari Acquisition
Company, Inc.)
o Neptune Management Corp.
o Neptune Pre-need Plan, Inc.
o Heritage Alternatives, Inc.
o Heritage Alternatives, L.P.
o Neptune Funeral Services, Inc.
o Neptune Funeral Services of Westchester, Inc.
o Neptune - Los Angeles, Ltd.
o Neptune - Santa Barbara, Ltd.
o Neptune - Ft. Lauderdale, Ltd.
o Neptune - St. Petersburg, Ltd.
o Neptune - Miami, Ltd.
o Neptune - Westchester, Ltd.
o Neptune - Nassau, Ltd.
On March 31, 1999, The Neptune Society, Inc. acquired all of the
outstanding shares and caused to be acquired the limited partnership
interests of The Neptune Society, in exchange for $1,000,000 cash,
1,000,000 shares of the company, notes payable of $21,000,000 and all cash
and cash equivalents of approximately $825,000 held by The Neptune Society
at March 31, 1999. Further the former controlling shareholder was provided
with a consulting agreement for $1,000,000 over a 3 year period.
The accompanying financial statements present the consolidated financial
position of The Neptune Society, Inc. as at June 30, 1999 and the results
of operations for the period then ended on a combining basis.
The business combination was accounted for using the purchase method of
accounting, and the excess of the purchase price over the estimated fair
value of assets acquired net of liabilities assumed, has been recorded as
goodwill and other intangibles, in the approximate amount of $23,100,000.
The historical financial statements prior to the acquisition have been
presented on a combined basis as a reorganization of companies under common
control. Pro forma financial information as if the acquisition had occurred
at the beginning of the period, has not been presented, as the operating
results of all combining entities has been included in the combined
statements.
2. Interim Financial Statements (Unaudited)
The accompanying unaudited condensed financial statements for the interim
periods ended June 30, 1999 and 1998 have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
<PAGE>
The Neptune Society, Inc.
Notes to the Consolidated Financial Statements
Periods Ended June 30, 1999 and 1998
3. Amortization of Goodwill
The excess of purchase price over the fair value of identifiable net assets
acquired in transactions accounted for as purchases are included in
"Goodwill" and amortized on a straight line basis over 40 years which, in
the opinion of management, is not necessarily the maximum period benefited.
Fair values at the date of acquisition are determined by management or
independent appraisals.
The amortization charged against income was $144,187 for the period (1998 -
nil). Accumulated amortization of Goodwill as of June 30, 1999 is $144,187.
4. Gain on Liquidation of Trust
During the period certain monies held in Trust in relation to the
merchandise component of prearranged cremation contracts entered into in
previous financial periods were allowed to be released under the governing
Trust Fund Legislation.
5. Litigation
During the period ending June 30, 1998, the Department of Consumer Affairs,
Funeral and Crematory Division (the "Department") commenced an
administrative proceeding alleging various statutory and regulatory
violations arising from an incident occurring at the Heritage Crematory.
The California operations were not allowed to operate during the period of
the administrative proceeding.
This proceeding has now been settled.
6. Long term debt
Promissory Note in the amount of $19,000,000 on the following terms:
o $4,125,784 due August 11, 1999 with no interest. This amount was
repaid.
o $701,740 due January 3, 2000 together with interest accrued at the
rate of 9% from August 1, 1999.
o $4,172,476 due January 3, 2000 with no interest,
o $5,065,836 due July 31, 2000 with no interest,
o $4,934,164 due July 31, 2000. Interest only at the rate of 9%
amounting to $37,006 is payable monthly.
Promissory Note in the amount of $2,000,000 payable in installments of
$40,000 per month, plus a balloon payment of $497,778 with interest at the
rate of 9% to accrue monthly on the sum of $15,556 per month, payable on
March 31, 2002.
7. Subsequent Event
On July 22, 1999 the Neptune Society entered into a private placement
Agency Agreement with Standard Securities Capital Corporation, for the sale
of 1,166,667 common shares in the
<PAGE>
The Neptune Society, Inc.
Notes to the Consolidated Financial Statements
Periods Ended June 30, 1999 and 1998
capital of the Neptune Society at an Issue Price of $6.00 per share. On
August 9, 1999, the Company issued 666,666 common shares pursuant to the
agreement for gross proceeds of $4,000,000. On October 12, 1999, the
Company issued a further 223,333 common shares pursuant to the agreement
for gross proceeds of $1,340,000. The Company will issue a further 276,668
common shares on or before January 31, 2000. Standard Securities Capital
Corporation will be paid a commission of $700,000 for the private placement
of which $140,000 was paid on October 12, 1999. The Issue Price is subject
to reset that may result in the Company issuing additional shares to the
private placement subscribers.
<PAGE>
THE NEPTUNE SOCIETY
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
CONTENTS
Page
----
Independent Auditors' Report ................................................ 1
Financial Statements:
Combined Balance Sheets ................................................... 2
Combined Statements of Income (Operations) ................................ 3
Combined Statements of Stockholders' Equity ............................... 4
Combined Statements of Cash Flows ......................................... 5
Notes to Combined Financial Statements ....................................6-9
<PAGE>
Stonefield Josephson, Inc.
Certified Public Accountants
Business & Personal Advisors
Members: DFK, IAPA, Institute of Profit Advisors
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Neptune Society
Burbank, California
We have audited the accompanying combined balance sheets of The Neptune Society
as of December 31, 1998 and 1997, and the related combined statements of income
(operations), stockholders' equity and cash flows for each of the years ended
December 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of The Neptune Society at
December 31, 1998 and 1997, and the results of their operations and cash flows
for the years ended December 31, 1998, 1997 and 1996, in conformity with
generally accepted accounting principles.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
June 11, 1999
1620 26th Street, Suite 400 South One Post Street, Suite 3300
Santa Monica, CA 90404-4041 San Francisco, CA 98104-9572
310 453-9400 FAX 310 453-1187 415 981-9400 FAX 415 391-2310
2121 N. California Blvd., Suite 900 4400 MacArthur Blvd., Suite 400
Walnut Creek, CA 94596-7306 Newport Beach, CA 92660-2519
925 938-9400 FAX 925 930-0107 949 653-9400 FAX 949 851-4669
www.sjaccounting.com
<PAGE>
THE NEPTUNE SOCIETY
COMBINED BALANCE SHEETS
<TABLE>
ASSETS December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 612,370 $ 601,767
Accounts receivable 107,896 250,552
Due from trusts 109,369 1,121,009
Other current assets 4,924 34,946
---------------- ---------------
Total current assets 834,559 2,008,274
---------------- ---------------
Property and equipment, at cost:
Automobiles 120,173 134,188
Furniture and fixtures 83,329 84,846
Machinery and equipment 309,084 308,734
Nautical equipment 57,075 57,075
Leasehold improvements 154,862 154,862
---------------- ---------------
724,523 739,705
Less accumulated depreciation and amortization 506,073 472,465
---------------- ---------------
Total property and equipment 218,450 267,240
---------------- ---------------
Other assets:
Prearranged cremation contracts 32,055,280 30,172,105
Deferred contract procurement costs, net 7,754,729 7,406,473
Other 40,554 99,119
---------------- ---------------
Total other assets 39,850,563 37,677,697
---------------- ---------------
$ 40,903,572 $ 39,953,211
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 181,007 $ 184,899
Accrued expenses and other liabilities 466,461 306,263
---------------- ---------------
Total current liabilities 647,468 491,162
---------------- ---------------
Deferred prearranged cremation contract revenues 32,055,280 30,172,105
---------------- ---------------
Stockholders' equity:
Common stock; $.001 par value, 50,000,000 shares
authorized, 12,000,000 shares issued and outstanding 13,200 12,700
Equity of combining entities 8,187,624 9,277,244
---------------- ---------------
Total stockholders' equity 8,200,824 9,289,944
---------------- ---------------
$ 40,903,572 $ 39,953,211
================ ===============
</TABLE>
See accompanying independent auditors' report
and notes to combined financial statements.
2
<PAGE>
THE NEPTUNE SOCIETY
COMBINED STATEMENTS OF INCOME (OPERATIONS)
<TABLE>
Year ended Year ended Year ended
December 31, December 31, December 31,
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Revenues, net:
Services $ 7,468,853 $ 8,838,854 $ 8,257,161
Management fees 969,300 918,000 786,000
--------------- -------------- --------------
Total revenues 8,438,153 9,756,854 9,043,161
Cost and expenses 4,851,956 4,661,966 4,957,001
--------------- -------------- --------------
Gross profit 3,586,197 5,094,888 4,086,160
--------------- -------------- --------------
General and administrative expenses 1,645,450 1,584,750 1,524,484
Professional fees 668,894 245,033 172,619
--------------- -------------- --------------
2,314,344 1,829,783 1,697,103
--------------- -------------- --------------
Income before compensation and expenses of
principal shareholder and partner 1,271,853 3,265,105 2,389,057
Compensation and expenses of principal
shareholder and partner 2,200,473 1,840,984 737,556
--------------- -------------- --------------
Net income (loss) $ (928,620) $ 1,424,121 $ 1,651,501
=============== ============== ==============
Net income (loss) per share, basic and
diluted $ (0.08) $ 0.12 $ 0.14
=============== ============== ==============
Weighted average number of shares
outstanding, basic and diluted 12,000,000 12,000,000 12,000,000
=============== ============== ==============
</TABLE>
See accompanying independent auditors' report
and notes to combined financial statements.
3
<PAGE>
THE NEPTUNE SOCIETY
COMBINED STATEMENTS OF STOCKHOLDERS ' EQUITY
<TABLE>
Common Equity of
stock combining entities Total
----------- ------------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1996 $ 12,700 $ 6,960,189 $ 6,972,889
Net income for the year ended
December 31, 1996 1,651,501 1,651,501
Distribution to owners (338,000) (338,000)
----------- -------------- -------------
Balance at December 31, 1996 12,700 8,273,690 8,286,390
Net income for the year ended
December 31, 1997 1,424,121 1,424,121
Distribution to owners (420,567) (420,567)
----------- -------------- -------------
Balance at December 31, 1997 12,700 9,277,244 9,289,944
Net loss for the year ended
December 31, 1998 (928,620) (928,620)
Distribution to owners (160,500) (160,500)
Common stock issued 500 (500)
----------- -------------- -------------
Balance at December 31, 1998 $ 13,200 $ 8,187,624 $ 8,200,824
=========== ============== =============
</TABLE>
See accompanying independent auditors' report
and notes to combined financial statements.
4
<PAGE>
THE NEPTUNE SOCIETY
COMBINED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
Year ended Year ended Year ended
December 31, December 31, December 31,
1998 1997 1996
--------------- --------------- -------------
<S> <C> <C> <C>
Cash flows provided by (used for) operating activities:
Net income (loss) $ (928,620) $ 1,424,121 $ 1,651,501
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 50,786 86,779 60,885
(Gain) loss on sale of assets (3,736) 2,460 (2,640)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 142,656 (134,880) 74,659
Due from trusts 1,011,640 (415,526) (268,204)
Other current assets 30,022 (175) (15,541)
Increase in deferred procurement costs (348,256) (835,298) (1,057,314)
Other assets 58,565 244,319 (35,058)
Increase (decrease) in liabilities:
Accounts payable (3,892) (66,436) 29,584
Accrued expenses and other liabilities 160,198 202,349 86,703
--------------- --------------- -------------
Total adjustments 1,097,983 (916,408) (1,126,926)
--------------- --------------- -------------
Net cash provided by operating activities 169,363 507,713 524,575
--------------- --------------- -------------
Cash flows provided by (used for) investing activities -
purchase (sale) of property and equipment 1,740 (164,943) (59,827)
--------------- --------------- -------------
Cash flows provided by (used for) financing activities:
Decrease (increase) in due from officer - 17,567 (17,567)
Distribution to owners (160,500) (420,567) (338,000)
--------------- --------------- -------------
Net cash used for financing activities (160,500) (403,000) (355,567)
--------------- --------------- -------------
Net increase (decrease) in cash and cash equivalents 10,603 (60,230) 109,181
Cash and cash equivalents, beginning of year 601,767 661,997 552,816
--------------- --------------- -------------
Cash and cash equivalents, end of year $ 612,370 $ 601,767 $ 661,997
Supplemental disclosure of cash flow information -
income taxes paid $ - $ 15,000 $ 65,000
=============== ============== ==============
</TABLE>
See accompanying independent auditors' report
and notes to combined financial statements.
5
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(1) Organization and Basis of Presentation:
The accompanying financial statements present the combined financial
position and results of operations of the following companies:
o Lari Corporation
o Neptune Management Corp.
o Neptune Pre-need Plan, Inc.
o Heritage Alternatives, Inc.
o Heritage Alternatives, L.P.
o Neptune Funeral Services, Inc.
o Neptune Funeral Services of Westchester, Inc.
o Neptune - Los Angeles, Ltd.
o Neptune - Santa Barbara, Ltd.
o Neptune - Ft. Lauderdale, Ltd.
o Neptune - St. Petersburg, Ltd.
o Neptune - Miami, Ltd. o Neptune - Westchester, Ltd.
o Neptune - Nassau, Ltd.
Subsequent to December 31, 1998, Lari Corporation acquired the ownership
interests of companies through a combination of cash, stock, and
acquisition indebtedness. Accordingly the accompanying financial statements
have been presented as a reorganization of companies under common control.
All material intercompany transactions have been eliminated in combination.
The Company performs crematoria and related professional services,
including the use of facilities, motor vehicles and nautical equipment, and
sells supplies, such as urns, cremation containers and literature.
(2) Summary of Significant Accounting Policies:
Cash and Cash Equivalents:
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Concentration
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
See accompanying independent auditors' report.
6
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies, Continued:
Depreciation and Amortization:
Depreciation of property plant and equipment is provided using the
straight-line method over the estimated useful lives of the various
classes of assets, as follows:
Automobiles 5 years
Furniture and fixtures 5-7 years
Machinery and equipment 5 years
Nautical equipment 5 years
Leasehold improvements are amortized over the terms of the leases or
estimated useful lives of the improvements, whichever is lesser.
Pre-need Arrangements:
Pre-need sales are affected by deposits to various trusts, the assets
for which are included on the combined balance sheet in the caption
"prearranged cremation contracts". Trust earnings, less management
fees earned by the Company are accrued and deferred until the service
is performed, at which time these funds are recognized in revenues and
are intended to cover future increases in the cost of providing a
price guaranteed service.
Deferred Contract Procurement Costs:
Deferred contract procurement costs consist of a portion of sales
commissions and other direct marketing costs applicable to the sale of
prearranged cremation contracts. These costs are deferred and
recognized in costs of revenues when the services, covered by the
contract, are performed.
Income Taxes:
The Company filed separate federal and state income tax returns for
each of the combining entities, all operating results for which were
generated by "pass through" entities (limited partnerships or
corporations). Since no taxes were due from the C corporations and any
income taxes from the limited partnerships and the S corporation
(other than state taxes on certain S corporation earnings) are the
obligations of the partners or shareholders, no income taxes have been
provided in the financial statements.
In connection with the Company's acquisition on March 31, 1999 (see Note
5), the income tax status changed. If income taxes had been determined in the
historical financial statements on a separate return basis, pro forma net income
would have been as follows:
<TABLE>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Net (loss)/income as reported $(928,620) $1,424,121 $1,651,501
Credit/provision for income taxes,
principally current (371,448) 568,448 660,600
---------- ---------- -----------
Pro forma net (loss)/income $(557,172) $ 855,673 $ 990,901
========== ========== ===========
Pro forma net (loss)/income per share $ (0.05) $ 0.07 $ 0.08
========== ========== ===========
</TABLE>
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
See accompanying independent auditors' report.
7
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies, Continued:
Fair Value:
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are
held for trading purposes) approximate the carrying values of such
amounts.
Earnings Per Share:
Earnings per share is computed based upon the weighted average number
of shares of common stock outstanding plus the shares issued in the
exchange transaction (see Note 5), adjusted for a 10,000 to 1 stock
split, in August 1998.
(3) Deferred Prearranged Cremation Contract Revenues:
Deferred prearranged cremation contract revenues includes the contract
amount of all price guaranteed prearranged service contracts as well as the
accrued trust earnings, less management fees to the Company. The Company
defers additional accruals of trust earnings as they are not earned until
the performance of the service. Upon performance of the service, the
Company recognizes as revenues, the fixed contract price as well as total
accumulated trust earnings.
The following table summarizes the activity in deferred prearranged
cremation contract revenues:
1998 1997
--------------- --------------
Beginning balance $ 30,172,105 $ 25,909,984
Acquisitions 4,430,978 6,310,101
Income - maturities 1,806,846 1,746,482
Cancellations 740,957 301,498
--------------- --------------
Ending balance $ 32,055,280 $ 30,172,105
=============== ==============
See accompanying independent auditors' report.
8
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
(4) Commitments and Contingencies:
Leases
The Company leases certain office facilities under operating leases for
terms ranging from one to thirteen years. Combined rent expense was
approximately $203,891, $212,388, and $192,136, for 1998, 1997 and 1996
respectively.
At December 31, 1998, minimum lease payments were as follows:
Years ending December 31,
1999 $ 191,929
2000 165,191
2001 119,756
2002 119,125
2003 118,063
Thereafter 480,337
---------------
$ 1,194,401
Litigation
During March 1998, the Department of Consumer Affairs, Funeral and Cemetery
Division (the "Department") commenced an administrative proceeding alleging
various statutory and regulatory violations arising from an incident
occurring at the Heritage Crematory. This proceeding was settled by the
parties by the Company agreeing to sell its business by a date certain or
surrender its funeral director's license. A sale of the Company to Lari
Acquisition Company, Inc. (see Note 5) was concluded in April 1999. The
Department is in the process of reviewing Lari's application for an
assignment of the Company's funeral director licenses to Lari.
Additionally the Company is, from time to time, subject to routine
litigation arising in the normal course of business. Management, with the
advice of legal counsel, believes that the results of any such routine
litigation or other pending legal proceedings will not have a material
effect on the combined financial position or results of operations.
(5) Subsequent Event:
In March 1999, Lari Acquisition Company, Inc. acquired all of the
outstanding shares and caused to be acquired the limited partnership
interests of The Neptune Society, in exchange for $1,000,000 cash,
1,000,000 shares of Lari with a stated value of $5,000,000, and notes
payable of $21,000,000. Further, the former controlling shareholder was
provided with a consulting agreement for $1,000,000 over a three-year
period.
See accompanying independent auditors' report.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Neptune Society, Inc.
(Registrant)
Date: November 8, 1999 By: /s/ Suzanne Wood
-----------------------------------
Suzanne Wood, Secretary/Director
<PAGE>
Exhibit
Number Description
- ------- -----------
3.1 Articles of Incorporation of L R Associates, Inc., filed January
4, 1985
3.2 Articles of Amendment of L R Associates, Inc. changing name to
Lari Corp., filed August 3, 1998
3.3 Articles of Amendment of Lari Corp. changing name to The Neptune
Society, Inc., filed April 26, 1999
3.4 Bylaws of The Neptune Society, Inc.
10.1 Form of Stock Option Plan
10.2 Share Purchase Agreement dated for reference March 26, 1999 by
and between Lari Acquisition Company, Inc., Emanuel Weintraub
Inter Vivos Trust, Emanuel Weintraub, Neptune Management Corp.,
Heritage Alternatives, Inc., Neptune Pre-Need Plan, Inc. and Lari
Corp.
10.3 Share Purchase Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc., Lari Corp. and Stanley Zicklin
10.4 Share Purchase Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc., Lari Corp. and Jill Schulman
10.5 Agreement dated August 1, 1999 by and between Lari Acquisition
Company, Inc., The Neptune Society, Inc. and Stanley Zicklin
10.6 Agreement dated August 1, 1999 by and between Lari Acquisition
Company, Inc., The Neptune Society, Inc., Emmanuel Weintraub and
Emmanuel Weintraub Inter Vivos Trust
10.7 Interest Purchase Agreement dated for reference March 31, 1999 by
and between Neptune Management Corp. Lari Corp., Lari Acquisition
Company, Inc. and the limited partners of Neptune-Los Angeles,
Ltd., Neptune-Santa Barbara, Ltd., Neptune-Miami, Ltd.,
Neptune-St. Petersburg, Ltd., Neptune-Ft. Lauderdale, Ltd.,
Neptune-Nassau, Ltd., Neptune-Westchester, Ltd.
10.8 Interest Purchase Agreement dated for reference March 31, 1999 by
and between Heritage Alternatives, Inc., Lari Corp., Lari
Acquisition Company, Inc. and the limited partners of Heritage
Alternatives, L.P.
<PAGE>
Exhibit
Number Description
- ------- -----------
10.9 Consulting Agreement dated March 31, 1999 by and between Lari
Acquisition Company, Inc. and Emanuel Weintraub
10.10 Amendment to Consulting Agreement dated August 1, 1999 by and
between Lari Acquisition Company, Inc. and Emanuel Weintraub
10.11 $19,000,000 Promissory Note dated March 31, 1999 by Lari
Acquisition Company, Inc.
10.12 Amendment to $19,000,000 Promissory Note dated August 1, 1999 by
Lari Acquisition Company, Inc. in favor of Emanuel Weintraub
Inter Vivos Trust
10.13 $2,000,000 Promissory Note dated March 31, 1999 by Lari
Acquisition Company, Inc.
10.14 Amendment to $2,000,000 Promissory Note dated August 1, 1999 by
Lari Acquisition Company, Inc. in favor of Emanuel Weintraub
Inter Vivos Trust
10.15 Pre-Need Trust Agreement dated October 1, 1993 by and between
Neptune Management Corp. and Sunbank/South Florida, N.A.
10.16 Asset Purchase Agreement dated March 31, 1992 by and between
Heritage Cremation Services, Inc., Joseph Estephan, Elie Estephan
and Emanuel Weintraub
10.17 Form of Commissioned Contractor Agreement
10.18 Agency Agreement dated for reference July 22, 1999 by and between
The Neptune Society, Inc. and Standard Securities Capital
Corporation
10.19 Amendment to Agency Agreement dated August 5, 1999 by and between
The Neptune Society, Inc. and Standard Securities Capital
Corporation
10.20 Form of Subscription Agreement
10.21 Form of Registration Rights Agreement
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
L R ASSOCIATES, INC.
THE UNDERSIGNED SUBSCRIBER(S) to these Articles of Incorporation hereby
associate themselves together to form a corporation under the Laws of the State
of Florida.
ARTICLE ONE:
The name of the corporation is: L R ASSOCIATES, INC.
ARTICLE TWO:
The corporation shall exist perpetually commencing upon the date of
execution and acknowledgment of these Articles.
ARTICLE THREE:
The corporation is organized for the purpose of managing real estate.
Further, the corporation may engage in any business or purpose lawful under
the laws of the State of Florida.
ARTICLE FOUR:
The corporation is authorized to issue 100 shares of five ($5.00) dollar
par value shares which shall be designated as common shares.
ARTICLE FIVE:
The street address of the initial registered office of the corporation is
3033 Grand Avenue, Suite 4, (P.O. Box 33022), Miami, FL 33133.
The name of the corporation's registered agent at that address is Michael
J. Samuels.
ARTICLE SIX:
This corporation shall have one director(s) initially. The number of
directors may be either increased or decreased from time to time by amendment to
the By-Laws but shall never be
1
<PAGE>
less than the number shown in this Article. The names and addresses of the
initial directors of this corporation are:
NAME ADDRESS
- ---- -------
MICHAEL J. SAMUELS 3033 Grand Avenue, Suite 4
P.O. Box 330022
Miami, FL 33133
ARTICLE SEVEN:
The name and address of the persons signing these articles as incorporators
[illegible].
NAME ADDRESS
- ---- -------
MICHAEL J. SAMUELS 3033 Grand Avenue, Suite 4
P.O. Box 330022
Miami, FL 33133
ARTICLE EIGHT:
The power to adopt, [illegible], amend or [illegible] the By-Laws shall be
vested in the Board of Directors and the Shareholders.
ARTICLE NINE:
The corporation shall indemnify [illegible] officer or director or any
former officer or director to the full extent permitted by law.
ARTICLE TEN:
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or amendments hereto, and any
[illegible] this reservation.
ARTICLE ELEVEN:
At each election for directors every shareholder entitled to vote shall
have the right to cumulate his votes by giving one candidate as many votes as
the number of directors to be
2
<PAGE>
selected at that time multiplied by the number of the shares or by distributing
such votes on the same principal among any number of such candidates.
ARTICLE TWELVE:
The members of the Board of Directors may participate in meetings of the
Board of Directors by means of conference telephone as provided by law.
IN WITNESS WHEREOF the undersigned subscriber has executed these Articles
of Incorporation this 4th day of January, 1985.
/s/ Michael J. Samuels
----------------------------------------
SUBSCRIBER - MICHAEL J. SAMUELS
STATE OF FLORIDA )
COUNTY OF DADE ) ss
BEFORE ME, a Notary Public authorized to take acknowledgments in the State
and County set forth above, personally appeared Michael J. Samuels, known to me
and known by me to be the person who executed the foregoing Articles of
Incorporation, and he acknowledged before me that he executed those Articles of
Incorporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, in the State and County aforesaid, this 4th day of January, 1985.
/s/ illegible
----------------------------------------
NOTARY PUBLIC
State of Florida at Large
My Commission Expires:
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO
L R ASSOCIATES
THE UNDERSIGNED, being the sole director and president of L R Associates,
Inc., does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be LARI Corp.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000 shares of
common stock, $0.001 par value.
ARTICLE V
PLACE OF BUSINESS
The initial address of the principal place of business of this corporation
in the State of Florida shall be 200 E. Robinson St., Suite 450 Orlando, FL
32801. The Board of Directors may at any time and from time move the principal
office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall not be less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
1
<PAGE>
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No share holder shall have the right to acquire share or other securities
of the corporation except to the extent to such right may be granted by an
amendment to these Articles of Incorporation or by a resolution of the Board of
Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-Laws, or the Florida
Corporation Act notwithstanding, by-laws not be adopted, modified, amended or
repealed by the shareholders of the Corporation except upon the affirmative vote
of a simple majority vote of the holders of all the issued and outstanding
shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of Books. The Board of Directors shall make the reasonable
rules to determine at what times and places and under what conditions the
books of the Corporation shall be open to inspection by shareholders or a
duly appointed representative of a shareholder.
9.2 Control Share Acquisition. The provisions relating to any control share
acquisition as contained in Florida Statutes now, or hereinafter amended,
and any successor provision shall not be applied to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of the votes at a
meeting of shareholders shall constitute a quorum.
9.4 Required Vote. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition the Corporation shall have the power, in its by-laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the best interest of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
2
<PAGE>
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any person,
firm or corporation shall be affected by the fact that any officer or director
of this corporation is such other party or is, or at some time in the future
becomes, an officer, director or partner of such other contracting party, or has
now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of the
shareholders and directors of the corporation on July 29, 1998 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF I have hereunto subscribed to and executed the Articles
of Incorporation on this 29th day of July 1998.
/s/ Pamela Wilkinson
- -----------------------------------
Pamela Wilkinson, Sole Director
President
The foregoing instrument was acknowledged before me on July 29, 1998, by
Pamela Wilkinson, who is personally known to me.
/s/ Nicole Johnson
- -----------------------------------
Nicole Johnson, Notary public
My Commission Expires:
EXHIBIT 3.3
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
LARI CORP.
THE UNDERSIGNED, being the sole director of LARI CORP. does hereby amend
the Articles of Incorporation of LARI CORP. as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be THE NEPTUNE SOCIETY, INC.
I hereby certify that the following was adopted by a majority vote of the
shareholders and directors of the corporation on April 20, 1999 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on April 20, 1999.
/s/ illegible
-------------------------------------
SUZANNE L. WOOD,
Director
The foregoing instrument was acknowledged before me on April 20, 1999,
by SUZANNE L. WOOD, who is personally known to me.
/s/ illegible
-------------------------------------
Permanent Commission Notary Public
EXHIBIT 3.4
BYLAWS
OF
NEPTUNE SOCIETY, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Registered Office. The registered office of the corporation
in Florida shall be that set forth in the articles of incorporation or in the
most recent amendment of the articles of incorporation or resolution of the
directors filed with the secretary of state of Florida changing the registered
office.
Section 1.02. Other Offices. The corporation may have such other offices,
within or without the state of Florida, as the directors shall, from time to
time, determine.
Section 1.03. Corporate Seal. The corporation shall have no seal.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Except as provided otherwise by
the Florida Business Corporation Act, meetings of the shareholders may be held
at any place, within or without the state of Florida, as may from time to time
be designated by the directors and, in the absence of such designation, shall be
held at the principal corporate office of the corporation in the state of
Florida. The directors shall designate the time of day for each meeting and, in
the absence of such designation, every meeting of shareholders shall be held at
eleven o=clock a.m.
Section 2.02. Regular Meetings.
(a) A regular meeting of the shareholders shall be held on such date as the
board of directors shall by resolution establish.
(b) At a regular meeting the shareholders, voting as provided in the
articles of incorporation and these bylaws shall designate the number of
directors to constitute the board of directors (subject to the authority of the
board of directors thereafter to increase or decrease the number of directors as
permitted by law), shall elect qualified successors for directors who serve for
an indefinite term or whose terms have expired or are due to expire within six
months after the date of the meeting, and shall transact such other business as
may properly come before them.
Section 2.03. Special Meetings. Special meetings of the shareholders may be
held at any time and for any purpose and may be called by the chief executive
officer, the chief financial officer, two or more directors or by a shareholder
or shareholders holding 10% or more of the voting power of all shares entitled
to vote, except that a special meeting for the purpose of
<PAGE>
considering any action to directly or indirectly facilitate or affect a business
combination, including any action to change or otherwise affect the composition
of the board of directors for that purpose, must be called by 25% or more of the
voting power of all shares entitled to vote. A shareholder or shareholders
holding the requisite percentage of the voting power of all shares entitled to
vote may demand a special meeting of the shareholders by written notice of
demand given to the chief executive officer or chief financial officer of the
corporation and containing the purposes of the meeting. Within 30 days after
receipt of demand by one of those officers, the board of directors shall cause a
special meeting of shareholders to be called and held on notice no later than 90
days after receipt of the demand, at the expense of the corporation. Special
meetings shall be held on the date and at the time and place fixed by the chief
executive officer or the board of directors, except that a special meeting
called by or at demand of a shareholder or shareholders shall be held in the
county where the principal executive office is located. The business transacted
at a special meeting shall be limited to the purposes as stated in the notice of
the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of one-third of the
shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, the meeting may be adjourned from time to time without
notice other than announcement at the time of adjournment of the date, time and
place of the adjourned meeting. If a quorum is present, a meeting may be
adjourned from time to time without notice other than announcement at the time
of adjournment of the date, time and place of the adjourned meeting. At
adjourned meetings at which a quorum is present, any business may be transacted
that might have been transacted at the meeting as originally noticed. If a
quorum is present when a meeting is convened, the shareholders present may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders originally present to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the articles of incorporation or statutes
provide otherwise, shall have one vote for each share having voting power
registered in such shareholder=s name on the books of the corporation. Jointly
owned shares may be voted by any joint owner unless the corporation receives
written notice from any one of them denying the authority of that person to vote
those shares. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by ballot. All questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote except if otherwise required by statute, the
articles of incorporation, or these bylaws. For purposes of these bylaws, no
shareholders owning shares of non-voting common stock of the corporation shall
be entitled to vote.
Section 2.06. Record Date. The board of directors may fix a date, not
exceeding 70 days preceding the date of any meeting of shareholders, as a record
date for the determination of the shareholders entitled to notice of, and to
vote at, such meeting, notwithstanding any transfer of shares on the books of
the corporation after any record date so fixed. If the board of directors fails
to fix a record date for determination of the shareholders entitled to notice
of, and
-2-
<PAGE>
to vote at, any meeting of shareholders, the record date shall be the twentieth
day preceding the date of such meeting.
Section 2.07. Notice of Meetings. There shall be mailed to each shareholder
shown by the books of the corporation to be a holder of record of voting shares,
at his or her address as shown by the books of the corporation, a notice setting
out the time and place of each regular meeting and each special meeting, except
(unless otherwise provided in Section 2.04 hereof) where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of adjournment, which notice shall be mailed at least 10 days but not
more than 60 days prior thereto (unless otherwise provided in Section 2.04
hereof). Every notice of any special meeting called pursuant to Section 2.03
hereof shall state the purpose or purposes for which the meeting has been
called, and the business transacted at all special meetings shall be confined to
the purposes stated in the notice. The written notice of any meeting at which a
plan of merger or exchange is to be considered shall so state such as a purpose
of the meeting. A copy or short description of the plan of merger or exchange
shall be included in or enclosed with such notice.
Section 2.08. Waiver of Notice. Notice of any regular or special meeting
may be waived by any shareholder either before or after such meeting, in
writing, signed by such shareholder or a representative entitled to vote the
shares of such shareholder. A shareholder, by his or her attendance at any
meeting of shareholders, shall be deemed to have waived notice of such meeting,
except where the shareholder objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened,
or objects before a vote on an item of business because the item may not
lawfully be considered at that meeting and does not participate in the
consideration of the item at that meeting.
Section 2.09. Written Action. Any action that may be taken at a meeting of
the shareholders may be taken without a meeting if done in writing and signed by
all of the shareholders entitled to vote on that action.
ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The business and affairs of the corporation
shall be managed by or under the authority of the board of directors, except as
otherwise permitted by statute.
Section 3.02. Number, Qualification and Term of Office. The number of
directors shall be increased or decreased from time to time by resolution of the
board of directors or the shareholders. Directors need not be shareholders. Each
of the directors shall hold office until the regular meeting of shareholders
next held after such director=s election and until such director's successor
shall have been elected and shall qualify, or until the earlier death,
resignation, removal, or disqualification of such director.
-3-
<PAGE>
Section 3.03. Board Meetings. Meetings of the board of directors may be
held from time to time at such time and place within or without the state of
Florida as may be designated in the notice of such meeting.
Section 3.04. Calling Meetings; Notice. Meetings of the board of directors
may be called by the chairman of the board by giving at least 24 hours= notice,
or by any other director by giving at least five days= notice, of the date, time
and place thereof to each director by mail, telephone, facsimile, telegram or in
person. If the day or date, time and place of a meeting of the board of
directors has been announced at a previous meeting of the board, no notice is
required. Notice of an adjourned meeting of the board of directors need not be
given other than by announcement at the meeting at which adjournment is taken.
Section 3.05. Waiver of Notice. Notice of any meeting of the board of
directors may be waived by any director either before or after such meeting
orally or in a writing signed by such director. A director, by his or her
attendance at any meeting of the board of directors, shall be deemed to have
waived notice of such meeting, except where the director objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.
Section 3.06. Quorum. A majority of the directors holding office
immediately prior to a meeting of the board of directors shall constitute a
quorum for the transaction of business at such meeting.
Section 3.07. Absent Directors. A director may give advance written consent
or opposition to a proposal to be acted on at a meeting of the board of
directors. If such director is not present at the meeting, consent or opposition
to a proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected.
Section 3.08. Conference Communications. Any or all directors may
participate in any meeting of the board of directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, the directors
participating pursuant to this Section 3.08 shall be deemed present in person at
the meeting; and the place of the meeting shall be the place of origination of
the conference telephone conversation or other comparable communication
technique.
Section 3.09. Vacancies; Newly Created Directorships. Vacancies on the
board of directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the board of directors as permitted by Section
-4-
<PAGE>
3.02 may be filled by a majority vote of the remaining directors serving at the
time of such increase although less than a quorum; and each director elected
pursuant to this Section 3.09 shall be a director until such director=s
successor is elected by the shareholders at their next regular or special
meeting.
Section 3.10. Removal. Any or all of the directors may be removed from
office at any time, with or without cause, by the affirmative vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors except, as otherwise provided by the Florida Business Corporation Act,
Section 607.0808, as amended, when the shareholders have the right to cumulate
their votes. A director named by the board of directors to fill a vacancy may be
removed from office at any time, with or without cause, by the affirmative vote
of the remaining directors if the shareholders have not elected directors in the
interim between the time of the appointment to fill such vacancy and the time of
the removal. In the event that the entire board or any one or more directors be
so removed, new directors may be elected at the same meeting.
Section 3.11. Committees. A resolution approved by the affirmative vote of
a majority of the board of directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the board of
directors, except as provided by the Florida Business Corporation Act, Section
607.0825.
A majority of the members of the committee present at a meeting is a quorum
for the transaction of business, unless a larger or smaller proportion or number
is provided in a resolution approved by the affirmative vote of a majority of
the directors present.
Section 3.12. Written Action. Any action that might be taken at a meeting
of the board of directors, or any duly constituted committee thereof, may be
taken without a meeting if done in writing and signed by all of the directors or
committee members, unless the articles provide otherwise and the action need not
be approved by the shareholders.
Section 3.13. Compensation. Directors who are not salaried officers of this
corporation shall receive such fixed sum per meeting attended or such fixed
annual sum as shall be determined from time to time by resolution of the board
of directors. The board of directors may by resolution provide that all
directors shall receive their expenses, if any, of attendance at meetings of the
board of directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
-5-
<PAGE>
ARTICLE IV.
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of a
chairman of the board (if one is elected by the board), a chief executive
officer, a president, one or more vice presidents (if desired by the board), a
treasurer, a secretary (if one is elected by the board) and such other officers
and agents as may from time to time be elected by the board of directors. Any
number of offices may be held by the same person.
Section 4.02. Election, Term of Office and Qualifications. The board of
directors shall elect or appoint, by resolution approved by the affirmative vote
of a majority of the directors present, from within or without their number, the
president, treasurer and such other officers as may be deemed advisable, each of
whom shall have the powers, rights, duties, responsibilities and terms in office
provided for in these bylaws or a resolution of the board of directors not
inconsistent with these bylaws. The president and all other officers who may be
directors shall continue to hold office until the election and qualification of
their successors, notwithstanding an earlier termination of their directorship.
Section 4.03. Removal and Vacancies. Any officer may be removed from his or
her office by the board of directors at any time, with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy in an office of the corporation by
reason of death, resignation or otherwise, such vacancy shall be filled for the
unexpired term by the board of directors.
Section 4.04. Chairman of the Board. The chairman of the board, if one is
elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
board of directors.
Section 4.05. Chief Executive Officer. The chief executive officer shall
have general active management of the business of the corporation. In the
absence of the chairman of the board, the chief executive officer shall preside
at all meetings of the shareholders and directors. He or she shall see that all
orders and resolutions of the board of directors are carried into effect. He or
she shall execute and deliver, in the name of the corporation, any deeds,
mortgages, bonds, contracts or other instruments pertaining to the business of
the corporation unless the authority to execute and deliver is required by law
to be exercised by another person or is expressly delegated by the articles or
bylaws or by the board of directors to some other officer or agent of the
corporation. He or she shall maintain records of and, whenever necessary,
certify all proceedings of the board of directors and the shareholders and, in
general, shall perform all duties usually incident to the office of the
president. He or she shall have such other duties as may from time to time be
prescribed by the board of directors.
Section 4.06. President. The president shall assist the chief executive
officer and shall have such powers and shall perform such duties as may be
delegated or prescribed by the
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board of directors or the chief executive officer, including, without
limitation, the power to execute share certificates issued by the corporation.
Section 4.07. Vice President. Each vice president, if one or more is
elected, shall have such powers and perform such duties as prescribed by the
board of directors, the chief executive officer or the president. In the event
of the absence or disability of the president, the vice president(s) shall
succeed to the president=s power and duties in the order designated by the board
of directors.
Section 4.08. Secretary. The secretary, if one is elected, shall be
secretary of and attend all meetings of the shareholders and board of directors
and shall record all proceedings of such meetings in the minute book of the
corporation. He or she shall give proper notice of meetings of shareholders and
directors and shall perform such other duties as may from time to time be
prescribed by the board of directors, the president or the chief executive
officer.
Section 4.09. Treasurer. The treasurer shall be the chief financial officer
and shall keep accurate financial records for the corporation. He or she shall
deposit all moneys, drafts and checks in the name of, and to the credit of, the
corporation in such banks and depositories as the board of directors shall, from
time to time, designate. He or she shall have power to endorse, for deposit, all
notes, checks and drafts received by the corporation. He or she shall disburse
the funds of the corporation, as ordered by the board of directors, making
proper vouchers therefor. He or she shall render to the president and the
directors, whenever requested, an account of all his or her transactions as
treasurer and of the financial condition of the corporation, and shall perform
such other duties as may from time to time be prescribed by the board of
directors or by the president.
Section 4.10. Compensation. The officers of the corporation shall receive
such compensation for their services as may be determined from time to time by
resolution of the board of directors.
ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. All shares of the corporation shall
be certificated shares. Every owner of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
board of directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
corporation by the chief executive officer (or the president, if the chief
executive officer delegates such authority) and by the secretary or an assistant
secretary or by such officers as the board of directors may designate. If the
certificate is signed by a transfer agent or registrar, such signatures of the
corporate officers may be by facsimile if authorized by the board of directors.
Every certificate surrendered to the corporation for exchange or transfer shall
be canceled, and no
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new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled, except
in cases provided for in Section 5.04.
Section 5.02. Issuance of Shares. The board of directors is authorized to
cause to be issued shares of the corporation up to the full amount authorized by
the articles of incorporation in such amounts as may be determined by the board
of directors and as may be permitted by law. Shares may be issued for any
consideration, including, without limitation, in consideration of cash or other
property, tangible or intangible, received or to be received by the corporation
under a written agreement, of services rendered or to be rendered to the
corporation under a written agreement, or of an amount transferred from surplus
to stated capital upon a share dividend. At the time of approval of the issuance
of shares, the board of directors shall state by resolution its determination of
the fair value to the corporation in monetary terms of any consideration other
than cash for which shares are to be issued.
Section 5.03. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate,
the shareholder=s legal representative or the shareholder=s duly authorized
attorney-in-fact, and upon surrender of the certificate or the certificates for
such shares. The corporation may treat as the absolute owner of shares of the
corporation the person or persons in whose name shares are registered on the
books of the corporation.
Section 5.04. Loss of Certificates. Any shareholder claiming a certificate
for shares to be lost, stolen or destroyed shall make an affidavit of that fact
in such form as the board of directors shall require and shall, if the board of
directors so requires, give the corporation a bond of indemnity in form, in an
amount and with one or more sureties satisfactory to the board of directors, to
indemnify the corporation against any claim that may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged to
have been lost, stolen or destroyed.
ARTICLE VI.
DISTRIBUTIONS, RECORD DATE
Section 6.01. Distributions. Subject to the provisions of the articles of
incorporation, of these bylaws and of law, the board of directors may authorize
and cause the corporation to make distributions whenever, and in such amounts or
forms as, in its opinion are deemed advisable.
Section 6.02. Record Date. Subject to any provisions of the articles of
incorporation, the board of directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any distribution as the record date
for the determination of the shareholders entitled to receive payment of the
distribution and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such distribution notwithstanding any
transfer of shares on the books of the corporation after the record date.
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ARTICLE VII.
BOOKS AND RECORDS, FISCAL YEAR
Section 7.01. Share Register. The board of directors of the corporation
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the board:
(a) a share register not more than one year old, containing the names and
addresses of the shareholders and the number and classes of shares
held by each shareholder; and
(b) a record of the dates on which certificates or transaction statements
representing shares were issued.
Section 7.02. Other Books and Records. The board of directors shall cause
to be kept at its principal executive office or, if its principal executive
office is not in Florida, shall make available at its Florida registered office
within five days after receipt by an officer of the corporation of a written
demand for them made by a shareholder or other person authorized by the Florida
Business Corporation Act, Section 607.1602, originals or copies of:
(a) its articles or restated articles of incorporation and all amendments
currently in effect;
(b) its bylaws or restated bylaws and all amendments currently in effect;
(c) resolutions adopted by the board of directors creating one or more
classes or series of shares and fixing the relative rights,
preferences, and limitations, if shares issued pursuant to the
resolutions are still outstanding;
(d) minutes of all shareholder meetings and records of all action taken by
the shareholders without a meeting within the last three years;
(e) written communication to all shareholders generally or to all
shareholders of a class or series within the last three years,
including the financial statements furnished for the last three years
required by the Florida Business Corporation Act, Section 607.1620;
(f) a list of the names and business street addresses of its current
directors and officers; and
(g) its most recent annual report delivered to the Department of State
pursuant to Florida Business Corporation Act, Section 607.1622.
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Section 7.03. Fiscal Year. The fiscal year of the corporation shall be
determined by the board of directors.
ARTICLE VIII.
LOANS, GUARANTEES
Section 8.01. The corporation may lend money to, guarantee an obligation of
or otherwise financially assist any officer, director or employee of the
corporation or of a subsidiary if the transaction, or a class of transactions to
which the transaction belongs, is approved by the affirmative vote of a majority
of the directors present, and if the transaction:
(a) is in the usual and regular course of business of the corporation;
(b) is with, or for the benefit of, a related corporation, an organization
in which the corporation has a financial interest, an organization
with which the corporation has a business relationship, or an
organization to which the corporation has the power to make donations;
(c) is with, or for the benefit of, an officer or other employee of the
corporation or a subsidiary, including an officer or employee who is a
director of the corporation or a subsidiary, and may reasonably be
expected, in the judgment of the board, to benefit the corporation; or
(d) has been approved by (1) the holders of two-thirds of the voting power
of the shares entitled to vote that are owned by persons other than
the interested person or persons, or (2) the unanimous affirmative
vote of the holders of all outstanding shares whether or not entitled
to vote.
Such loan, guarantee or other financial assistance may be with or without
interest and may be unsecured, or may be secured in the manner as a majority of
the directors present approve, including, without limitation, a pledge of or
other security interest in shares of the corporation. Nothing in this section
shall be deemed to deny, limit or restrict the powers of guaranty, surety or
warranty of the corporation at common law or under a statute of the state of
Florida.
ARTICLE IX.
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.01. The corporation shall indemnify all officers and directors of
the corporation for such expenses and liabilities, in such manner, under such
circumstances and to such extent as permitted by the Florida Business
Corporation Act, Section 607.0850, as now enacted or hereafter amended. Unless
otherwise approved by the board of directors, the corporation shall not
indemnify any employee of the corporation who is not otherwise entitled to
indemnification pursuant to this Section 9.01.
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ARTICLE X.
AMENDMENTS
Section 10.01. These bylaws may be amended or altered by a vote of the
majority of the whole board of directors at any meeting. Such authority of the
board of directors is subject to the power of the shareholders, exercisable in
the manner provided in the Florida Business Corporation Act, Section 607.1020,
to adopt, amend or repeal bylaws adopted, amended or repealed by the board of
directors.
ARTICLE XI.
SECURITIES OF OTHER CORPORATIONS
Section 11.01. Voting Securities Held by the Corporation. Unless otherwise
ordered by the board of directors, the president and chief executive officer
shall have full power and authority on behalf of the corporation (a) to attend
any meeting of security holders of other corporations in which the corporation
may hold securities and to vote such securities on behalf of this corporation;
(b) to execute any proxy for such meeting on behalf of the corporation; or (c)
to execute a written action in lieu of a meeting of such other corporation on
behalf of this corporation. At such meeting, the president shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities that the corporation possesses. The board of directors may from time
to time grant such power and authority to one or more other persons and may
remove such power and authority from the president or any other person or
persons.
Section 11.02. Purchase and Sale of Securities. Unless otherwise ordered by
the board of directors, the president and chief executive officer shall have
full power and authority on behalf of the corporation to purchase, sell,
transfer or encumber any and all securities of any other corporation owned by
the corporation, and may execute and deliver such documents as may be necessary
to effectuate such purchase, sale, transfer or encumbrance. The board of
directors may from time to time confer like powers upon any other person or
persons.
Adopted: September 30, 1999
/s/ Suzanne Wood
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Suzanne Wood, Secretary
EXHIBIT 10.1
EXHIBIT A
The Neptune Society, Inc.
1999 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this 1999 Stock Incentive Plan (the "Plan") is
to enable The Neptune Society, Inc., a Florida corporation (the "Company"), to
attract and retain the services of (a) selected employees, officers and
directors of the Company or of any parent or subsidiary corporation of the
Company, and (b) selected nonemployee agents, consultants, advisers and
independent contractors of the Company or any parent or subsidiary of the
Company.
2. Shares Subject to the Plan. Subject to adjustment as provided below
and in paragraph 8, up to 1,800,000 (one-million-eight-hundred-thousand) shares
of common stock of the Company (the "Shares") shall be offered and issued under
the Plan. If an option granted under the Plan expires, terminates or is
canceled, the unissued Shares subject to such option shall again be available
under the Plan. If Shares sold or awarded as a bonus under the Plan are
forfeited to the Company or repurchased by the Company, the number of Shares
forfeited or repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective when adopted by
the Board of Directors of the Company (the "Board"), unless a later date is
specified by the Board. However, no option granted under the Plan shall become
exercisable until the Plan is approved by the affirmative vote of the holders of
a majority of the outstanding voting capital shares of the Company represented
at a shareholder meeting at which a quorum is present, and any such grants of
options under the Plan prior to such approval shall be conditioned on and
subject to such approval. Subject to this limitation, options to purchase Shares
may be granted and Shares may be awarded as bonuses or sold under the Plan at
any time after the effective date and before termination of the Plan.
(b) Duration. No options may be granted pursuant to paragraph 6 of the
Plan on or after May 31, 2009. However, the Plan shall continue in effect until
all Shares available for issuance under the Plan have been issued and all
restrictions on such Shares have lapsed. The Board may suspend or terminate the
Plan at any time, except with respect to options and Shares subject to
restrictions then outstanding under the Plan. The Administrator may amend or
terminate this Plan or modify or amend options granted under this Plan,
including, without limitation, such modifications or amendments as are necessary
to maintain compliance with applicable statutes, rules or regulations.
Termination of the Plan shall not affect any outstanding options, any right of
the Company or its shareholders to repurchase Shares or the forfeitability of
options granted or Shares issued under the Plan.
4. Administration.
(a) The Plan shall be administered by a plan administrator (the
"Administrator") that shall be the Board or a committee appointed by the Board
(the "Committee"). The Administrator shall determine and designate from time to
time the individuals to whom grants of options shall be made, the amount of the
grants, and the other terms and conditions of the grants; and may amend or
terminate this Plan or modify or amend options granted under this Plan,
including, without limitation, such modifications or amendments as are necessary
to maintain compliance with applicable statutes, rules or regulations as
provided in paragraphs 3 and 11, subject to regulatory approval, if required. At
any time when the officers and directors of the Company are subject to Section
16(b) of the United States Securities Exchange Act of 1934 (the "Exchange Act"),
the Committee shall consist solely of "Non-employee" directors as such term is
defined from time to time in Rule 16b-3 under the Exchange Act. In addition, at
any time when the officers and directors of the Company are subject to Section
16(b) of the Exchange Act, no member of the Committee shall be eligible to
receive any grant under the Plan while such person serves as a Committee member.
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(b) Subject to the provisions of the Plan, and to regulatory approval,
if required, the Administrator may from time to time adopt and amend rules and
regulations relating to administration of the Plan, accelerate any exercise
date, waive or modify any restriction applicable to Shares (except those
restrictions imposed by law) and make all other determinations in the judgment
of the Administrator necessary or desirable for the administration of the Plan.
The interpretation and construction of the provisions of the Plan and related
agreements by the Administrator shall be final and conclusive. The Administrator
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any related agreement in the manner and to the extent it shall
deem expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.
5. Types of Grants - Eligibility. The Administrator may, from time to
time, take the following actions under the Plan: (i) grant Incentive Stock
Options, as defined in Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"), as provided in paragraph 6 (b); and, (ii) grant
options other than Incentive Stock Options ("Nonqualified Stock Options") as
provided in paragraph 6(c). Any such grants may be made to directors or
employees (including employees who are officers or directors) of the Company or
of any parent or subsidiary corporation of the Company, and to other individuals
described in paragraph 1 who the Administrator, in its sole discretion, believes
have made or will make an important contribution to the Company or its parent or
subsidiaries; provided, however, that only employees of the Company or a parent
or subsidiary shall be eligible to receive Incentive Stock Options under the
Plan. The Administrator shall select the individuals to whom grants shall be
made and shall specify the action taken with respect to each individual to whom
a grant is made under the Plan. At the discretion of the Administrator, an
individual may be given an election to surrender a grant in exchange for a new
grant under the Plan.
6. Option Grants.
(a) Grant. Each option granted under the Plan shall be evidenced by a
stock option agreement, in substantially the same form as attached hereto as
Exhibit A. With respect to each option grant, the Administrator shall determine
the number of Shares subject to the option, the option price, the period of the
option, and the time or times at which the option may be exercised and whether
the option is an Incentive Stock Option or a Nonqualified Stock Option.
(b) Incentive Stock Options. Incentive Stock Options granted under the
Plan shall be subject to the following terms and conditions:
(i) No employee may be granted Incentive Stock Options under the
Plan such that the aggregate fair market value, on the date of grant,
of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by that employee during any calendar
year under the Plan and under any other Incentive Stock Option plan
(within the meaning of Section 422 of the Code) of the Company or of
any parent or subsidiary corporation of the Company exceeds $100,000.
Any portion of an option which exceeds the annual limit shall not be
void but rather shall be a Nonqualified Stock Option.
(ii) An Incentive Stock Option may be granted under the Plan to
an employee possessing more than 10 percent of the total combined
voting power of all classes of shares of the Company or of any parent
or subsidiary corporation of the Company only if the option price is
at least 110 percent of the fair market value, as described in
paragraph 6 (b) (iv), of the Shares subject to the option on the date
it is granted, and the option by its terms is not exercisable more
than five years from the date of grant.
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(iii) Subject to paragraphs 6(b) (ii) and 6(e), Incentive Stock
Options granted under the Plan shall continue in effect for the period
fixed by the Administrator, except that no Incentive Stock Option
shall be exercisable more than 10 years from the date of grant.
(iv) The option price per Share shall be determined by the
Administrator at the time of grant. Subject to paragraph 6(b) (ii),
the option price shall not be less than 100 percent of the fair market
value of the Shares covered by the Incentive Stock Option at the date
the option is granted. For purposes of the Plan, the fair market value
of the Shares shall be determined by the Plan Administrator in good
faith.
(v) The Administrator may at any time without the consent of the
optionee convert an Incentive Stock Option into a Nonqualified Stock
Option.
(c) Nonqualified Stock Options. Nonqualified Stock Options shall be
subject to the following additional terms and conditions:
(i) The option price for Nonqualified Stock Options shall be
determined by the Administrator at the time of grant and may be any
amount that the Administrator shall specify. The option price may not
be less than 75 percent of the fair market value of the Shares covered
by the Nonqualified Stock Option on the date of grant. The fair market
value of the Shares covered by a Nonqualified Stock Option shall be
determined pursuant to paragraph 6(b)(iv).
(ii) Nonqualified Stock Options granted under the Plan shall
continue in effect for the period fixed by the Administrator.
(d) Exercise of Options. Except as provided in paragraph 6(f) or as
determined by the Administrator, no option granted under the Plan may be
exercised unless at the time of such exercise the optionee is employed by or in
the service of the Company or any parent or subsidiary corporation of the
Company and shall have been so employed or have provided such service
continuously since the date such option was granted. With respect to
Nonqualified Stock Options, absence on leave or on account of illness or
disability under rules established by the Administrator shall not, however, be
deemed an interruption of employment for purposes of the Plan. Unless otherwise
determined by the Administrator, vesting of options shall not continue during an
absence on leave (including an extended illness) or on account of disability. At
such time as the officers and directors of the Company become subject to Section
16(b) of the Exchange Act, no option may be exercised by an officer or director
of the Company within six months of the date of grant. Except as provided in
paragraphs 6(f), 8 and 9, options granted under the Plan may be exercised from
time to time over the period stated in each option in such amounts and at such
times as shall be prescribed by the Administrator, provided that options shall
not be exercised for fractional shares.
(e) Nontransferability. Options granted under this Plan and the rights
and privileges conferred by this Plan may not be transferred, assigned, pledged
or hypothecated in any manner (whether by operation of law or otherwise) other
than by will, by applicable laws of descent and distribution or (except in the
case of an Incentive Stock Option) pursuant to a qualified domestic relations
order, and shall not be subject to execution, attachment or similar process;
provided however, that any stock option agreement may provide or be amended to
provide that a Nonqualified Stock Option to which it relates is transferable
without payment of consideration to immediate family members of the optionee or
to trusts or partnerships established exclusively for the benefit of the
optionee and the optionee's immediate family members. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any option or of
any right or privilege conferred by this Plan contrary to the provisions hereof,
or upon the sale, levy or any attachment or similar process upon the rights and
privileges conferred by this Plan, such option shall thereupon terminate and
become null and void.
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(f) Termination of Employment or Service. Unless otherwise set forth
in the optionee's stock option agreement:
(i) In the event the employment or service of the optionee by the
Company or a parent or subsidiary corporation of the Company
terminates for any reason other than because of death, physical
disability, cause or voluntary termination not related to normal
retirement, the option may be exercised at any time prior to the
expiration date of the option or the expiration of three months after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
(ii) In the event of the termination of the optionee's employment
or service with the Company or a parent or subsidiary corporation of
the Company because the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code), the option may be exercised at any
time prior to the expiration date of the option or the expiration of
one year after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.
(iii) In the event of the death of an optionee while employed by
or providing services to the Company or a parent or subsidiary
corporation of the Company, the option may be exercised at any time
prior to the expiration date of the option or the expiration of one
year after the date of such death, whichever is the shorter period,
but only if and to the extent the optionee was entitled to exercise
the option on the date of death, and only by the person or persons to
whom such optionee's rights under the option shall pass by the
optionee's will or by the laws of descent and distribution of the
optionee's state of domicile at the time of death.
(iv) In the event of termination of the optionee's employment or
service with the Company or a parent or subsidiary corporation of the
Company for cause (as determined in the sole discretion of the
Administrator and defined in the optionee's stock option agreement) or
because of voluntary termination not related to normal retirement, the
option expires on the date of such termination.
(v) The Administrator, at the time of grant or at any time
thereafter, may extend the three-month and one-year expiration periods
any length of time not later than the original expiration date of the
option, and may increase the portion of an option that is exercisable,
subject to such terms and conditions as the Administrator may
determine.
(vi) To the extent that the option of any deceased optionee or of
any optionee whose employment or service terminates is not exercised
within the applicable period, all further rights to purchase Shares
pursuant to such option shall cease and terminate.
(g) Purchase of Shares. Unless the Administrator determines otherwise,
Shares may be acquired pursuant to an option only upon receipt by the Company of
notice in writing from the optionee of the optionee's intention to exercise,
specifying the number of Shares as to which the optionee desires to exercise the
option, and, if required to comply with the United States Securities Act of
1933, as amended, or state securities laws, the notice shall include a
representation that it is the optionee's present intention to acquire the Shares
for investment and not with a view to distribution. The certificates
representing the Shares shall bear any legends required by the Administrator.
Unless the Administrator determines otherwise, on or before the date specified
for completion of the purchase of Shares pursuant to an option, the optionee
must have paid the Company the full purchase price of such Shares in cash.
Unless the Administrator determines otherwise, all payments made to the
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Company in connection with the exercise of an option must be made by a certified
or cashier's bank check or by the transfer of immediately available funds. No
Shares shall be issued until full payment therefor has been made. Each optionee
who has exercised an option shall immediately upon notification of the amount
due, if any, pay to the Company in cash amounts necessary to satisfy any
applicable federal, state and local tax withholding requirements. If additional
withholding is or becomes required beyond any amount deposited before delivery
of the certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company or any
parent or subsidiary corporation of the Company may withhold that amount from
other amounts payable to the optionee by the Company or the parent or subsidiary
corporation, including salary, subject to applicable law.
7. Additional Provisions.
(a) The Administrator may include in a stock option agreement relating
to benefits under the Plan such additional terms and provisions as the
Administrator shall, in its discretion, see fit to include, including, without
limitation, restriction on transfer of the Shares or conditions under which the
Company shall or may repurchase the Shares.
(b) Lock-Up Agreement. If a Qualified Public Offering (as defined
below) of the common stock of the Company shall be proposed, each recipient of
options or Shares, at the request of a managing underwriter of such Qualified
Public Offering, enter into any agreement (a "Lock-Up Agreement") proposed by
such managing underwriter not to transfer such holder's Shares, any right to
acquire any Shares of the Company or any securities exercisable for or
convertible into Shares for a period not exceeding six months after the closing
date of such Qualified Public Offering. Whether or not a Qualified Public
Offering shall have been proposed, the Company may delay, and may instruct its
transfer agent to delay, the delivery of any certificate or certificates for
Shares until the Company shall have received a written undertaking from the
recipient that such recipient will enter into any Lock-Up Agreement as may be
requested by a managing underwriter of a proposed Qualified Public Offering.
A "Qualified Public Offering" is defined as an underwritten public offering
of the Company's common stock pursuant to an effective registration statement
under the United States Securities Act of 1933, as amended, covering the offer
and sale of common stock for cash for the account of the Company to the public.
8. Changes in Capital Structure. If the shares outstanding common stock
of the Company are hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of any recapitalization, reclassification,
share split, combination of shares or dividend payable in shares, the
Administrator shall make appropriate adjustments in the number and kind of
Shares as to which outstanding options or portions thereof then unexercised,
shall be exercisable, so that the participant's proportionate interest before
and after the occurrence of the event is maintained, provided that this
paragraph 8 shall not apply with respect to transactions referred to in
paragraph 9. The Administrator may also require that any securities issued in
respect of or exchanged for Shares issued hereunder that are subject to
restrictions be subject to similar restrictions. Notwithstanding the foregoing,
the Administrator shall have no obligation to effect any adjustment that would
or might result in the issuance of fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for in any manner
determined by the Administrator. Any such adjustment made by the Administrator
shall be conclusive, and shall bind holders of outstanding options and Shares
under the Plan.
9. Effect of Reorganization or Liquidation.
(a) Cash, Shares or Other Property for Shares. Except as provided in
paragraph 9(b), upon a merger, consolidation, reorganization, plan of exchange
or liquidation involving the Company, as a result of which the shareholders of
the Company receive cash, shares or other property in exchange for or in
-5-
<PAGE>
connection with their common stock (any such transaction to be referred to in
this paragraph 9 as an "Event"), any option granted hereunder shall terminate.
At such time as the officers and directors of the Company become subject to
Section 16(b) of the Exchange Act, with respect to an option granted to an
officer or director less than six months prior to any Event, such officer or
director shall have the right to require the Company to purchase such vested
option at a purchase price computed pursuant to paragraph 9(c) during the 30-day
period following the expiration of six months following the date of such grant,
and this right shall apply even if the option has otherwise terminated pursuant
to paragraph 6(f) following such Event.
(b) Shares for Shares. If the shareholders of the Company receive
capital shares of another corporation ("Exchange Shares") in exchange for their
shares of common stock in any transaction involving a merger, consolidation,
reorganization, or plan of exchange, all options granted hereunder shall be
converted into options to purchase Exchange Shares, unless the Administrator, in
its sole discretion, determines that any or all such options granted hereunder
shall not be converted, but instead shall terminate in accordance with the
provisions of paragraph 9(a). The amount and price of converted options shall be
determined by adjusting the amount and price of the options granted hereunder to
take into account the relative values of the Exchange Shares and the shares of
common stock in the transaction.
(c) Purchase Price. With respect to an option granted to an officer or
director who is subject to the provisions of Section 16(b) of the Exchange Act
less than six months prior to an Event, the purchase price payable pursuant to
paragraph 9(a) shall be computed as follows:
(i) With respect to a Nonqualified Stock Option, the purchase
price shall be the product of (A) the excess, if any, of the higher of
(1) the purchase price paid for each Share in the Event, or (2) the
highest fair market value of a Share (determined pursuant to paragraph
6(b) (iv)) during the 30-day period ending on the day the Event
occurs, over the option price, and (B) the number of Shares covered by
the option.
(ii) With respect to an Incentive Stock Option, the purchase
price shall be the product of (A) the excess, if any, of the fair
market value of each Share (determined pursuant to paragraph 6(b)(iv))
on the date of exercise over the option price, and (B) the number of
Shares covered by the option.
(iii) No option may be exercised in connection with an Event if
the purchase price determined under this paragraph 9(c) is negative.
(d) The rights set forth in this paragraph 9 shall be
transferable only to the extent the related option is transferable.
10. Corporate Mergers, Acquisitions, Etc. The Administrator may also grant
options under the Plan having terms, conditions and provisions that vary from
those specified in the Plan; provided that any such grants are granted in
substitution for, or in connection with the assumption of, existing options and
rights to acquire or purchase shares by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition of property
or shares, separation, reorganization or liquidation to which the Company or a
parent or subsidiary corporation of the Company is a party.
11. Amendment of Plan. The Administrator may at any time, and from time to
time, modify or amend the Plan in such respects as it shall deem advisable
because of changes in the law while the Plan is in effect or for any other
reason. Except as provided in paragraphs 6 (b) (v), 8 and 9, however, no change
in an option already granted shall be made without the written consent of the
holder of such option.
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<PAGE>
12. Approvals. The obligations of the Company under the Plan are subject
to the approval of regulatory agencies, state and federal authorities or
agencies with jurisdiction in the matter. The Company shall not be obligated to
issue or deliver Shares under the Plan if such issuance or delivery would
violate applicable state or federal securities laws, or if compliance with such
laws would, in the opinion of the Administrator, be unduly burdensome or require
the disclosure of information which would not be in the Company's best
interests.
13. Employment and Service Rights. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any parent or subsidiary
corporation of the Company or shall interfere in any way with the right of the
Company or any parent or subsidiary corporation of the Company by whom such
employee is employed to terminate such employee's employment at any time, for
any reason, with or without cause, or to increase or decrease such employee's
compensation or benefits; or (ii) confer upon any person engaged by the Company
or any parent or subsidiary corporation of the Company any right to be retained
or employed by the Company or the parent or subsidiary or to the continuation,
extension, renewal, or modification of any compensation, contract, or
arrangement with or by the Company or the parent or subsidiary.
14. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Shares until the date
of issue to the recipient of a share certificate for such Shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
share certificate is issued.
Approved by the Board of Directors of the Company on June 1, 1999.
-7-
EXHIBIT 10.2
SHARE PURCHASE AGREEMENT
BETWEEN
Lari Acquisition Company, Inc. (the "Purchaser"),
the Emanuel Weintraub Inter Vivos Trust (the 'Trust'),
Emanuel Weintraub ("Weintraub"),
Neptune Management Corp. ("Neptune"),
Heritage Alternatives, Inc. ("Heritage"),
Neptune Pre-Need Plan, Inc. ("Neptune Pre-Need")
(the Trust, Weintraub, Neptune, Heritage and Neptune Pre-Need
are collectively referred to as the "Vendors")
and Lari Corp. ("Lari").
DATED: March 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
1 INTERPRETATION.............................................................................................2
1.1 Definitions.......................................................................................2
1.2 Schedules.........................................................................................2
1.3 Division, Headings, Index.........................................................................5
1.4 Gender and Number.................................................................................6
1.5 Currency..........................................................................................7
2 PURCHASE AND PURCHASE PRICE................................................................................7
2.1 Purchase..........................................................................................7
2.2 Payment of Purchase Price.........................................................................7
2.3 Elections.........................................................................................7
2.4 Effective Date....................................................................................8
2.5 Excluded Assets and Excluded Liabilities..........................................................8
2.6 Reconciliation....................................................................................8
2.7 Payment of Difference.............................................................................8
2.8 Right of Set-Off..................................................................................8
2.9 Assignment of Accounts Receivable.................................................................8
3 JOINT AND SEVERAL REPRESTATIONS AND WARRANTIES
OF THE VENDORS WITH RESPECT TO THE OPERATING ENTITIES.............................................8
3.1 Corporate Status and Authority....................................................................8
3.2 Share Capital and Partnership Units:..............................................................9
3.3 Assets...........................................................................................10
3.4 Trust Accounts...................................................................................11
3.5 Business Operations..............................................................................12
3.6 Financial........................................................................................12
3.7 Banking..........................................................................................15
3.8 Insurance........................................................................................15
3.9 Tax Matters......................................................................................16
3.10 Employee Matters.................................................................................17
3.11 Litigation and Claims............................................................................18
3.12 Contracts and Commitments........................................................................18
3.13 Contingency and Environmental Liabilities........................................................19
3.14 Effect of this Transaction.......................................................................20
4 REPRESENTATIONS AND WARRANTIES OF THE TRUST...............................................................21
4.1 Individual Authority.............................................................................21
4.2 Receipt of the Securities........................................................................21
4.3 Solicitation.....................................................................................21
4.4 Accredited Investor..............................................................................21
4.5 Residency........................................................................................21
4.6 Joint and Several................................................................................21
5 COVENANTS OF THE VENDORS..................................................................................22
5.1 Access to the....................................................................................22
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
5.2 Delivery of Books and Records....................................................................23
5.3 Conduct Prior to Closing.........................................................................23
5.4 Delivery of Documents............................................................................23
5.5 Minority Shares:.................................................................................24
5.6 Joint and Several................................................................................24
5.7 Vendors' Taxes...................................................................................24
6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER................................................24
6.1 Corporate Status and Authority...................................................................24
6.2 Authorizations...................................................................................24
6.3 Regulatory Approval..............................................................................24
6.4 Share Transfer Restrictions......................................................................25
6.5 Issued Share Capital.............................................................................25
6.6 Fully Paid Shares................................................................................25
6.7 General Security Agreement.......................................................................25
6.8 Purchaser's Liabilities..........................................................................25
7 CONDITIONS OF CLOSING.....................................................................................25
7.1 Conditions of Closing in Favour of the Purchaser.................................................25
7.2 Conditions of Closing in Favour of the Vendors...................................................27
7.3 Parties' Efforts.................................................................................38
8 CLOSING ARRANGEMENTS......................................................................................28
8.1 Place of Closing.................................................................................28
8.2 Transfer.........................................................................................28
8.3 Further Assurances...............................................................................29
9 LIABILITY FOR CLAIMS......................................................................................29
9.1 Claims...........................................................................................29
9.2 Subrogation......................................................................................30
9.3 Insurance........................................................................................30
10 INDEMNITY.................................................................................................30
10.1 Known Actions and Proceedings....................................................................30
10.2 Right to Set-Off.................................................................................31
11 GENERAL MATTERS...........................................................................................31
11.1 Governing Law and Arbitration....................................................................31
11.2 Entire Agreement.................................................................................31
11.3 Assignment.......................................................................................31
11.4 Public Notices...................................................................................31
11.5 Confidential Information.........................................................................32
11.6 Non-Waiver.......................................................................................32
11.7 Indemnification in Respect of Brokers or Agents..................................................32
11.8 Expenses.........................................................................................32
11.9 Notices..........................................................................................32
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
11.10 Time of the Essence..............................................................................33
11.11 Further Assurances...............................................................................33
11.12 Severability.....................................................................................33
11.13 Counterparts.....................................................................................34
</TABLE>
<PAGE>
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 26th day of March, 1999 between Lari
Acquisition Company, Inc., a company incorporated under the laws of the State of
California (the "Purchaser"), the Emanuel Weintraub Inter Vivos Trust (the
"Trust"), Emanuel Weintraub, a businessman ("Weintraub"), Neptune Management
Corp., a company incorporated under the laws of the State of California
("Neptune"), Heritage Alternatives, Inc., a company incorporated under the laws
of the State of California ("Heritage"), Neptune Pre-Need Plan, Inc., a company
incorporated under the laws of the State of California ("Neptune Pre-Need") (the
Trust, Weintraub, Neptune, Heritage and Neptune Pre-Need are collectively
referred to as the "Vendors") and Lari Corp., a company incorporated under the
laws of the State of Florida ("Lari").
WHEREAS:
A. Neptune is the general partner and a 50% owner of each of Neptune-Los
Angeles, Ltd., a limited partnership under the laws of the State of
California ("Neptune LA"), Neptune-Santa Barbara, Ltd., a limited
partnership under the laws of the State of California ("Neptune SB"),
Neptune-Miami, Ltd., a limited partnership under the laws of the State of
Florida ("Neptune MI"), Neptune-St. Petersburg, Ltd., a limited partnership
under the laws of the State of Califomia ("Neptune SP"), Neptune-Ft.
Lauderdale, Ltd., a limited partnership under the laws of the State of
Florida ("Neptune FT"), Neptune-Nassau, Ltd., a limited partnership under
the laws of the State of California ("Neptune NA"), and
Neptune-Westchester, Ltd., a limited partnership under the laws of the
State of California ("Neptune WT").
B. Heritage is the general partner and a 50% owner of Heritage Alternatives,
L.P., a limited partnership under the laws of the State of California
("Heritage ALT").
C. The Vendors operate and carry on a funeral, burial and cremation business
known as "Neptune Society" operating under Neptune, Heritage, Neptune
Pre-Need (collectively, the "Companies"), Neptune LA, Neptune SB, Neptune
MI, Neptune SP, Neptune FT, Neptune NA, Neptune WT and Heritage ALT
(collectively, the "Partnerships").
D. The Trust is the legal and beneficial owner of the following:
(i) 82% of the issued and outstanding shares of Neptune;
(ii) 95% of the issued and outstanding shares of Heritage; and
(iii) all of the issued and outstanding shares of Neptune Pre-Need.
E. The Trust has agreed to sell all of its issued and outstanding shares in
the Companies and the Purchaser has agreed to purchase all of its issued
and outstanding shares in the Companies.
<PAGE>
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NOW THEREFORE, in consideration of $10.00 payable by the Purchaser to the
Vendors, the mutual covenants and agreements contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
1 INTERPRETATION
1.1 Definitions: In this Agreement and in any schedules and amendments, the
following terms shall have the meanings set forth below unless the context
otherwise requires:
(a) "Agreement" means this Agreement including the Schedules attached as
the same may be amended or supplemented from time to time;
(b) "Assets" means all of the Companies' and/or the Partnerships' rights
in the Pre-Need Contracts, the Trust Accounts, the Intangible Assets,
the Land and Buildings, the Leased Assets, the Leases, the Material
Contracts and all other leases and contracts, subject to the
Purchaser's right not to assume specific contracts, the Specified
Assets, the Other Operating and Fixed Assets and all other fixed
assets and equipment used in connection with the Business, all
licenses and other rights required in order for the Purchaser to
operate the Business, the Insurance Policies, all existing and
prospective customer lists, lists of suppliers, employee contracts,
promotional material, websites and electronic commerce sites, price
lists, the Books and Records and other information relating to the day
to day carrying on of the Business but does not include the Excluded
Assets or the Excluded Liabilities;
(c) "Books and Records" means all files, ledgers, correspondence, lists,
manuals, reports, texts, notes, memoranda, invoices, receipts,
accounts, financial statements, financial working papers, computer
discs, tapes or other means of electronic storage, and all other
records or documents of any nature or kind whatsoever belonging to the
Vendors and the Partnerships in connection with the Business;
(d) "Business" means the business of providing funeral, burial and
cremation services including the provision and sale of pre-need
cremation services carried on by the Vendors directly and indirectly
through the Partnerships and any other business now carried on by the
Vendors and the Partnerships;
(e) "Business Day" means any day except Saturday, Sunday or any statutory
holiday in the State of California;
(f) "Charter Documents" means articles, articles of incorporation,
memorandum, memorandum of association, articles of association,
by-laws, limited partnership agreements or any similar constating
document of a corporate or limited partnership entity;
<PAGE>
- 3 -
(g) "Claim" means any claim by the Purchaser against the Vendors, or the
Vendors against the Purchaser, for any breach of representation,
warranty, covenant or other agreement or obligation of the Vendors or
Purchaser pursuant to this Agreement;
(h) "Closing" means the completion of the sale and purchase of the
Weiritraub Shares as provided in this Agreement;
(i) "Closing Date" means April 9, 1999 or such earlier or later date as
the parties may agree to in writing;
(j) "Encumbrances" means and includes, whether or not registered or
recorded, any and all:
(i) mortgages, assignments of rent, liens, licences, leases,
charges, security interests, hypothecs, and pledges whether
fixed or floating against property (whether real, personal,
mixed, tangible or intangible), or conditional sales
contracts or title retention agreements or equipment trusts
or financing leases relating thereto, or any subordination
to any right or claim of others in respect thereof;
(ii) claims, interests and estates against or in proper (whether
real, personal, mixed, tangible or intangible) including
easements, rights-of-way servitudes or other similar rights
in property granted to or reserved or taken by any person or
any governmental body or authority;
(iii) any option, or other right to acquire, or acquire any
interest in, any property; and
(iv) other encumbrances of whatsoever nature and kind against
property (whether real, personal, mixed, tangible or
intangible);
(k) "Effective Date" means March 31, 1999;
(1) "Escrow Agent" means City National Bank at 400 North Roxbury Drive,
Suite 600, Beverly Hills, California, USA 90210;
(m) "Excluded Assets" means the accounts receivable balance for the
(at-need) services in the accounts of the Partnerships, the cash and
cash equivalents at the Effective Date and the balance of cash
remaining from the collection of accounts receivable at the Effective
Date from the sale of pre-need services prior to the Effective Date up
to and including the close of business on April 23, 1999 less the
amounts due and owing for merchandise, commissions, taxes of all kinds
and payments due to the Trust Accounts in accordance with the Pre-Need
Contracts sold to the Effective Date;
<PAGE>
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(n) "Excluded Liabilities" means all actual or accrued liabilities,
including but not limited to all trade payables, commissions payable,
sales tax, employee remittances of every kind whatsoever, federal,
municipal, and/or state taxes of any kind whatsoever, with respect to
the Operating Entities up to the Effective Date and partnership draws
accrued to the Effective Date for the benefit of the limited partners
of Neptune FT, Neptune NA, Neptune Ml, Neptune SP and Neptune WT;
(o) "Insurance Policies" means those insurance policies described in
Schedule J;
(p) "Intangible Assets" means those registered and unregistered names,
trade names, trademarks, designs, copyrights, patents and similar
rights specifically including but not limited to the Trade Names and
any proprietary software as described in Schedule E;
(q) "Land and Buildings" means those interests in real property described
in Schedule D;
(r) "Leased Assets" means those assets included in the Assets which are
leased by any of the Operating Entities as lessee and as are described
in Schedule B;
(s) "Leases" means the leases under which the Leased Assets are leased by
any of the Operating Entities;
(t) "Material Contracts" means those contracts described in Subsection
3.12;
(u) "Operating Entities" means each of the Companies and the Partnerships;
(v) "Other Operating and Fixed Assets" means those operating and fixed
assets described in Schedule F;
(w) "Person" means an individual, a corporation, a partnership, a trust,
an unincorporated organization or a government agency or
instrumentality;
(x) "Place of Closing" means the offices of DuMoulin & Boskovich at Suite
1800, 1095 West Pender Street, Vancouver, B.C.;
(y) "Pre-Need Contracts" means those pre-need contracts for cremation
services sold prior to the death of the beneficiary by or for the
Operating Entities, their predecessors and assignors for the provision
of funeral cremation services as described in Schedule N;
(z) "Purchase Price" has the meaning ascribed thereto in Subsection 2.1 of
this Agreement;
<PAGE>
- 5 -
(aa) "Securities" means the Note, the Lari Shares and the Weintraub Note as
described in Subsection 2.2 of this Agreement;
(ab) "Specified Assets" means those specified assets described in Schedule
C;
(ac) "Time of Closing" means the time at which the Closing takes place,
which shall be 10:00 am, at the Place of Closing on the Closing Date
or such other time as the parties may agree upon;
(ad) "Trade Name" means "Neptune Society";
(ae) For further clarification, "Trust" means the trust created and defined
by the Emanuel Weintraub Inter Vivos Trust Agreement, dated February
26, 1996;
(af) "Trustee" means Emanuel Weintraub as trustee of the Trust;
(ag) "Trust Accounts" means all cash, funds and accounts and investments,
as described in Schedule G, which arise from the sale of the Pre-Need
Contracts which are administered in trust by the Operating Entities;
(ah) "Unaudited Financial Statements" means the unaudited financial
statements of each of the Companies and the Partnerships (except for
Heritage), for the 12 month period ending December 31, 1998, a copy of
each of which is incorporated as Schedule H; and
(ai) "Weintraub Shares" means the shares in the capital of Neptune,
Heritage and Neptune Pre-Need beneficially owned by Weintraub, either
directly or indirectly, at the Time of Closing being that number and
class of shares set out in Schedule A to this Agreement.
1.2 Schedules: The following are the schedules delivered concurrently with, and
incorporated in, this Agreement:
<TABLE>
Schedule Description Reference
-------- ----------- ---------
<S> <C> <C>
A Authorized and Issued Share Capital of Each of the Companies 3.2(a)(b)
and Issued Partnership Units of Each of the Partnerships
B List of Leased Assets 3.3(b)
C List of Specified Assets 3.3(d)
D List of Land and Buildings 3.3(h)
</TABLE>
<PAGE>
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<TABLE>
Schedule Description Reference
-------- ----------- ---------
<S> <C> <C>
E List of Intangible Assets 3.3(i)
F List of Other Operating and Fixed Assets 3.3(j)
G List of Trust Accounts 3.4(a)
H Unaudited Financial Statements 3.6(a)
I List of Bank Accounts 3.7(b)
J List of Insurance Policies 3.8(a)(b)(c)
K List of Employees and Employee Benefit Plans 3.10(a)(c)
L List of Adverse Proceedings 3.8(c) and
3.11(a)
M List of Material Contracts 3.12(a)
N List of Pre Need Contracts 3.12(b)
O Required Consents 3.14(a) and
8.1(a)
P Certificate of Accredited Investor 8.1(d)
Q Minority Shareholder Agreements 8.1(k)
R Interest Purchase Agreements 8.1(l)
S Weintraub Consulting Agreement 8.1(n)
T Miller Employment Agreement 8.1(o)
U Form of Note 2.4(c)
V Form of Weintraub Note 2.4(d)
W Limited Partner Units Not Tendered 6.1
</TABLE>
1.3 Division, Headings, Index: The division of this Agreement into sections,
subsections and paragraphs and the insertion of headings and any index
provided are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.4 Gender and Number: Unless the context otherwise requires, words importing
the singular include the plural and vice versa and words importing gender
include both genders.
<PAGE>
- 7 -
1.5 Currency: All dollar amounts referred to in this Agreement are stated in
United States of America currency, unless otherwise expressly stated.
2 PURCHASE AND PURCHASE PRICE
2.1 Purchase: On the Closing Date and subject to the terms and conditions
contained in this Agreement, the Trust shall sell, assign and transfer the
Weintraub Shares and Lari through the Purchaser, shall purchase the
Weintraub Shares for the aggregate price of $14,698,017.00 (the "Purchase
Price").
2.2 Payment of Purchase Price: At the Time of Closing, the Purchase Price will
be payable by the Purchaser to the Trust as follows:
(a) the sum of $506,583.00 by way of a solicitor's cheque payable to the
Escrow Agent;
(b) 513,273 shares of common stock of Lari (the "Lari Shares") issued by
Lari to the Trust and delivered to the Escrow Agent in trust for the
benefit of the Trust, provided that the closing price of such shares
on the NASD OTC on the trading day that is two Business Days prior to
the Closing Date (the "Price Date") is equal to or greater than $5.00
per share (the "Deemed Price"). In the event that the Deemed Price is
less that $5.00 per share on the Price Date, the Purchaser will
deliver on Closing the Lari Shares plus that number of shares in the
common trading stock of Lari which will increase the aggregate deemed
value of the Lari Shares to $2,566,368.00;
(c) the sum of $9,625,069.00 by way of an undivided interest to the Trust
in a promissory note in the form attached as Schedule U to this
Agreement (the "Note"), delivered to the Escrow Agent in trust for the
benefit of the Trust; and
(d) the sum of $2,000,000.00 by way of a promissory note payable by the
Purchaser to the Trust in the form attached as Schedule V to this
Agreement (the "Weintraub Note");
which shall be good and sufficient payment to the Trust to the extent of
such amounts.
2.3 Effective Date: Notwithstanding the Closing Date, all transactions
contemplated in this Agreement will be effective on the Effective Date and
all income from the Business will accrue to the benefit of the Purchaser
from the Effective Date.
2.4 Excluded Assets and Excluded Liabilities: From and after the Effective
Date, the Purchaser will have operational control and responsibility of the
management of the Excluded Assets and Excluded Liabilities.
<PAGE>
- 8 -
2.5 Interim Payments: The Purchaser will cause the Operating Entities to pay to
the Trust on each of May 17, 1999 and June 15, 1999, an amount of
$200,000.00 (or such lesser amount in the event that there is insufficient
working capital to operate the Business in the ordinary course) subject to
withholding or to other statutory deductions, if any (the "Interim
Payments").
2.6 Reconciliation: On or before June 30, 1999 (the "Reconciliation Date"), the
Purchaser will provide to Weintraub a reconciliation of the Excluded Assets
and Excluded Liabilities, being that amount of cash, collections and
amounts paid, respectively, from the Effective Date less the Interim
Payments.
2.7 Payment of Difference: Any amount of cash and collected receivables that
pertain to the Excluded Assets, which is in excess of the amount of
payments that pertain to the Excluded Liabilities plus any Interim
Payments, will be paid by the Purchaser to the Trust on or before July 15,
1999. Any amount of cash and collected receivables that pertain to the
Excluded Assets which is less than the amount of payments that pertain to
the Excluded Liabilities plus any Interim Payments will be paid by
Weintraub to the Purchaser on or before July 31, 1999.
2.8 Right of Set-Off: In the event that Weintraub owes the Purchaser any
amounts in connection with the reconciliation set forth in Section 2, the
Purchaser and Lari have the right to set-off any such amount against any
money due and owing to Weintraub or to the Trust from the Purchaser or Lari
under this or any other Agreement.
3 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE VENDORS WITH RESPECT TO THE OPERATING ENTITIES
The Vendors jointly and severally represent and warrant to the Purchaser as
follows and acknowledge that the Purchaser is relying upon such representations
and warranties in connection with the purchase of the Weintraub Shares:
3.1 Corporate Status and Authority:
(a) Corporate Status: Each of the Operating Entities has been duly
organized and is validly subsisting under the laws of the State of
California or the State of Florida as the case may be and have all
requisite power and capacity to own or lease the Assets and to carry
on the Business. The Operating Entities are duly qualified and
licensed to carry on their business in all jurisdictions in which the
nature of their business or the properties and assets owned or leased
by them make such qualification and licensing necessary and where the
failure to be so qualified and licensed would have a material adverse
effect on the Business or the Assets;
<PAGE>
- 9 -
(b) Amendments to Charter: The Operating Entities have not made any
amendments to their Charter Documents other than those expressly
reflected in their corporate records; and
(c) Corporate Records: The corporate and/or limited partnership records
and minute books of the Operating Entities accurately reflect all
material proceedings of its directors and shareholders and partnership
proceedings, as the case may be, and include complete and accurate
minutes of all meetings of its directors, shareholders or partners, as
the case may be, copies of all resolutions passed, up-to-date and
accurate shareholder, director and partner registers, transfer
registers and any other corporate and limited partnership registers
required to be maintained by the Operating Entities. All meetings of
shareholders, directors and partners, as the case may be, were duly
called and held and all resolutions, whether passed at meetings, or in
writing, are valid and effectual in all cases where the matters dealt
with at such meetings or in such resolutions could have a material
effect on the Operating Entities as the case may be.
3.2 Share Capital and Partnership Units:
(a) Share Capital: The authorized and issued share capital of each of the
Companies is accurately described in Schedule A to this Agreement. The
shares shown as constituting the issued share capital of each of the
Companies have been duly issued and are outstanding and are fully paid
and non-assessable;
(b) Partnership Units: The total number of partnership units outstanding
in the capital stock of each of the Partnerships is accurately
described in Schedule A to this Agreement; and
(c) Rights to Acquire Securities: No person has any agreement, option,
right or privilege (whether by law, pre-emptive, or contractual), or
any interest capable of becoming an agreement, including convertible
securities, warrants, or convertible obligations of any nature, for
the purchase, subscription, allotment or issuance of any of the
unissued shares of any of the Companies or any of the units in the
capital stock of each of the Partnerships.
3.3 Assets:
(a) Ownership: Except for the Leased Assets, the Operating Entities have
good and marketable title to all of the Assets free and clear of all
Encumbrances;
(b) Leased Assets: The Leased Assets are held under valid and subsisting
Leases, each of which is listed in Schedule B. Each Lease is in full
force and effect and without amendment thereto, and the Leases and the
Leased Assets are free and
<PAGE>
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clear of all Encumbrances. Except for the Leases, there are no leases,
agreements to lease, tenancy arrangements or licences to which the
Operating Entities are a party which have a capitalized value in
excess of $1,000. The Operating Entities have not previously assigned
the Leases nor sublet their interest in any of the Leased Assets under
the Leases. The Operating Entities have not released any of the other
parties to such leases from the performance of any of their
obligations thereunder. The Operating Entities are not in breach of
any of the terms of any Leases, and the Vendors are not aware of any
of the other parties to the Leases being in breach of any of the terms
of the Leases, and, to the best of the knowledge of the Vendors, no
event or condition has occurred which, either immediately or after
notice or lapse of time or both, could give rise to the cancellation
or termination of any of the Leases. There are no prepaid rents,
rent-free periods or outstanding lessor's contributions or obligations
for lessee incentives under any of the leases which consist of
subleases under which the Operating Entities are a sublessor. The
Vendors have no knowledge of anything or matter which does or shall
give any of the sublessees under any of the subleases any right of
abatement, set-off or deduction in respect of the rent payable by the
sublessees;
(c) Condition of Assets: To the best of the knowledge of the Vendors, all
fixed assets and equipment owned or used by the Operating Entities in
the conduct of the Business all, of which is listed in either
Schedules C or F, have been properly maintained and are in good
working order and contain no defects which could adversely affect the
operation of the Business to any material degree;
(d) Condition of Specified Assets: The Specified Assets have been properly
maintained and are in good working order and contain no defects which
could adversely affect the operation of the Business to any material
degree;
(e) Rights to Assets: No present or former director, officer, shareholder
or partner of the Operating Entities or any person not dealing at
arm's length with any of the foregoing owns directly or indirectly or
has any agreement, option or commitment to acquire or lease, any
property, asset, right or license used by the Business;
(f) Zoning: All real property at which the Operating Entities carry on the
Business is zoned to permit the particular activity carried out on
such property;
(g) Rents and Taxes: All rents, operating costs, property taxes (whether
municipal, school, general and special taxes, rates, assessments,
local improvements charges or frontage taxes), business taxes,
development cost charges, other subdivision charges and costs and
other levies which are chargeable against the Land and Buildings
leased by the Operating Entities have been paid in fill unless the
same are not due and payable;
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(h) Land and Buildings: The list the Land and Buildings set out in
Schedule D accurately reflects all interests of the Operating Entities
in real property used in the conduct of the Business. The Vendors
represent that all agreements with respect to the Operating Entities'
interests in the Land and Buildings are in force and effect and
without amendment thereto and the interests in the Land and Buildings
are free and clear of all Encumbrances. To the best of the knowledge
of the Vendors, neither asbestos nor urea formaldehyde foam is now
used in any of the buildings listed in Schedule D;
(i) Intangible Assets: The list the Intangible Assets set out in Schedule
E accurately reflects all registered and unregistered names, trade
names, trademarks, designs, copyrights, patents and similar rights
specifically including but not limited to the Trade Names and any
proprietary software used in connection with the Business and/or owned
or held by the Operating Entities on the date hereof free of
Encumbrances; and
(j) Other Operating and Fixed Assets: The list the Other Operating and
Fixed Assets set out in Schedule F accurately reflects all operating
and fixed assets owned or held by the Operating Entities having an
original capital cost of $500 or more which are not disclosed
elsewhere in this Subsection 3.3. Except for sales and purchases in
the ordinary course of business since January 12, 1999, the Operating
Entities own such assets on the date hereof free of Encumbrances.
3.4 Trust Accounts:
(a) The Trust Accounts described in Schedule G accurately reflects all
funds received by the Operating Entities in connection with the sale
of pre-need funeral arrangements or for undelivered funeral
merchandise which has been placed in the Trust Accounts on behalf of
the pre-need customer to the extent required by the terms of the
Pre-Need Contract with the customer and as required by the applicable
laws and regulations governing the Trust Accounts as of the date
indicated in Schedule G;
(b) All investments of the Trust Accounts are in accordance with all
applicable state and federal laws and regulations pertaining to the
investment and administration of such Trust Accounts; and
(c) The Operating Entities have delivered to the customer, or at the
election of the customer stored for the benefit of the customer, all
pre-need merchandise sold by the Operating Entities to the customer
under the Pre-Need Contracts. Any such storage of merchandise is in an
appropriate storage facility in accordance with the applicable laws
and regulations regarding such storage.
<PAGE>
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3.5 Business Operations:
(a) Operating Authorities: Except as set forth in Subsection 3.11, the
Operating Entities have acquired, and currently hold, all permits,
licenses, consents, authorizations, approvals, privileges, waivers,
exemptions, orders, certificates, rulings, agreements and other
concessions granted by or entered into with any governmental or
regulatory authority required in connection with the Assets or the
Business, that are material to the Assets or the Business and all of
the foregoing are in good standing and are being complied with in all
material respects;
(b) Compliance with Laws: The Operating Entities are operating and using
the Assets, and are conducting the Business, in compliance with all
applicable laws and regulations of each jurisdiction in which the
Assets are located or in which they conduct the Business; and
(c) Jurisdictions in which Business is Carried On: The Operating Entities
do not carry on the Business or own or lease any assets in any
jurisdiction other than in the State of California, the State of
Florida and the State of New York which would require registration or
licensing in such jurisdiction.
3.6 Financial:
(a) Unaudited Financial Statements: The Unaudited Financial Statements
present fairly in all material respects the financial position of the
Operating Entities as at the respective dates of the said statements
and the results of their operations for the 12 month period then ended
in accordance with accounting principles used by the Operating
Entities applied on a basis consistent annually except as noted in the
Thomas-Pierce & Company reconciliations as reviewed by Deloitte &
Touche.
(b) No Material Change: Since January 12, 1999 and up to the date hereof
there has been no material adverse change in the nature or condition
of the Assets or the Business, financial or otherwise, except changes
occurring in the ordinary course of its business, nor has there been
any development or threatened or probable development of which the
Vendors are aware which materially and adversely affects the Assets or
the Business. The Business has been carried on in the ordinary course
as it had previously been carried on. In addition, save as disclosed
herein, since January 12, 1999 and up to the date hereof the Operating
Entities have not:
(i) issued any shares, units or other securities;
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(ii) incurred any liability or obligation (absolute or
contingent) save current liabilities incurred in the
ordinary course of business which as to their nature and
amount are consistent with the Business as carried on;
(iii) discharged or satisfied any Encumbrance or paid any
obligation or liability (absolute or contingent) except for
current liabilities incurred in the ordinary course of
business and except for regularly scheduled payments of term
debt and lease payments;
(iv) declared, paid, authorized or made any dividend, payment or
distribution of any kind or nature to its shareholders or
partners in their capacity as such or redeemed or purchased
or otherwise acquired any of its capital stock or agreed to
do so except for an accrual included as an Excluded
Liability at March 31, 1999 in the aggregate amount of
$24,993.00 to be paid as a partner draw to the limited
partners of Neptune FT, Neptune NA, Neptune MI, Neptune SP
and Neptune WT as at March 30, 1999;
(v) subjected any of the Assets to any Encumbrances;
(vi) sold or transferred any of the Assets or cancelled or
released any debts or claims, except, in each case, in the
ordinary course of business;
(vii) waived any rights of material value;
(viii) entered into any transaction or into any contracts or
agreements or modifications or cancellations thereof, other
than in the ordinary course of business;
(ix) made or authorized any payment to officers, directors or
employees in their capacity as such except in the ordinary
course of business and at rates of salary, bonus or other
remuneration consistent with remuneration of previous years;
(x) used any funds other than in the ordinary course of business
as theretofore carried on; and
(xi) made any capital expenditures greater than $1,000 or entered
into any lease with a capitalized value greater than $1,000;
(c) Books and Records: The Books and Records fairly and correctly set out
and disclose in all material respects the financial position of the
Operating Entities and all material financial transactions of the
Operating Entities have been accurately recorded in the Books and
Records;
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(d) Liabilities: The Operating Entities do not have any debts or
liabilities (whether accrued, contingent, absolute or otherwise and
whether or not determined or determinable), including liabilities
which arise hereafter based on events which have occurred up to the
date hereof, and including liabilities relating to income and other
taxes except:
(i) liabilities disclosed on, reflected in or provided for in
the Unaudited Financial Statements;
(ii) other liabilities disclosed in this Agreement; or
(iii) liabilities incurred in the ordinary course of its
businesses since January 12, 1999;
(e) Current Liabilities: Notwithstanding paragraph 3.6(d) above, the
Operating Entities do not have accounts or trade payables or any other
current liabilities, including any sales tax or commissions payable,
which exceed $300,000.00 at the Effective Date.
(f) Receivables: All accounts receivable recorded on the books of the
Operating Entities are due and payable and no right of set off or
counterclaim exists with respect to those accounts, except for the
right of cancellation of Pre-Need Contracts as set forth in those
agreements. The reserves taken for doubtful or bad accounts as shown
on the Unaudited Financial Statements have been determined on a basis
consistent with past practice of the Operating Entities and consistent
with the accounting procedures used by the Operating Entities in
previous fiscal periods. There is no circumstance of which any of the
Vendors is aware which would indicate that such reserve is not
adequate;
(g) Accountants: The Operating Entities have not had any material
disagreement or dispute with their auditors or accountants over the
accounting or tax treatment of their financial information during this
period or for the period ended January 12, 1999; and
(h) Shareholder and Related Party Loans: At the Time of Closing, the
Operating Entities will not be indebted, directly or indirectly, to
any of the Vendors, any present or former director, officer,
shareholder, partner or employee of the Operating Entities or any
person not dealing at arms length with any of the foregoing and none
of such persons is indebted to the Operating Entities except for
matters arising out of normal relations between employee and employer.
<PAGE>
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3.7 Banking:
(a) Loans and Credit Facilities: Except for the promissory note issued by
Neptune SP on March 19, 1996, the Operating Entities have not entered
into, or otherwise arranged for, any loans, operating lines of credit
or other credit facilities (including interest rate or currency swaps,
hedging contracts, forward loan or rate agreements or other financial
instruments), and do not have outstanding any bonds, debentures,
mortgages, notes or other similar indebtedness and the Operating
Entities are not obligated to create or issue any bonds, debentures,
mortgages, notes or other similar indebtedness;
(b) Bank Facilities: Schedule I contains a complete and accurate listing
showing the name of each bank, trust company or similar financial
institution in which the Operating Entities have an account, safety
deposit box or other banking facility, including the names of all
persons authorized to transact business in respect of such accounts;
(c) Cash Balance: The Operating Entities have cash and cash equivalents,
not including the Trust Accounts, which is no less than $900,000.00;
and
(d) Guarantees/Indemnities: The Operating Entities have not guaranteed or
indemnified, or agreed to guarantee or indemnify, or agreed to any
other like commitment, in respect of any debt, liability or other
obligation of any person.
3.8 Insurance:
(a) List of Policies: Schedule J contains a complete and accurate listing
of all insurance policies of the Operating Entities relating to the
Assets and the Business including all property damage, general
liability, motor vehicle, director and officer liability and life
policies;
(b) Good Standing: Each of the insurance policies listed in Schedule J is
in good standing, all premiums required to be paid by the Operating
Entities have been properly paid, there have been no
misrepresentations or failures to disclose material facts, and except
as provided for by CNA, there has been no refusal to renew any of the
policies and none of the Vendors have any knowledge of any facts which
might render any of the policies invalid, unenforceable or
non-renewable; and
(c) Outstanding Claims: Except as disclosed in Schedule L no threatened or
actual claims against any of the policies described in Schedule J have
been made in the last 3 years. The Operating Entities have given
notice of or have otherwise presented in a timely fashion every claim
under each such insurance policy.
<PAGE>
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3.9 Tax Matters:
(a) Filings: Each of the Operating Entities have duly and timely filed all
returns, elections and designations required to be filed by it with
any taxation authority or if not filed on a timely basis, all fees,
penalties, interest and other amounts payable as a result thereof have
been paid. No such returns, elections or designations contain any
material misstatement or omit any material statements that should have
been included and each return, election and designation, including
accompanying schedules and statements is true, correct and complete in
all material respects;
(b) Payment: Each of the Operating Entities have paid in full all amounts
(including but not limited to sales, capital, use and consumption
taxes and taxes measured on income and all instalments of taxes) owing
to all federal, state and municipal taxation authorities due and
payable by it up to the date of this Agreement;
(c) Extensions: There are no agreements, waivers or other arrangements
with any taxation authority providing for an extension of time with
respect to the filing of any return, election or designation by, or
any payment of any amount by or governmental charge against any of the
Operating Entities, nor with respect to the issuance of any assessment
or reassessment;
(d) Adverse Proceedings: To the best of the knowledge of the Vendors,
there are no actions, suits, proceedings, investigations or claims by
any governmental authority pending or threatened against any of the
Operating Entities relating to taxes, governmental charges or
assessments, except as described in Schedule L. There are also no
matters under discussion with any governmental authority relating to
taxes, governmental charges or assessments asserted or to be asserted
by such authority;
(e) Deductions/Remittances: Each of the Operating Entities have withheld
and remitted all amounts required to be withheld by it including
without limitation, income tax, Social Security Plan contributions and
Employment Insurance premiums and has paid such amounts including any
penalties or interest due to the appropriate authority on a timely
basis and in the form required under the appropriate legislation;
(f) Acquisitions: None of the Operating Entities have acquired property
from, or disposed of property to, any person, firm or corporation with
whom any of the Operating Entities does not deal at arm's length since
January 12, 1999; and
(g) Other Jurisdictions: None of the Operating Entities have filed or are
currently required to file any returns, elections or designations with
any taxation authority located in any jurisdiction other than the
State of California, the State of Florida and the State of New York.
<PAGE>
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3.10 Employee Matters:
(a) List of Employees: The list of employees set out in Schedule K is a
comprehensive list of the employees and commissioned sales people of
the Operating Entities as at March 31, 1999 and includes an accurate
description of, the compensation, and/or commission structure,
position, job classification, date of hire and age. There have been no
material variations to this list since March 31, 1999 except such
changes as occur in the ordinary course of business;
(b) Employment Contracts: Except for the Independent Contractor Agreements
and Amendments thereto, as set out in Schedule M and except for the
employment contract with Larry Miller to be entered into as
contemplated in paragraph 7.1(n), the Operating Entities are not a
party to any oral or written consulting contract, management contract,
labour services contract or similar agreement for the services of a
particular individual and none of the employees of the Operating
Entities are employed on other than an indefinite hiring basis
terminable on reasonable notice according to law without further
liability to the Operating Entities;
(c) Benefit Plans: Schedule K contains a complete and accurate listing of
all benefit, bonus, profit-sharing, retirement income, termination or
severance, dental, medical, disability, health or other plan, program,
policy or other arrangement in place for the benefit or advantage of
the salaried employees of the Operating Entities as at March 22, 1999
and there have been no material variations to this list since that
date other than in the ordinary course of business. All contributions
required to be made by the Operating Entities to such plans have been
properly made and all retirement plans are fully funded, and all
returns and other documents have been filed and all amounts owing to
any governmental or other regulatory authority relating to such plans,
programs, policies or arrangements have been paid;
(d) Pension Plans: The Operating Entities do not have nor have they ever
had a pension plan for any of its directors, officers, employees or
affiliates thereof; and
(e) Employer Associations: None of the Operating Entities is a member of
any employer, management, industry or other trade or business
association under which any of the Operating Entities is obligated to
contribute to any employee or contractor employee benefit fund,
including any pension plans, health benefit plans or other similar
employee entitlements.
3.11 Litigation and Claims:
(a) Adverse Proceedings: The list of outstanding claims contained in
Schedule L is a complete and accurate listing of all outstanding
actions, claims, demands, lawsuits, prosecutions or governmental
investigations by or against any of the
<PAGE>
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Operating Entities, and there is no other adverse proceeding which is
to the knowledge of any of the Vendors pending or threatened by,
against, or relating to any of the Operating Entities, the Assets, or
the Business. Except as set out in Schedule L, the Vendors are not
aware of any basis for any other action, claim, demand, lawsuit,
investigation or other adverse proceeding which, if pursued would have
a significant likelihood of having a material adverse effect on any of
the Operating Entities;
(b) Compliance Directives: Except as set out in Schedule L, there are no
outstanding compliance directives or work orders of which the Vendors
are aware relating to the Assets, or the Business, from any police,
fire department, sanitation or health authorities, environmental
agencies, or from any other federal, state or municipal authority,
department or agency, nor do any of the Vendors have notice that there
are any matters under formal consideration by any such authorities
relating to any of the Operating Entities;
(c) Notice of Default/Claims: Except as expressly disclosed in this
Agreement, none of the Operating Entities have received any notice of
any default, violation or termination of any of the Pre-Need Contracts
(other than individual cancellations of Pre-Need Contracts within the
ordinary course of business), Material Contracts, Leases or other
contracts entered into by the Operating Entities which will, or is
likely to, result in such a default, violation or termination;
(d) No Seizure: There is no appropriation, expropriation or seizure of any
of the Assets that is pending or, which to the knowledge of any of the
Vendors has been threatened against any of the Operating Entities; and
(e) Trademark and Patent Infringement: Except as set out in Schedule L,
the conduct of the Business by any of the Operating Entities does not
infringe upon any patent, trademark or other proprietary right,
domestic or foreign, of any person in respect of which there is any
significant likelihood that it would have a material adverse effect on
the Assets or the Business.
3.12 Contracts and Commitments:
(a) Material Contracts: Other than the Pre-Need Contracts and the Leases,
Schedule M contains a complete and accurate listing of all material
contracts, agreements, leases, commitments, instruments or other
dealings to which each of the Operating Entities is a party, by which
either any of the Operating Entities is bound or under which any of
the Operating Entities is entitled to any benefits. For the purposes
of this Agreement a contract shall be material if:
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(i) performance of any right or obligation by any party to such
contract involves a payment by either party of $1,000 or
more and having a term of more than one year; or
(ii) if an expenditure, receipt or transfer or other disposition
of property with a value of greater than $1,000 may arise
under such contract (other than a contract with a customer
or supplier in the ordinary course of business); or
(iii) if such contract has been entered into out of the ordinary
course of business;
(b) Pre-Need Contracts: Schedule N contains a complete and accurate
listing of all active pre-need contracts sold by or for the Operating
Entities, their predecessors and assignors for the provision of
funeral cremation services as of December 31, 1998;
(c) Good Standing: Except as disclosed herein, the Operating Entities are
not in breach or default of any of the terms of the Material Contracts
or Pre-Need Contracts, and none of the Vendors are aware of any breach
or default of any of the terms of the Material Contracts or Pre-Need
Contracts by any other party thereto, and each such contract is in
good standing and in full force and effect without amendment thereto.
To the best of the knowledge of the Vendors no state of facts exists,
which, after notice or lapse of time or both, would constitute such a
default or breach where there is any significant likelihood that such
breach or default referred to in this paragraph 3.12(c) would have a
material adverse effect on the Assets or the Business; and
(d) Shareholder Agreements: At the Time of Closing, except for an
agreement dated February 11, 1980 between Stanley Zicklin and
Neptune's predecessor-in-interest, there will be no shareholder
agreements, unanimous shareholder agreements, voting trust, pooling or
any other similar agreement among or between any of the shareholders
or partners of the Operating Entities.
3.13 Contingency and Environmental Liabilities:
(a) Compliance: The Operating Entities are in compliance in all material
respects with all federal, state and municipal environmental laws and
regulations (the "Environmental Laws"). The existing activities of the
Operating Entities and the crematories and, to the best knowledge of
the Vendors, its prior uses and activities and the uses and activities
of other property now or previously owned or operated by the Operating
Entities, comply and at all times have complied with all Environmental
Laws, with the exception of citations for excessive emissions at
Heritage which citations have all been corrected (the "Citations").
The Operating Entities have filed all environmental reports and
notifications required to be filed under applicable laws and
regulations;
<PAGE>
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(b) Notice of Non-Compliance: None of the Operating Entities have nor, to
the best knowledge of the Operating Entities, any prior owner or
occupant of the property now leased or operated by the Vendors, has
received any notice or other communication alleging that they are not
in compliance with any Environmental Laws, or alleging any liability
under any Environmental Laws, except for the Citations. The Vendors
and the Operating Entities are not subject to, and have not been
subject to, any claim, judgement, decree, order, writ, citation, fine,
penalty, injunction, litigation or proceeding relating to any
Environmental Laws, except for the Citations;
(c) Hazardous Material: None of the Operating Entities nor, to the best
knowledge of the Vendors, any other person or entity has engaged in or
permitted any operations or activities upon, or any use or occupancy
of property now or previously owned or operated by the Operating
Entities, resulting in the storage, emission, release, discharge or
disposal of any hazardous materials on, in, under or from any property
used for or by the Operating Entities;
(d) Cremation Residue: Except as set forth in Schedule L, none of the
Operating Entities have transported or disposed of, or arranged for
the transportation or disposal of, any cremation residue or other
waste to or at a site which is not in accordance with applicable
Environmental Laws;
(e) No Expenditures: No expenditures will be required in order for the
Assets to comply with Environmental Laws in connection with the
current operation and continued operation of the activities of the
Operating Entities.
3.14 Effect of this Transaction:
(a) No Adverse Implications: Except as disclosed in Schedule O with
respect to certain required consents, neither the execution and
delivery of this Agreement nor the completion and performance of the
transactions contemplated hereby will:
(i) give any person the right to terminate or cancel any
contractual or other rights with any of the Operating
Entities where such termination or cancellation would have a
material adverse effect on the Assets or the Business;
(ii) violate any restriction of any nature applicable to the
Vendors or relating to the disposition of any of the
Weintraub Shares;
(iii) result in the creation of any liens or encumbrances on the
Assets or in the default under any agreement giving a third
party security against the Assets or in the crystallization
of any floating charge in a debenture as
<PAGE>
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general security interest in a security agreement granted,
issued or assumed by the Operating Entities where any of
such events could have a material adverse effect on the
Assets or the Business;
(iv) violate any provision of any indenture, mortgage, lien,
lease, agreement, instrument, order, arbitration award,
judgment or decree to which any of the Operating Entities is
a party or by which any of the Operating Entities or the
Assets are bound the violation of which could have a
material adverse effect on the Assets or the Business or
impair the legality or enforceability of this Agreement or
the transactions contemplated hereby; nor
(v) be contrary to the provisions of the Charter Documents of
the Operating Entities;
(b) Notice Procedure: The Vendors may, at any time up to 5:00 p.m. on the
day which is two Business Days prior to the Closing, give notice to
the Purchaser advising it of any fact which, except for this
Subsection 3.14, would constitute a breach of any of the
representations and warranties set out in this Section 3 or Section 4.
Such notice shall state that it is being given pursuant to this
Subsection 3.14 and shall set out sufficient information to enable the
Purchaser to make a reasoned business judgment with respect to the
choices set out herein. Upon receipt of such notice, the Purchaser
may:
(i) postpone the Closing; and
(ii) at any time prior to the Closing Date as specified in
Section 1 or as postponed as set out above, either complete
the Closing, in which case this Agreement shall be deemed to
be amended so that the representation and warranty in
respect of which the notice was given shall incorporate the
disclosure set out in the notice; or, terminate this
agreement without further obligation on the part of any
party to this Agreement;
(c) Joint and Several: The obligations of the Vendors shall be joint and
several with respect to all the representations and warranties set out
in this Section 3.
4 REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trustee represents and warrants to the Purchaser and to Lari as follows with
respect to the Trust and not with respect to any other of the Vendors. The
Trustee acknowledges that the Purchaser and Lari are relying upon such
representations and warranties in connection with the issuance of the
Securities:
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4.1 Individual Authority: The Trust has have the legal capacity, power and
authority to hold the Securities to be owned by it at the Time of Closing,
to enter into this Agreement and to transfer the legal and beneficial title
and ownership of the Weintraub Shares to the Purchaser free of
Encumbrances;
4.2 Receipt of the Securities: The Trust is accepting the Securities as the
Purchase Price as set out in Section 2 only for investment purposes on its
own account and not for the purpose of selling the Securities in connection
with any distribution of the Purchaser securities. The Trustee acknowledges
that the Securities have not been registered under the Securities Act 1933,
as amended, or the securities laws of any state of the United States and
may not be offered, sold, transferred or assigned without registration
under such act or compliance with an exemption from such registration
requirement and for this reason, certificates evidencing the Securities
shall display the legend, substantially in the form as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE
144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT PRIOR TO SUCH SALE
THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL OF
RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS TO
THE AVAILABILITY OF AN EXEMPTION."
4.3 Solicitation: The Trustee acknowledges that the Securities to be received
by the Trust at Closing were not advertised in printed media of general and
regular paid circulation, radio or television.
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4.4 Accredited Investor: The Trust is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (U.S.).
4.5 No Trades: The Trustee and the Trust have not traded in the common stock of
Lari and will refrain from trading in or selling short any shares in the
common stock of Lari or entering into any derivative transactions of same
prior to the Closing Date.
4.6 Residency: The Trust is resident at 718 North Elm, Beverly Hill,
California..
4.7 Joint and Several: The obligations of the Trustee and the Trust shall be
joint and several with respect to all the representations and warranties
set out in this Section 4.
5 COVENANTS OF THE VENDORS
The Vendors covenant and agree with the Purchaser as follows and acknowledge
that the Purchaser is relying upon such covenants and agreements in connection
with the purchase of the Weintraub Shares:
5.1 Access to the Operating Entities: The Vendors shall forthwith make
available to the Purchaser and its authorized representatives and, if
requested by the Purchaser, provide a copy to the Purchaser of all title
documents, contracts, financial statements, minute books, share certificate
books, share registers, limited partnership agreements and records, plans,
reports, licences, orders, permits, books of account, accounting records,
constating documents and all other documents, information or data relating
to the Operating Entities. The Vendors shall afford the Purchaser and its
authorized representatives every reasonable opportunity to have free and
unrestricted access to the property, assets, undertaking, records and
documents of the Operating Entities. At the request of the Purchaser, the
Vendors shall execute or cause to be executed such consents, authorizations
and directions as may be necessary to permit any inspection of any property
of the Operating Entities or to enable the Purchaser or its authorized
representatives to obtain full access to all files and records relating to
any of the assets of the Operating Entities maintained by governmental or
other public authorities. At the Purchaser's request, the Vendors shall
co-operate with the Purchaser in arranging any such meetings as the
Purchaser should reasonably request with:
(a) all employees of the Operating Entities;
(b) customers, suppliers, distributors or others who have or have had a
business relationship with the Operating Entities; and
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(c) auditors, solicitors or any other persons engaged or previously
engaged to provide services to the Operating Entities who have
knowledge of matters relating to the Operating Entities.
In particular, without limitation, the Vendors shall permit the Purchasers
representatives or consultants to conduct such physical review of the
inventory of the Operating Entities as is necessary so as to enable the
confirmation of the condition of such inventory, to the reasonable
satisfaction of the Purchaser. The exercise of any rights of inspection by
or on behalf of the Purchaser under this Subsection shall not mitigate or
otherwise affect the representations and warranties of the Vendors
hereunder, which shall continue in full force and effect. In exercising its
rights hereunder the Purchaser shall use its reasonable commercial efforts
to avoid interfering with the Business to the extent reasonably practical
consistent with the need to complete its review of the Business and the
Assets.
5.2 Delivery of Books and Records: At the Time of Closing there shall be
delivered to the Purchaser by the Vendors all of the Books and Records. The
Purchaser agrees that it will preserve the Books and Records so delivered
to it for so long as such Books and Records may be required to enable the
Vendors to defend any claim against the Operating Entities which could
result in a Claim hereunder and at least until December 31, 2005. The
Purchaser will permit the Vendors or their authorized representatives
reasonable access thereto in connection with the affairs of the Vendors.
The Purchaser shall not be responsible or liable to the Vendors for or as a
result of any accidental loss or destruction of or damage to any such Books
or Records, unless the Purchaser's negligence caused the loss, destruction
or damage.
5.3 Conduct Prior to Closing: Without in any way limiting any other obligations
of the Vendors hereunder, during the period from the date hereof to the
Time of Closing:
(a) Conduct Business in the Ordinary Course: The Vendors shall cause the
Operating Entities to conduct its business in its ordinary and normal
course and the Operating Entities shall not, without the prior written
consent of the Purchaser (such consent not to be unreasonably
withheld), enter into any transaction or take any action that, if
effected after January 12, 1999 and before the date of this Agreement,
would constitute a breach of any representation, warranty, covenant or
other obligation of the Vendors contained herein. In particular the
Vendors shall cause the Operating Entities to refrain from entering
into any contract or commitment which would, if entered into prior to
the date hereof, constitute a Material Contract or Lease, save with
the consent of the Purchaser (such consent not to be unreasonably
withheld);
(b) Continue Insurance: The Vendors shall cause the Operating Entities to
continue to maintain in full force and effect all policies of
insurance or renewals thereof now in effect, shall take out, at the
expense of the Purchaser, such additional insurance
<PAGE>
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as may be reasonably requested by the Purchaser and shall give all
notices and present all claims under all policies of insurance in a
due and timely fashion; and
(c) Preserve Goodwill: The Vendors shall use reasonable commercial efforts
to preserve, and cause the Operating Entities to preserve intact the
Assets, the Business and to promote and preserve for the Purchaser the
goodwill of suppliers, customers and others having business relations
with the Operating Entities.
5.4 Delivery of Documents: The Trustee shall deliver to the Purchaser all
necessary transfers, assignments and other documentation reasonably
required to transfer to the Purchaser the Weintraub Shares owned by the
Trust with a good and marketable title, free of Encumbrances without any
right of set-off;
5.5 Minority Shares: Notwithstanding paragraph 7.1(k), Weintraub will use his
reasonable, good faith efforts to deliver to the Purchaser, on or before
July 31, 2000, an agreement of the minority shareholders of each of Neptune
and Heritage in the form attached to this Agreement as Schedule Q (the
"Minority Shareholder Agreements").
5.6 Joint and Several: The covenants and agreements of the Vendors contained in
Section 5 shall be joint and several.
5.7 Vendors' Taxes: The Vendors are responsible for any federal, state or other
taxes which may be payable by them in connection with the completion of the
transactions contemplated in this Agreement. Neptune and Heritage are
responsible for any federal, state or other taxes which may arise in
connection with the purchase by Neptune and Heritage of the limited
partnership interests.
6 COVENANTS OF WEINTRAUB AND THE TRUST
Weintraub and the Trust covenant and agree with the Purchaser as follows and
acknowledge that the Purchaser is relying upon such covenants and agreement in
connection with the purchaser of the Weintraub Shares:
6.1 Limited Partner Units Not Tendered: Schedule W accurately sets out the
names and number of units in each Partnership and consideration to be paid
to each of the limited partners so listed who have indicated that they will
not or may not be tendering their Partnership units for sale at the Closing
Date (the "Dissident Partners') to the Purchaser, Lari, Neptune or
Heritage, as the case may be (the "Tenderees").
6.2 Reasonable Effort to Cause Tenders of Partnership Units: Weintraub will use
reasonable effort to have the Dissident Partners tender their respective
Partnership units for sale on or before the Closing Date to the Tenderees.
All costs, expenses or any other payments incurred by Weintraub in
connection with the above (except the sales price) will be the
<PAGE>
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responsibility of Weintraub and will not be paid or incurred by any of the
Operating Entities, Purchaser or Lari.
6.3 Option to Dissolve: If any of the Dissident Partners do not tender their
Partnership units to the Tenderees on or before July 28, 1999, Neptune and
Heritage may at their option, and in accordance with all applicable
Partnership agreements, give written notice to Weintraub of the
Partnerships intention to dissolve after July 31, 1999.
6.4 Right to Set-Off: In order for the dissolution of Partnerships as
contemplated in Subsection 6.3 to be completed, Weintraub and the Trust
agree that the Purchaser will set-off from the July 31, 1999 payment of the
Note an amount equal to the total consideration allocated to the Dissident
Partner under Schedule W (the "Set-Off Amount") to be used solely, but not
necessarily in its entirety for the purchase of the assets of any of the
Partnerships being dissolved. The Purchaser and the Trust acknowledge and
agree that the Set-Off Amount, if any, will be an unsecured loan to the
Purchaser from the Trust and such Set-Off Amount will be repayable, on an
installment basis and such other reasonable terms and conditions
satisfactory to the Purchaser and the Trust, on the termination of the
consulting agreement between the Purchaser and Weintraub which is being
entered into pursuant to this Agreement.
6.5 Indemnity: In the event that the dissolution of any of the Partnerships
results in any of the Dissident Partners receiving cash distributed on the
dissolution which is in excess of the consideration allocated to the
Dissident Partner on Schedule W, Weintraub will indemnify the Tenderees to
the amount so exceeded and the Purchaser will be entitled to set-off that
amount on any monies due to Weintraub or the Trust pursuant to this or any
other agreement.
6.6 Right to Recover: If the dissolution of any of the Partnerships results in
any of the Dissident Partners receiving cash distributed on the dissolution
in an amount less than the amount withheld pursuant to Subsection 6.4
above, the Purchaser will pay that difference to the Trust within 10
Business Days of completing the distribution of assets on the dissolution
of a Partnership.
6.7 Majority Tendered: Notwithstanding Schedule W, Weintraub will arrange for
greater than 7.5 units of each of the Partnerships, except for Neptune WT
and Neptune MI, to be tendered for sale on the Closing Date.
7 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser and Lari represent, warrant and covenant to and with the Vendors
as follows and acknowledges that the Vendors are relying upon such
representations, warranties and covenants in connection with the sale of the
Weintraub Shares:
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- 27 -
7.1 Corporate Status and Authority: The Purchaser and Lari are valid and
subsisting corporations, duly incorporated and in good standing under the
laws of the State of California and Florida, respectively, and are duly
qualified to carry on their businesses as they are presently carried on and
are duly qualified and authorized to carry on business and are in good
standing as a foreign corporation in each jurisdiction in which the
character of their properties or the nature of their businesses made such
qualification or authorization necessary and have all requisite power and
authority to carry on their business as they are now carried on and to own,
lease and operate their properties and assets.
7.2 Authorization: The Purchaser and Lari have full corporate power, capacity
and authority to enter into this Agreement on the terms and conditions
hereof and all necessary corporate acts have been performed in order to
authorize this Agreement.
7.3 Regulatory Approval: The Purchaser and Lari have complied and will comply
fully with the requirements of all applicable corporate and securities laws
in relation to the issue of the Securities and Weintraub Note on the
acquisition of the Weintraub Shares (subject to the accuracy of the
representations of the Trust contained herein) and Weintraub's entering
into a non-competition agreement. The entering into and performance of this
Agreement and the transactions contemplated herein will not result in the
violation of any of the terms and provisions of the constating documents of
the Purchaser or Lari, any shareholders' or directors' resolution or of any
indenture or other agreement, written or oral, to which the Purchaser or
Lari may be a party or by which the Purchaser or Lari may be bound or to
which it may be subject or any judgment, decree, order, rule or regulation
of any court or administrative body by which the Purchaser or Lari is bound
or to the knowledge of the Purchaser or Lari, any statute or regulation
applicable to the Purchaser or Lari.
7.4 Share Transfer Restrictions: No order ceasing or suspending trading in
securities of the Purchaser or Lari nor prohibiting the sale of such
securities has been issued to the Purchaser or Lari or its directors,
officers or promoters or to any other companies that have common directors,
officers or promoters and no investigations or proceedings for such
purposes are pending or threatened in writing by an officer or official of
a competent authority.
7.5 Issued Share Capital: As at March 19, 1999, the authorized capital of Lari
is 100,000,000 shares of which 3,000,000 shares are issued and outstanding.
In addition, Lari has 8,000,000 warrants outstanding as of March 19, 1999
which may by the Time of Closing be exchanged or exercised into 8,000,000
shares of Lari.
7.6 Fully Paid Shares: Upon completion of the transactions contemplated in this
Agreement, the shares of the common trading stock of Lari issued by Lari to
Weintraub will be fully paid and non-assessable shares of the common
trading stock of Lari.
7.7 General Security Agreement: The Purchaser will, at Closing, enter into
general security agreements (the "Security Agreements") with the Trust to
secure the Note and the Weintraub
<PAGE>
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Note (which will be subordinated to the Note) provided any such Security
Agreements are on terms and conditions reasonably satisfactory to the
Purchaser..
7.8 Purchaser's Liabilities: As at the Time of Closing, the Purchaser will not
have existing debts or liabilities in excess of $300,000.00.
8 CONDITIONS OF CLOSING
8.1 Conditions of Closing in Favour of the Purchaser: The obligation of Lari
and the Purchaser to complete the sale and purchase of the Weintraub Shares
is subject to the following terms and conditions for the exclusive benefit
of Lari and the Purchaser, to be fulfilled or performed at or prior to the
Time of Closing or waived in whole on in part by Lari and the Purchaser at
their sole discretion without prejudice to any rights to Lari and the
Purchaser may otherwise have:
(a) Contractual Consents: The Vendors shall have delivered to the
Purchaser such waivers, consents and certificates, including but not
limited to those described in Schedule O from parties having
contractual relations with the Operating Entities as may be necessary
including, without limitation, waivers under loan agreements to which
the any of the Operating Entities is a party;
(b) Representations and Warranties: The representations and warranties of
the Vendors contained in this Agreement shall be true and correct in
all material respects at the Time of Closing, with the same force and
effect as if such representations and warranties were made at and as
of such time, and certificates of the Vendors dated the Closing Date
to that effect shall have been delivered to the Purchaser, such
certificates to be in form and substance satisfactory to the
Purchaser, acting reasonably;
(c) Covenants: All of the covenants and agreements of the Vendors and all
other terms of this Agreement to be complied with or performed by the
Vendors at or before the Time of Closing shall have been complied with
or performed and certificates of the Vendors dated the Closing Date to
that effect shall have been delivered to the Purchaser, such
certificates to be in form and substance satisfactory to the
Purchaser, acting reasonably;
(d) Certificate of Accredited Investor: The Trust and Weintraub have
delivered to the Purchaser and Lari a certificate of accredited
investor in the form attached as Schedule P to this Agreement;
(e) Regulatory Consents: There shall have been obtained, from all
appropriate federal and state or other governmental or administrative
bodies or stock exchanges, such licences, permits, consents,
approvals, certificates, registrations and authorization
<PAGE>
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as are required to permit the change of ownership of the Weintraub
Shares and the transactions as contemplated herein;
(f) Material Adverse Change: There shall have been no material adverse
changes in the condition of the Assets or the Business (financial or
otherwise) since the date of this Agreement up to the Time of Closing;
(g) No Action or Proceeding: No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict on
prohibit the purchase and sale of the Weintraub Shares contemplated
hereby;
(h) No Material Damage: No damage by fire or other hazard to the whole or
any material part of the Assets shall have occurred from the date
hereof to the Time of Closing;
(i) No Agreements on Assets or Business: The Purchaser shall be satisfied
that there is no fact not disclosed in this Agreement relating to the
Assets or the Business which, if known to the Purchaser, might
reasonably be expected to have a material adverse effect on the value
of the Weintraub Shares;
(j) No Payments from Shareholders' Equity: The Purchaser shall be
satisfied that no payments have been made from the Companies'
shareholders' equity accounts and no distributions have been made from
the Partnerships without the prior written consent of the Purchaser;
(k) Purchase and Sale of Minority Shares: The Purchaser has entered into
the Minority Shareholder Agreements attached as Schedule Q to this
Agreement, on or before the Closing Date;
(l) Escrow Arrangements: The Trust, Weintraub, Lari and the Purchaser have
entered into an escrow arrangement with the Escrow Agent on terms and
conditions satisfactory to the Purchaser and Lari ;
(m) Weintraub Consulting Agreement: Weintraub has entered into a
consulting and non-competition agreement attached as Schedule S to
this Agreement;
(n) Miller Employment Agreement: Larry Miller, an employee of the Vendors,
has entered into an employment and non-competition agreement attached
as Schedule T to this Agreement;
(o) Opinion of Vendors' Attorney: The Purchaser and Lari have received
legal opinions of the Vendors' solicitors, dated as of the date of
Closing, respecting the transactions
<PAGE>
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contemplated in this Agreement, consistent with standard agreements
for the purchase and sale of funeral businesses.
If any of the conditions contained in this Subsection 8.1 shall not be
performed or fulfilled at or prior to the Time of Closing to the
satisfaction of Lari and the Purchaser and Lari, acting reasonably, the
Purchaser may, by notice to the Vendors, terminate this Agreement and the
obligations of the Vendors, Lari and the Purchaser under this Agreement,
provided that the Purchaser may also bring an action against the Vendors
for damages suffered by the Purchaser where the non-performance or
non-fulfilment of the relevant condition is as a result of a breach of
covenant, representation or warranty (as the same may be modified by a
notice pursuant to Subsection 3.14(b)) by the Vendors. Any such condition
may be waived in whole or in part by the Purchaser without prejudice to any
claims it may have for breach of covenant, representation or warranty
8.2 Conditions of Closing in Favour of the Vendors: The purchase and sale of
the Weintraub Shares are subject to the following terms and conditions for
the exclusive benefit of the Vendors to be fulfilled or performed at or
prior to the Time of Closing:
(a) Representations and Warranties: The representations and warranties of
Lari and the Purchaser contained in this Agreement shall be true and
correct at the Time of Closing, with the same force and effect as if
such representations and warranties were made at and as of such time
and a certificate of Lari and the Purchaser dated the Closing Date to
that effect shall have been delivered to the Vendors, such certificate
to be in form and substance satisfactory to the Vendors acting
reasonably;
(b) Covenants: All of the terms, covenants and conditions of this
Agreement to be complied with or performed by Lari and the Purchaser
at or before the Time of Closing shall have been complied with or
performed and a certificate of Lari and the Purchaser dated the
Closing Date to that effect shall have been delivered to the Vendors,
such certificate to be in form and substance satisfactory to the
Vendors acting reasonably;
(c) The Purchaser will, at Closing, enter int general security agreements
with the Trust to secure the Note and the Weintraub Note (which will
be subordinated to the Note), a stock pledge agreement and a trademark
security agreement on terms and conditions reasonably satisfactory to
the Vendors; and
(d) Lari will, at Closing, enter into a guarantee of the Purchaser's
obligations under this Agreement, the Note and the Weintraub Note on
terms and conditions reasonably satisfactory to the Vendors.
If any of the conditions contained in this Subsection 8.2 shall not be
performed or fulfilled at or prior to the Time of Closing to the
satisfaction of the Vendors, acting reasonably, the
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Vendors may, by notice to Lari and the Purchaser, terminate this Agreement
and the obligations of the Vendors and the Purchaser under this Agreement,
provided that the Vendors may also bring an action against the Purchaser
for damages suffered by the Vendors where the non-performance or
non-fulfilment of the relevant condition is as a result of a breach of
covenant, representations or warranty by the Purchaser. Any such condition
may be waived in whole or in part by the Vendors without prejudice to any
claims they may have for breach of covenant, representation or warranty.
8.3 Parties' Efforts: The parties shall use reasonable commercial efforts to
satisfy the conditions contained in Section 7.
9 CLOSING ARRANGEMENTS
9.1 Place of Closing: The closing shall take place at the Time of Closing at
the offices of DuMoulin & Boskovich at Suite 1800, 1095 West Pender Street,
Vancouver, B.C.
9.2 Transfer: At the Time of Closing, upon fulfilment of all the conditions set
out in Section 7 that have not been waived in writing by Lari and the
Purchaser or the Vendors as the case may be:
(a) the Purchaser will cause to be delivered to the Escrow Agent a
solicitor's cheque in the amount of $506,583.00 payable to the Escrow
Agent;
(b) Lari will issue 513,273 shares in the capital of Lari to the Trust and
deliver same to the Escrow agent;
(c) the Purchaser will issue the Note to the Escrow Agent;
(d) the Purchaser will issue the Weintraub Note to the Trust; and
(e) the Vendors shall deliver to the Purchaser certificates respecting all
the Weintraub Shares, duly endorsed in blank for transfer and will
cooperate with the Purchaser in having the Weintraub Shares
transferred to the Purchaser or its nominee and in changing the
directors to persons nominated by the Purchaser.
9.3 Further Assurances: Each party to this Agreement covenants and agrees that,
from time to time subsequent to the Closing Date, it will, at the request
and expense of the requesting party, execute and deliver all such
documents, including, without limitation, all such additional conveyances,
transfers, consents and other assurances and do all such other acts and
things as any other party to this Agreement, acting reasonably, may from
time to time request be executed or done in order to better evidence or
perfect or effectuate any provision of this Agreement or of any agreement
or other document executed pursuant to this Agreement or any of the
respective obligations intended to be created by this Agreement.
<PAGE>
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10 LIABILITY FOR CLAIMS
10.1 Claims: If any person shall make any claim or demand against any of the
Operating Entities or the Purchaser which gives rise or may give rise to
any Claim, the Purchaser shall promptly notify Weintraub giving the general
nature of such claim or demand along with such further information known to
the Purchaser as may be reasonably required to enable Weintraub to decide
whether or not to assume the defence thereof. The Purchaser shall not be
under any liability or obligation to Weintraub for any failure to so notify
Weintraub or for the sufficiency of the notice unless and then only to the
extent that the rights and remedies of the Operating Entities, or Weintraub
shall have been prejudiced as a result. Weintraub shall be entitled (but
not required) to assume the defence in the name of the Operating Entities
of any suit brought against the Purchaser or the Operating Entities to
enforce such claim or demand and to assert any counterclaim of the
Operating Entities if, but only if, the Purchaser shall be entitled to make
a Claim for the full amount of the claim or demand, and if the defence
shall be through legal counsel acceptable to the Purchaser, acting
reasonably. Weintraub shall indemnify and save harmless the Purchaser, the
Operating Entities of and from all costs and expenses incurred or to be
incurred in connection with such defence. Such right shall be subject to
the rights of any insurer to defend any action. In all cases, the Purchaser
shall have the right to retain at its own expense, additional counsel to
act on its behalf. Weintraub shall not settle or (without giving the
Purchaser a reasonable opportunity to take carriage thereof) abandon any
such claim or demand which it has elected to defend unless they have first
unconditionally acknowledged to the Purchaser that they will pay to the
Purchaser the full amount of such claim or demand. Weintraub shall keep the
Purchaser reasonably informed as to the progress thereof. The Purchaser
shall at all times cooperate in all reasonable ways with, make all its
relevant files and records and those of the Operating Entities available
for inspection and copying by, and make its employees and those of the
Operating Entities reasonably available or otherwise render reasonable
assistance to, Weintraub (i) in the defence of any claim or demand for
which indemnity is sought hereunder and (ii) in any action brought by
Weintraub to assert any related claim, counterclaim or right of subrogation
under Subsection 9.3 hereof No claim or demand may be settled or
compromised by the Purchaser without the written consent of Weintraub, such
consent not to be unreasonably withheld.
10.2 Subrogation: Weintraub and the Trust shall be subrogated to the claims and
rights of the Purchaser and the Operating Entities as against other
Persons, and shall be entitled to contribution from any such Person, with
respect to any Claim paid by Weintraub and the Trust under this Section 9,
but only after the Purchaser shall have received payment in full of its
Claim with interest.
10.3 Insurance: The Vendors shall not be liable to the Purchaser with respect to
any liability of the Operating Entities if and to the extent that:
<PAGE>
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(a) the Operating Entities would have been insured against such liability
under the insurance coverage maintained by the Operating Entities, as
the case may be, prior to the Closing; and
(b) the Operating Entities are not insured against such liability at the
time the liability arises.
The Purchaser shall take all steps necessary to make claims under the
Companies and Partnerships insurance policies with respect to any liability
of the Operating Entities which could be the subject of any Claim and the
Vendors shall not be liable to the Purchaser with respect to any Claim to
the extent that they have been prejudiced by a failure to make such claim.
Nothing in this Subsection 9.3 shall effect any rights of subrogation.
11 INDEMNITY
11.1 Known Actions and Proceedings: The Trust and Weintraub, jointly and
severally, hereby indemnity and saves harmless the Operating Entities, the
Purchaser and Lari and their successors and assigns from and against any
and all losses, liabilities, damages, costs, increases in insurance
premiums for policies (comparable to existing coverage at the Effective
Date) for renewals to December 31, 1999, and expenses of any kind
whatsoever including, without limitation, the costs of defending,
cross-claiming or claiming against third parties in respect of any action,
claim or matter, including legal fees, costs and disbursements on a
solicitor and his own client basis and at all court and administrative
levels, which at any time or from time to time may be paid, incurred or
asserted against the Operating Entities, the Purchaser or Lari, as to a
direct or indirect result of the outstanding claims listed in Schedule L or
any actions, claims, demands, lawsuits, assessments, penalties,
prosecutions or governmental investigations by or against the Operating
Entities in respect of the operation of the Business up to and including
the Effective Date, provided that such liability is not the result of any
actions taken by the Purchaser after the Effective Date, or in respect of
any action, claim or matter, including legal fees (on a solicitor and his
own client basis), costs and disbursements and at all court and
administrative levels, which at any time or from time to time may be paid,
incurred or asserted against the Operating Entities, the Purchaser or Lari,
as to a direct or indirect result of the sale of any of the interests of
the limited partnership units of the Partnerships to the Purchaser, Lari,
Neptune or Heritage, as the case may.
11.2 Right to Set-Off: The Operating Entities, the Purchaser and Lari have the
right to set-off any amount owed by the Trust or Weintraub to the Operating
Entities, the Purchaser or Lari, pursuant to Subsection 10.1 of this
Agreement, against any money due and owing to Weintraub or to the Trust (at
the option of the Operating Entities, the Purchaser or Lari) from the
Purchaser under this or any other agreement between the Purchaser and
Weintraub or the Trust.
<PAGE>
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12 GENERAL MATTERS
12.1 Governing Law and Arbitration: This Agreement shall be governed by and
construed in accordance with the laws of the State of California. Any
dispute arising out of or in connection with this Agreement, including any
question regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration under the rules of the
American Arbitration Association which rules are deemed to be incorporated
by reference into this clause. The number of arbitrators shall be one. The
place of arbitration shall be Los Angeles, California. The language of
arbitration shall be English. The parties expressly waive and forego any
right to punitive, exemplary or other similar damages unless an applicable
statute requires the award of such damages or that compensatory damages be
increased in a specified manner. This provision is not intended to apply to
any award of arbitration costs to a party to compensate for dilatory or bad
faith conduct in the arbitration pursuant to this paragraph. The prevailing
parties shall also be entitled to an award of reasonable attorney's fees.
12.2 Entire Agreement: Except as may be otherwise expressly agreed between the
parties in writing, this Agreement, the Security Agreements, Note and
Weintraub Note constitute the entire agreement between the parties
pertaining to the subject matter and there are no oral statements,
warranties, representations or other agreements between the parties in
connection with the subject matter except as specifically set forth or
referred to herein. No amendment, waiver or termination of this Agreement
shall be binding unless executed in writing by the party or parties to be
bound thereby. No waiver of any provision of this Agreement shall be deemed
or shall constitute a waiver of any other provision nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
12.3 Assignment: The Vendors will not assign their interests in this Agreement
without prior written consent of the Purchaser. Prior to payment of the
Purchase Price in full, the Purchaser may not assign its interests in this
Agreement without any prior written consent of the Vendors.
12.4 Public Notices: Except as required by applicable law, regulatory authority
or any listing or trading agreement, no press release or other announcement
concerning this transaction shall be made by the Vendors or the Purchaser
without the prior approval of the other, such approval not to be
unreasonably withheld.
12.5 Confidential Information: The Purchaser and each of the Vendors covenant to
hold in strict confidence all information obtained in connection with the
transactions which are the subject matter of this Agreement. If the
transactions which are the subject matter of this Agreement are not
completed, this covenant shall continue in full force and effect. All
confidentiality obligations of the Purchaser with respect to the Vendors,
including but not limited to the Partnerships, shall cease upon Closing.
Notwithstanding the Closing, each of the Vendors covenants to maintain as
confidential all confidential information respecting the Purchaser in that
Vendor's possession prior to Closing and all information obtained in
connection with the transactions which are the subject matter of this
Agreement including all information concerning the Purchaser other than
information provided to that Vendor's personal advisers
<PAGE>
- 35 -
for the purpose of filing personal tax returns and other similar matters
and other than as may be required to be disclosed by law and other than
information that becomes generally available to the public other than as a
result of a disclosure by the Vendors or their representatives.
12.6 Non-Waiver: No investigations made by or on behalf of the Purchaser at any
time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representations or warranties made herein or
pursuant hereto. No investigations made by or on behalf of the Vendors at
any time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representations or warranties made herein or
pursuant hereto.
12.7 Indemnification in Respect of Brokers or Agents: Except for any fee payable
to John Brown or any other finder or broker engaged by the Purchaser or
Lari, Weintraub and the Trust severally indemnifies and saves harmless the
Purchaser and the Operating Entities from and against any claim for
commission or other remuneration payable or alleged to be payable to any
broker, agent or other intermediary who claims to be so entitled by virtue
of a contract or other arrangement with such Vendor.
12.8 Expenses: All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expense. The Purchaser shall not bear any legal, accounting
or other costs incurred by the Vendors. The Vendors shall not bear any
legal, accounting or other costs incurred by the Purchaser.
12.9 Notices: Any notice or other communication required or permitted to be
given hereunder shall be in writing and delivered or sent by overnight
mail, overnight delivery or telefax and, if telefaxed, shall be deemed to
have been received on the next Business Day following transmittal and
acknowledgment of receipt by the recipient's telefax machine or if
delivered by hand shall be deemed to have been received at the time it is
delivered. Notices addressed to an individual shall be validly given if
left on the premises indicated below. Notice of change of address shall
also be governed by this Subsection 11.9. Notices shall be delivered or
addressed as follows:
(a) If to the Purchaser:
Brent Lokash
Barrister & Solicitor
1708 - 808 Nelson Street
Vancouver, BC. V6Z 2H2
Fax (604) 681-9579
<PAGE>
- 36 -
(b) If to the Vendors:
Stein & Flugge, LLP
9200 Sunset Boulevard, Suite 825
Los Angeles, California 90069-3686
Fax (310) 273-8706
Attention: Valerie Flugge, Esq.
Any party may give written notice of change of address in the same manner,
in which event such notice shall thereafter be given to it as above
provided at such changed address.
12.10 Time of the Essence: Time shall be of the essence of this Agreement.
12.11 Further Assurances: Each of the parties hereto agrees promptly to do,
make, execute, deliver or cause to be done, made, executed or delivered at
their own expense all such further acts, documents and things as the other
party hereto may reasonably require for the purpose of giving effect to
this Agreement whether before or after the Closing.
[The remainder of this page has been intentionally left blank.]
<PAGE>
- 37 -
12.12 Severability: If any covenant, obligation or agreement of this Agreement,
or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement or
the application of such covenant, obligation or agreement to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each covenant, obligation
and agreement of this Agreement shall be separately valid and enforceable
to the fullest extent permitted by the law.
12.13 Counterparts: This Agreement may be executed in any number of
counterparts, each of which when delivered shall be deemed to be an
original and all of which together shall constitute one and the same
document. A signed facsimile or telecopied copy of this Agreement shall be
effectual and valid proof of execution and delivery.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first hereinabove written.
LARI ACQUISITION COMPANY, INC. LARI CORP.
Per: /s/ Suzanne L. Wood Per: /s/ Suzanne L. Wood
-------------------------------- ------------------------------
Authorized Signatory Suzanne Wood, President
EMANUEL WEINTRAUB
INTER VIVOS TRUST
Per: /s/ Emanuel Weintraub
--------------------------------
Emanuel Weintraub, Trustee
NEPTUNE MANAGEMENT CORP. NEPTUNE PRE-NEED PLAN, INC.
Per: /s/ Emanuel Weintraub Per: /s/ Emanuel Weintraub
-------------------------------- ------------------------------
Emanuel Weintraub Emanuel Weintraub
HERITAGE ALTERNATIVES, INC.
Per: /s/ Emanuel Weintraub
--------------------------------
Emanuel Weintraub
<PAGE>
- 38 -
SIGNED, SEALED AND DELIVERED by )
EMANUEL WEINTRAUB in the presence of: )
)
/s/Valerie V. Flugge )
- ------------------------------------------ )
Witness Signature )
9200 Sunset Blvd., Suite 825 )
Los Angeles, CA 90069 USA )
- ------------------------------------------ )
Address ) /s/ Emanuel Weintraub
) -----------------------------
Attorney ) EMANUEL WEINTRAUB
- ------------------------------------------ )
Occupation )
EXHIBIT 10.3
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 31St day of March, 1999 between Lari
Acquisition Company, Inc., (the "Purchaser"), Lari Corp. ("Lari") and Stanley
Zicklin, a businessman (the Vendor).
WHEREAS:
A. There are 82 Series A shares and 18 Series B shares issued and outstanding
in the capital of Neptune Management Corp., a company incorporated under
the laws of the State of California (the "Company");
B. The Vendor is the registered and beneficial owner of the 18 Series B shares
in the capital of the Company (the "Shares');
C. The 82 Series A shares in the capital of the Company are being purchased
from Emanuel Weintraub "(Weintraub") by the Purchaser pursuant to a
purchase agreement dated March 31, 1999 (the "Series A Purchase
Agreement");
D. The Vendor shall sell the Shares to the Purchaser and the Purchaser shall
purchase the Shares from the Vendor; and
E. The Company has advised the Purchaser of the following facts:
(a) the Company is asserting a claim against the Vendor based on the
Vendor's alleged obligation under a written agreement, which the
Company contends (and the Vendor denies) obligates the Vendor to offer
to the Company the right to purchase the Shares, at a specified price
(also set forth in the said written agreement) prior to the Vendor
having the right or authority to sell the Shares to others (the
"Disputed Obligation");
(b) the Company has made demand upon the Vendor to perform the Disputed
Obligation but the Vendor has refused to comply with such demand and
has denied the applicability, enforceability and validity of the said
written agreement;
(c) the Vendor, Weintraub and the Company are currently parties in an
action pending in the Superior Court for the State of California,
County of Los Angeles, denominated L.A.S.C. No. BC 203930, pertaining
to the Disputed Obligation (the "Action");
(d) the Company and Weintraub have advised the Purchaser of the said claim
and the Action and have instructed the Purchaser not to release to the
Vendor any of the purchase price for the Shares unless and until the
conditions referred to in Subsection 6(b) herein below occur or are
otherwise satisfied; and
<PAGE>
- 2 -
(e) the Company has, in order to permit this sales transaction to take
place prior to the resolution of the Disputed Obligation agreed to
allow the Shares to be sold to the Purchaser if the purchase price for
the Shares is delivered directly to a designated, recognized and
independent escrow/disbursing agent which the Purchaser and the
Company shall establish in Los Angeles, California, which escrow shall
be governed by an escrow agreement for the benefit of the Vendor and
Weintraub.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agrees as follows:
1. PURCHASE AND SALE OF SHARES
The Vendor hereby sells and transfers to Lari through the Purchaser, and Lari
through the Purchaser hereby purchases and acquires from the Vendor, all the
Vendor's right, title, and interest in and to the Shares.
2. PURCHASE PRICE
The Purchaser hereby agrees to pay the Vendor $2,561,572.00 (the "Purchase
Price") for the Shares.
3. PAYMENT OF PURCHASE PRICE
The Purchaser will pay the Purchase Price on March 31, 1999, or such other date
as the parties may agree to in writing (the "Closing Date") as follows:
(a) the sum of $ 101,866.00 by way of a solicitors' cheque payable to City
National Bank, 400 North Roxbury Drive, Beverly Hills, CA, 90210 (the
"Escrow Agent"), in trust for the joint benefit of the Vendor, the
Purchaser, Lari and Weintraub, subject to resolution of the Disputed
Obligation;
(b) 104,852 shares of common trading stock of Lari (the "Lari Shares")
issued by Lari to the Vendor and delivered to the Escrow Agent, in
trust for the joint benefit of the Vendor, the Purchaser, Lari and
Weintraub, subject to resolution of the Disputed Obiligation; and
(c) the sum of $1,935,446.00 by way of an undivided interest to the Vendor
in a promissory note ("Note"), in the form attached as Schedule "A" to
this Agreement, delivered to the Escrow Agent, in trust for the joint
benefit of the Vendor, the Purchaser, Lari and Weintraub subject to
resolution of the Disputed Obligation.
<PAGE>
-3-
4. VENDOR'S DOCUMENTS DELIVERED AT CLOSING
On the Closing Date, the Vendor will deliver or cause to be delivered to the
Purchaser the share certificate representing the Shares, duly endorsed for
transfer. If the Vendor cannot locate the certificate, the Vendor shall execute
and deliver to the Purchaser an affidavit of lost certificate in form and
substance reasonably acceptable to the Purchaser.
5. VENDOR'S WARRANTIES AND REPRESENTATIONS
5.1 The Vendor represents, warrants and covenants to the Purchaser as
follows:
(a) the Vendor is the registered and beneficial owner of the Shares;
(b) the Shares are validly issued and outstanding as fully paid and
non-assessable in the capital of the Company and are free and clear of
all liens, charges and encumbrances save and except for any claims set
forth in the Action.
(c) the Vendor has good and sufficient right and authority to enter into
this Agreement and to transfer legal and beneficial title and
ownership of the Shares to the Purchaser;
(d) the Vendor has not previously entered into a binding agreement for the
sale of, or the granting of an option to purchase the Shares;
(e) subject to any claims set forth in the Action, the Vendor is not
indebted to the Company and the Company is not indebted to the Vendor;
(f) the Vendor has not relied on any representations, understandings or
other inducements not expressly set forth in this Agreement;
(g) the Vendor has been fully advised by independent legal counsel
concerning the terms and effect of this Agreement;
(h) the Vendor enters into this Agreement voluntarily, without duress or
undue influence;
(i) the Vendor has the legal capacity, power and authority to hold the
Lari Shares and the Note (collectively, the "Securities") to be owned
by him on the Closing Date;
(j) the Vendor is accepting the Securities as part of the Purchase Price
as set out in Subsection 3(b) only for investment purposes on his own
account and not for the purpose of selling the Securities in
connection with any distribution of the Securities. The Vendor
acknowledges that the Lari Shares are subject to resale restrictions
and, for this reason, shall display the legend, substantially in the
form as follows:
<PAGE>
-4-
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE
144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT PRIOR TO SUCH SALE
THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL OF
RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS TO
THE AVAILABILITY OF AN EXEMPTION."
(k) the Vendor acknowledges that the Lari Shares to be received by the
Vendor on the Closing Date were not advertised in printed media of
general and regular paid circulation, radio or television;
(1) the Vendor is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (U.S.); and
(m) the Vendor is a resident at the following address:
3503 Via Del Prado
Calabasas, CA 91302
(n) The Vendor will indemnify the Purchaser against any loss or damage
sustained by the Purchaser, directly or indirectly, by reason of a
breach of any of the warranties or representations set forth in this
Section 5. The Vendor acknowledges that the Purchaser has entered into
this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement and that no information which
is now known or which may hereafter become known to the Purchaser or
its professional advisers will limit or extinguish the obligation to
indemnify hereunder.
(o) The representations, warranties, covenants and agreements contained in
the Agreement and in any certificates and documents delivered in
connection herewith will be true at and as of the Closing Date and
will survive the Closing Date, the purchase and sale contemplated
herein and any re-organization or amalgamation of any party hereto.
<PAGE>
-5-
6. CONDITIONS OF CLOSING
The obligation of the Purchaser and Lari to complete the sale and purchase of
the Shares is subject to the following terms and conditions for the exclusive
benefit of the Purchaser and Lari, to be fulfilled or performed at or prior to
the Closing Date or waived by the Purchaser and Lari at their sole discretion:
(a) The transactions contemplated in the Series A Purchase Agreement have
been completed and the Purchaser is the registered and beneficial
owner of the Series A shares of the Company;
(b) The Vendor has entered into an escrow agreement with the Escrow Agent
on terms and conditions which are satisfactory to the Vendor,
Weintraub, the Purchaser, Lari and the Company. The signing of such
agreement is also a condition of the Vendor's obligation to sell the
Shares as provided herein;
(c) The Vendor has executed the Certificate of Accredited Investor
attached as Schedule "B" to this Agreement; and
(d) The Vendor has executed a release agreement attached as Schedule "C"
to this Agreement. Such release (Schedule "C") shall not be valid or
binding unless and until the Vendor executes and delivers the escrow
agreement referred to in Section 6(b) above.
7. MISCELLANEOUS
7.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of California. Any dispute arising out of or in
connection with this Agreement, including any question regarding its
existence, validity or termination, but not including any matter
arising out of the Action, shall be referred to and finally resolved
by arbitration under the rules of the American Arbitration Association
which rules are deemed to be incorporated by reference into this
clause. The number of arbitrators shall be one. The place of
arbitration shall be Los Angeles, California. The language of
arbitration shall be English. The parties expressly waive and forego
any right to punitive or exemplary damages unless an applicable
statute requires the award of such damages or that compensatory
damages be increased in a specified manner. This provision is not
intended to apply to any award of arbitration costs to a party to
compensate for dilatory or bad faith conduct in the arbitration
pursuant to this paragraph. The prevailing parties shall also be
entitled to an award of reasonable attorneys' fees.
7.2 The Vendor will execute and deliver all such further documents and
instruments and do all acts and things the Purchaser may reasonably
require to carry out the
<PAGE>
-6-
full intent and meaning of this Agreement and to assure the Purchaser
the transfer of the Shares.
7.3 This Agreement constitutes the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings of the parties with
respect to the subject matter hereof. Nothing herein shall prejudice
or otherwise affect the respective rights and claims of the Vendor and
Weintraub in or relating to the Action.
7.4 This agreement will be binding upon and inure to the benefit of, and
be enforceable by, the parties hereto and their respective permitted
successors, assigns, heirs, executors and administrators. There is no
third party beneficiary of this Agreement.
7.5 The Vendor will not assign his rights or obligations provided by this
Agreement without the prior written consent of the Purchaser. The
Purchaser will be entitled to assign any of its respective rights and
obligations provided by this Agreement without any prior consent of
the Vendors, but no such assignment shall relieve the Purchaser of its
obligations hereunder to the Vendor.
7.6 Any notice or other communication required or permitted to be given
hereunder shall be in writing and delivered or sent by telefax and, if
telefaxed, shall be deemed to have been received on the next business
day following transmittal and acknowledgment of receipt by the
recipient's telefax machine or if delivered by hand shall be deemed to
have been received at the time it is delivered. Notices addressed to
an individual shall be validly given if left on the premises indicated
below. Notice of change of address shall also be governed by this
Subsection 7.6. Notices shall be delivered or addressed as follows:
If to the Purchaser and Lari, to:
Brent Lokash
Barrister & Solicitor
1708-808 Nelson Street
Vancouver, B.C. V6Z 2H2
Fax: (604) 68l-9579
If to the Vendor:
Sandler and Rosen, LLP
1801 Avenue of the Stars, Suite 510
Los Angeles, CA 90067
Fax: (310) 277-5954
7.7 In the event that any one or more of the provisions of this Agreement
should be invalid, illegal or unenforceable in any respect, the
validity, legality and
<PAGE>
- 7 -
enforceability of the remaining provisions contained herein will not
in any way be affected or impaired thereby.
7.8 Time will be of the essence of this Agreement,
7.9 The captions and headings of the sections and the subsections in this
Agreement have been inserted as a matter of convenience and reference
only.
7.10 Whenever the singular or the masculine are used in this Agreement the
same will be deemed to include the plural or the feminine or the
corporate where the context or the parties so require.
7.11 All dollar amounts referred to in this Agreement are stated in United
States of America currency, unless otherwise expressly stated.
7.12 This Agreement may be executed in any number of counterparts, each of
which will be treated as an original but all of which, collectively,
will constitute a single instrument. This Agreement will be binding
once signed and delivered and a signature by facsimile, will be deemed
to be execution and delivery.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first hereinabove written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne Wood
---------------------------------
Authorized Signatory
LARI CORP.
Per: /s/ Suzanne Wood
---------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
STANLEY ZICKLIN in the presence of: )
)
/s/ Wm. F. Tisch )
Witness )
1801 Ave. of the Stars, Suite 510 )
Los Angeles, CA 90067 )
- ---------------------------------------- )
Address ) /s/ Stanley Zicklin
) ---------------------------------
Attorney ) STANLEY ZICKLIN
- ---------------------------------------- )
Occupation )
EXHIBIT 10.4
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 3lst day of March, 1999 between Lari
Acquisition Company, Inc., (the "Purchaser"), Lari Corp. ("Lari") and Jill
Schulman, a businesswoman (the "Vendor").
WHEREAS:
A. There are 100 shares issued and outstanding in the capital of Heritage
Alternatives, Inc., a company incorporated under the laws of the State of
California (the "Company");
B. the Vendor is the registered and beneficial owner of 5 shares in the
capital of the Company (the "Shares");
C. The 95 remaining shares in the capital of the Company (the "Remaining
Shares") are being purchased by the Purchaser and Lari pursuant to a
purchase agreement dated March 31, 1999 (the "Remaining Share Purchase
Agreement"); and
D. The Vendor has agreed to sell the Shares to the Purchaser and the Purchaser
has agreed to purchase the Shares from the Vendor.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF SHARES
The Vendor hereby sells and transfers to Lari through the Purchaser, and Lari
through the Purchaser hereby purchases and acquires from the Vendor, all the
Vendor's right, title and interest in and to the Shares.
2. PURCHASE PRICE
The Purchaser hereby agrees to pay to the Vendor $54,137.00 (the "Purchase
Price") for the Shares.
3. PAYMENT OF PURCHASE PRICE
The Purchaser will pay the Purchase Price on March 31, 1999, or such other date
as the parties may agree (the "Closing Date") as follows:
(a) the sum of $2,238.00 by way of a solicitors' cheque payable to City
National Bank, 400 North Roxbury Drive, Beverly Hills, CA, 90210 (the
"Escrow Agent"), in trust for the benefit of the Vendor (the "Escrow
Agent");
<PAGE>
-2-
(b) 1,874 shares of common stock of Lari (the "Lari Shares") issued by
Lari to the Vendor and delivered to the Escrow Agent, in trust for the
benefit of the Vendor; and
(c) the sum of $42,529 by way of an undivided 0.2238368% interest to the
Vendor in a promissory note ("Note"), in the form attached as Schedule
"A" to this Agreement, delivered to the Escrow Agent, in trust for the
benefit of the Vendor.
4. VENDOR'S DOCUMENTS DELIVERED AT CLOSING
On the Closing Date, the Vendor will deliver or cause to be delivered to the
Purchaser the share certificate representing the Shares, duly endorsed for
transfer.
5. VENDOR'S WARRANTIES AND REPRESENTATIONS
5.1 The Vendor represents, warrants and covenants to the Purchaser as
follows:
(a) the Vendor is the registered and beneficial owner of the Shares;
(b) the Shares are validly issued and outstanding as fully paid and
non-assessable in the capital of the Company and are free and clear of
all liens, charges and encumbrances;
(c) the Vendor has good and sufficient right and authority to enter into
this Agreement and to transfer legal and beneficial title and
ownership of the Shares to the Purchaser;
(d) the Vendor has not previously entered into a binding agreement for the
sale of, or the granting of an option to purchase the Shares;
(e) the Vendor is not indebted to the Company and the Company is not
indebted to the Vendor;
(f) the Vendor has not relied on any representations, understandings or
other inducements not expressly set forth in this Agreement;
(g) the Vendor has been fully advised by independent legal counsel
concerning the terms and effect of this Agreement;
(h) the Vendor enters into this Agreement voluntarily, without duress or
undue influence;
(i) the Vendor has the legal capacity, power and authority to hold the
Lari Shares and the Note (collectively, the "Securities") to bc owned
by her on the Closing Date;
(j) the Vendor is accepting the Securities as the Purchase Price as set
out in Subsection 3(b) only for investment purposes on her own account
and not for the purpose of selling the Securities in connection with
any distribution of the Securities.
<PAGE>
-3-
The Vendor acknowledges that the Lari Shares are subject to resale
restrictions and, for this reason, shall display the legend,
substantially in the form as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT'). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE
144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT PRIOR TO SUCH SALE
THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL OF
RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS TO
THE AVAILABILITY OF AN EXEMPTION."
(k) the Vendor acknowledges that the Lari Shares to be received by the
Vendor on the Closing Date were not advertised in printed media of
general and regular paid circulation, radio or television;
(l) the Vendor is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (U.S.); and
(m) the Vendor is a resident at the following address:
735 Warner Avenue
Los Angeles, CA 90024
(n) The Vendor will indemnify the Purchaser against any loss or damage
sustained by the Purchaser, directly or indirectly, by reason of a
breach of any of the warranties or representations set forth in this
Section 5. The Vendor acknowledges that the Purchaser has entered into
this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement and that no information which
is now known or which may hereafter become known to the Purchaser or
its professional advisers will limit or extinguish the obligation to
indemnify hereunder.
(o) The representations, warranties, covenants and agreements contained in
the Agreement and in any certificates and documents delivered in
connection herewith will be true at and as of the Closing Date and
will survive the Closing
<PAGE>
-4-
Date, the purchase and sale contemplated herein and any
re-organization or amalgamation of any party hereto.
6. CONDITIONS OF CLOSING
The obligation of the Purchaser and Lari to complete the sale and purchase of
the Shares is subject to the following terms and conditions for the exclusive
benefit of the Purchaser and Lari, to be fulfilled or performed at or prior to
the Closing Date or waived by the Purchaser and Lari at their sole discretion;
(a) The transactions contemplated in the Remaining Share Purchase
Agreement have been completed and the Purchaser is the registered and
beneficial owner of the Remaining Shares of the Company;
(b) The Vendor has entered into an escrow arrangement with the Escrow
Agent on terms and conditions which are satisfactory to the Purchaser,
Lari and the Company;
(c) The Vendor has executed the Certificate of Accredited Investor
attached as Schedule "B" to this Agreement; and
(d) The Vendor has executed a release agreement attached as Schedule "C"
to this Agreement.
7. MISCELLANEOUS
7.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of California. Any dispute arising out of or in
connection with this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration
Association which rules are deemed to be incorporated by reference
into this clause. The number of arbitrators shall be one. The place of
arbitration shall be Los Angeles, California. The language of
arbitration shall be English. The parties expressly waive and forego
any right to punitive, exemplary or other similar damages unless an
applicable statute requires the award of such damages or that
compensatory damages be increased in a specified manner. This
provision is not intended to apply to any award of arbitration costs
to a party to compensate for dilatory or bad faith conduct in the
arbitration pursuant to this paragraph. The prevailing parties shall
also be entitled to an award of reasonable attorneys' fees.
7.2 The Vendor will execute and deliver all such further documents and
instruments and do all acts and things the Purchaser may require to
carry out the full intent and meaning of this Agreement and to assure
the Purchaser the transfer of the Shares.
<PAGE>
-5-
7.3 This Agreement constitutes the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings of the parties with
respect to the subject matter hereof.
7.4 This agreement will be binding upon and inure to the benefit of, and
be enforceable by, the parties hereto and their respective permitted
successors, assigns, heirs, executors and administrators.
7.5 The Vendor will not assign her rights or obligations provided by this
Agreement without the prior written consent of the Purchaser. Prior to
the full payment of the Purchase Price, the Purchaser will not be
entitled to assign any of its respective rights and obligations
provided by this Agreement without prior written consent of the
Vendor.
7.6 Any notice or other communication required or permitted to be given
hereunder shall be in writing and delivered or sent by telefax and, if
telefaxed, shall be deemed to have been received on the next business
day following transmittal and acknowledgment of receipt by the
recipient's telex machine or if delivered by hand shall be deemed to
have been received at the time it is delivered. Notices addressed to
an individual shall be validly given if left on the premises indicated
below. Notice of change of address shall also be governed by this
Subsection 7.6. Notices shall be delivered or addressed as follows:
If to the Purchaser and Lari, to:
Brent Lokash
Barrister & Solicitor
1708-808 Nelson Street
Vancouver, B.C. V6Z 2H2
Fax: (604) 681-9579
If to the Vendor:
Jill Schulman
735 Warner Avenue
Los Angeles, California
U.S.A. 90024
7.7 In the event that any one or more of the provisions of this Agreement
should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby.
7.8 Time will be of the essence of this agreement
<PAGE>
-6-
7.9 The captions and headings of the sections and the subsections in this
Agreement have been inserted as a matter of convenience and reference
only.
7.10 Whenever the singular or the masculine are used in this Agreement the
same will be deemed to include the plural or the feminine or the
corporate where the context or the parties so require.
7.11 All dollar amounts referred to in this Agreement are stated in United
States of America currency, unless otherwise expressly stated.
7.12 This Agreement may be executed in any number of counterparts, each of
which will be treated as an original but all of which, collectively,
will constitute a single instrument. This Agreement will be binding
once signed and delivered and a signature by facsimile, will be deemed
to be execution and delivery.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first hereinabove written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
--------------------------------
Authorized Signatory
LARI CORP.
Per: /s/ Suzanne L. Wood
--------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
JILL SCHULMAN in the presence of: )
)
)
/s/ [Illegible] )
- --------------------------------------------- )
Witness )
)
10529 Melvin Ave, Northridge, CA 91326 ) /s/ Jill Schulman
- --------------------------------------------- ) -----------------------------
Address ) JILL SCHULMAN
)
Sales )
- --------------------------------------------- )
Occupation )
EXHIBIT 10.5
AGREEMENT
This Agreement is entered into as of August 1, 1999 by and between Lari
Acquisition Company, Inc. ("Lari") and The Neptune Society, Inc. (formerly known
as Lari Corp.) ("Neptune"), on the one hand, and Stanley Zicklin ( "Zicklin"),
on the other hand, with reference to the following facts:
WHEREAS:
A. Lari has certain existing obligations to Zicklin under, a promissory
note in the amount of $19 million (the "Note"),
B. Lari has requested that Zicklin agree to restructure certain of Lari's
obligations to Zicklin in order to assist Lari to increase its cash
flow for operation of its recently acquired cremation business and to
provide additional available funds to Lari for the acquisition of new
cremation businesses.
C. Zicklin has agreed to accommodate certain of Lari's requests and to
restructure certain of Lari's obligations.
D. The parties are concurrently herewith entering into amendments of the
Note and the Joint Written Instructions to Escrow Agent dated April
22, 1999 (the "Instructions") which govern the manner in which certain
sums due to Zicklin and others are to be paid and disbursed
E. Lari and Neptune have agreed to provide certain consideration to
Zicklin in exchange for his agreement to modify Lari's payment
obligations.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
warranties and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree with each other
as follows:
1. Neptune will issue, to the order of Zicklin, on or before August 13,
1999, stock warrants to purchase 25,000 shares in Neptune at a price of $6.00
per share, to be held in the Weintraub/Zicklin Fund as contemplated in the
Instructions, and amendments thereto, and the Agreement Concerning Escrow and
Related Matters among the parties hereto and Emanuel Weintraub dated April 22,
1999.
The warrants shall be exercisable within four years (i.e. until August
15, 2003) and subject to a one-year statutory holding period restriction.
2. Lari and Neptune shall immediately reimburse Zicklin for $3,500 in legal
fees and costs incurred by him in connection with and related to the
negotiations and documentation of the restructuring of Lari's obligations, by
check for $3,500 payable to Sandler & Rosen, LLP.
<PAGE>
3. Each of the obligations set forth in this agreement are acknowledged to
be obligations which are secured by that security interest created by that
Security Agreement dated as of March 31, 1999 by and between Lari, Neptune
Management Corp., Neptune Pre-Need Plan, Inc., Heritage Alternatives, Inc. and
the Emanuel Weintraub Inter Vivos Trust.
4. This Agreement may be executed in any number of counterparts, each of
which when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or telecopied
copy of this Agreement shall be effectual and valid proof of execution and
delivery.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
LARI ACQUISITION COMPANY, INC.
Per:
--------------------------------
Authorized Signatory
THE NEPTUNE SOCIETY, INC.
(formerly, Lari Corp.)
Per: /s/ Suzanne L.Wood
--------------------------------
Authorized Signatory
STANLEY ZICKLIN
By:
--------------------------------
William F. Tisch, Esq.
Sandler & Rosen, LLP.
Attorneys for Stanley Zicklin,
signed on his behalf
EXHIBIT 10.6
AGREEMENT
This Agreement is entered into as of August 1, 1999 by and between Lari
Acquisition Company, Inc. ("Lari") and The Neptune Society, Inc. (formerly known
as Lari Corp.) ("Neptune"), on the one hand, and Emanuel Weintraub and the
Emanuel Weintraub Inter Vivos Trust (collectively "Weintraub"), on the other
hand, with reference to the following facts:
WHEREAS:
A. Lari has certain existing obligations to Weintraub under, inter alia, a
Consulting Contract a promissory note in the amount of $19 million and a
promissory note in the amount of $2 million;
B. Lari has requested that Weintraub agree to restructure certain of Lari's
obligations to Weintraub in order to assist Lari to increase its cash flow for
operation of its recently acquired cremation business and to provide additional
available funds to Lari for the acquisition of new cremation businesses;
C. Weintraub has agreed to accommodate certain of Lari's requests and to
agree to restructure certain of Lari's obligations;
D. The parties are concurrently herewith entering into amendments of the
Consulting Contract, the $19 million Promissory Note, the $2 million Promissory
Note and the Joint Written Instructions to Escrow Agent dated April 22, 1999
which govern the manner in which certain sums due to Weintraub and others are to
be paid and disbursed; and
E. Lari and Neptune have agreed to provide certain consideration to
Weintraub in exchange for his agreement to modify Lari's payment obligations.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
warranties and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree with each other
as follows:
1. Neptune will issue, on or before August 13, 1999, stock warrants to
purchase 250,000 shares in Neptune at a price of $6.00 per share to the
following individuals in the following amounts:
Linda Stark 125,000 shares
Jill Schulman 62,500 shares
-1-
<PAGE>
Nancy Leferman 62,500 shares
The warrants shall be exerciseable within four years (i.e., until August
15, 2003) and subject to a one-year statutory holding period restriction.
2. Lari and Neptune agree to reimburse Weintraub for all reasonable legal
fees and costs incurred by him in connection with and related to the negotiation
and documentation of the restructuring of Lari' s obligations. Such
reimbursement shall be made by not later than 15 days after delivery by
Weintraub or his attorneys of the invoice reflecting the incurrence of such
legal fees and costs.
3. Lari will pay to Weintraub the sum of $76,350, of which sum Weintraub
acknowledges receipt of $38,175. The remaining $38,175 will be paid by Lari on
the earliest of: (1) the payment in full of the $19 million Promissory Note; or
(2) July 31, 2000.
4. Each of the obligations set forth in this agreement are acknowledged to
be obligations which are secured by that security interest created by that
Security Agreement dated as of March 31, 1999 by and between Lari, Neptune
Management Corp., Neptune Pre-Need Plan, Inc., Heritage Alternatives, Inc. and
the Emanuel Weintraub Inter Vivos Trust.
5. This Agreement may be executed in any number of counterparts, each of
which when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or telecopied
copy of this Agreement shall be effectual and valid proof of execution and
delivery.
IN WINESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Lari Aquisition Company, Inc.
By /s/ Marco Markin
-----------------------------
Title: Vice President
-2-
<PAGE>
The Neptune Society, Inc.
(formerly Lari Corp)
By /s/ Suzanne L. Wood
------------------------------
Title: President
EMANUEL WEINTRAUB INTER VIVOS TRUST
Per:
----------------------------
Emanuel Weintraub, Trustee
- ---------------------------------
EMANUEL WEINTRAUB
-3-
EXHIBIT 10.7
INTEREST PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 31st day of March, 1999 between
Neptune Management Corp., a company incorporated under the laws of the State of
California (the "Purchaser") and the limited partners as described in Schedule
"A" and in Schedule "E" attached to this Agreement (collectively, the "Vendors")
of Neptune-Los Angeles, Ltd., a limited partnership under the laws of the State
of California ("Neptune LA"), Neptune-Santa Barbara, Ltd., a limited partnership
under the laws of the State of California ("Neptune SB"), Neptune-Miami, Ltd., a
limited partnership under the laws of the State of Florida ("Neptune MI"),
Neptune-St. Petersburg, Ltd., a limited partnership under the laws of the State
of California ("Neptune SP"), Neptune-Ft. Lauderdale, Ltd., a limited
partnership under the laws of the State of Florida ("Neptune "FT"),
Neptune-Nassau, Ltd., a limited partnership under the laws of the State of
California ("Neptune NA"), and Neptune-Westchester, Ltd., a limited partnership
under the laws of the State of California ("Neptune WT") (Neptune LA, Neptune
SB, Neptune MI, Neptune SP, Neptune FT, Neptune NA and Neptune WT are
collectively referred to as the "Partnerships"), Lari Acquisition Company, Inc.,
a company incorporated under the laws of the State of California ("Lari Co.")
and Lari Corp., a company incorporated under the laws of the State of Florida
("Lari").
WHEREAS:
A. The Purchaser is the general partner and a 50% owner of each of the
Partnerships;
B. Each of the Vendors is the registered and beneficial owner of those number
limited partnership units in one or more of the Partnerships as set forth
beside each of their names in Schedule "A" and in Schedule "E"
(collectively, the "Interests");
C. Each of the Partnerships have been established pursuant to limited
partnership agreements (the "Partnership Agreements") which set forth,
among other things, the manner in which the Interests may be sold, assigned
or transferred;
D. The Purchaser is being purchased by Lari Co. and Lari pursuant to two
purchase agreements dated March 31, 1999 (the "Share Purchase Agreements");
and
E. The Vendors have agreed to sell their respective Interests to the Purchaser
and the Purchaser has agreed to purchase the Interests from the Vendors.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF INTERESTS
Each of the Vendors hereby sells and transfers to Lari through the Purchaser,
and Lari through the Purchaser hereby purchases and acquires from each of the
Vendors, all of each of the Vendors' right, title and interest in and to the
Interests.
[Initials]
<PAGE>
-2-
2. PURCHASE PRICE
The Purchaser hereby agrees to pay to the Vendors $9,022,626.00 (the "Purchase
Price") for the Interests,
3. PAYMENT OF PURCHASE PRICE
3.1 The Purchaser will pay the Purchase Price on March 31, 1999, or such
other date as the parties may agree (the "Closing Date"), as follows:
(a) the sum of $361,874.00 byway of wire transfer to City National
Bank, 400 North Roxbury Drive, Beverly Hills, CA, 90210 (the
"Escrow Agent"), in trust for the Vendors (the "Escrow Agent");
(b) 357,025 shares of common stock of Lari (the "Lari Shares") issued
by Lari to each of the Vendors and delivered to the Escrow Agent,
in trust for the Vendors; and
(c) the sum of $6,875,627.00 by way of an undivided 36.1875105%
interest to the Vendors in a promissory note ("Note"), in the
form attached as Schedule "B" to this Agreement, delivered to the
Escrow Agent, in trust for the Vendors.
3.2 The Purchase Price payable to each of the Vendors is set out in
Schedule "A" and Schedule "E" of this Agreement.
4. ACKNOWLEDGMENT UNDER THE PARTNERSHIP AGREEMENTS
The parties acknowledge that all conditions required in each of the Partnership
Agreements for the sale, assignment or transfer of the Interests as contemplated
herein, including, but not limited to, any right of first refusal offerings and
any consents, have been satisfied or hereby waived and that any sale, assignment
or transfer of the Interests as contemplated herein does not violate any
provision of any of the Partnership Agreements.
5. VENDORS' WARRANTIES AND REPRESENTATIONS
5.1 Each of the Vendors represent, warrant and covenant on behalf of each
of themselves only and on behalf of no other partners, limited or
general, to the Purchaser, Lari and Lari Co. as follows:
(a) each of the Vendors is the registered and beneficial owner of
those number of limited partnership units of one or more of the
Partnerships as set forth beside each of their names in Schedule
A and Schedule `E";
[Initials]
<PAGE>
- 3 -
(b) all of the Interests are validly issued and outstanding as fully
paid and non-assessable in the limited partnership units of the
Partnerships and are free and clear of all liens, charges and
encumbrances;
(c) the Purchaser is not indebted to any of the Vendors and none of
the Vendors is indebted to the Purchaser;
(d) each of the Vendors has good and sufficient right and authority
to enter into this Agreement and to transfer legal and beneficial
title and ownership of the Interests to the Purchaser;
(e) none of the Vendors has previously entered into a binding
agreement for the sale of, or the granting of an option to
purchase their respective Interests;
(f) none of the Vendors has relied on any representations,
understandings or other inducements not expressly set forth in
this Agreement;
(g) each of the Vendors has been fully advised by independent legal
counsel concerning the terms and effect of this Agreement;
(h) each of the Vendors enter into this Agreement voluntarily,
without duress or undue influence;
(i) each of the Vendors has the legal capacity, power and authority
to hold the Lari Shares and the Note to be owned by them on the
Closing Date (the "Securities");
(j) each of the Vendors acknowledge that Lari Co. and Lari are newly
formed companies which were formed in part for the purpose of
acquiring the Interests and that the Vendors have not been
provided with any offering memorandum or similar disclosure
document, including financial information, in respect of the
current or proposed business activities of Lari Co. and Lari;
(k) each of the Vendors is accepting the Securities as the Purchase
Price as set out in subsection 3 only for investment purposes on
their own account and not for the purpose of selling the
Securities in connection with any distribution of the Securities.
Each of the Vendors acknowledge that the Securities are subject
to resale restrictions and, for this reason, the Securities shall
display the legend, substantially in the form as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
SUCH
[Initials]
<PAGE>
- 4 -
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A)
TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 144A UNDER THE
SECURITIES ACT OR RULE 144 UNDER THE SECURITIES ACT, IF
APPLICABLE, OR (D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PROVIDED THAT PRIOR TO SUCH SALE THE CORPORATION
SHALL HAVE RECEIVED AN OPINION OF COUNSEL OF RECOGNIZED STANDING,
IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS TO THE AVAILABILITY
OF AN EXEMPTION."
(l) each of the Vendors acknowledge that the Securities to be
received by them on the Closing Date were not advertised in
printed media of general and regular paid circulation, radio or
television;
(m) each of the Vendors is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as
amended (U.S.); and
(n) the Vendors are resident at the addresses set forth beside their
names in Schedule "A" and Schedule "E".
5.2 Each of the Vendors indemnify the Purchaser against any loss or damage
sustained by the Purchaser, directly or indirectly, by reason of a
breach of their respective warranties or representations (and not the
warranties and representations of others) set forth in this Section 5.
Each of the Vendors acknowledge that the Purchaser has entered into
this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement and that no information which
is now known or which may hereafter become known to the Purchaser or
its professional advisers will limit or extinguish the obligation to
indemnify hereunder.
5.3 The respective representations, warranties, covenants and agreements
of the parties hereto, which are contained in this Agreement and in
any certificates and documents delivered in connection herewith will
be true at and as of the Closing Date and will survive the Closing
Date, the purchase and sale contemplated herein and any reorganization
or amalgamation of any party hereto.
[Initials]
<PAGE>
-5-
6. CONDITIONS OF CLOSING
The obligation of the Purchaser, Lari Co. and Lari to complete the sale and
purchase of the Interests is subject to the following terms and conditions for
the exclusive benefit of the Purchaser, Lari Co. and Lari, to be fulfilled on
performed at or prior to the Closing Date or said terms and conditions may be
waived by the Purchaser, Lari Co. and Lari at their sole discretion:
(a) The transactions contemplated in the Share Purchase Agreements
have been completed and Lari Co. is the registered and beneficial
owner of all the issued and outstanding shares of the Purchaser;
(b) Each of the Vendors has entered into an escrow arrangement with
the Escrow Agent on terms and conditions which are satisfactory
to the Purchaser, Lari Co. and Lari;
(c) Each of the Vendors has executed a Certificate of Accredited
Investor in the form attached as Schedule "C" to this Agreement;
and
(d) Each of the Vendors listed in Schedule "A" has executed a release
agreement in the form attached as Schedule "D" to this Agreement.
(e) Each of the Vendors listed in Schedule "F" has executed release
agreements attached as Schedule "F" to this Agreement.
7. MISCELLANEOUS
7.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of California. Any dispute arising out of or in
connection with this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration
Association which rules are deemed to be incorporated by reference
into this clause. The number of arbitrators shall be one. The place of
arbitration shall be Los Angeles. The language of arbitration shall be
English. This provision is not intended to apply to any award of
arbitration costs to a party to compensate for dilatory or bad faith
conduct in the arbitration pursuant to this paragraph. The prevailing
parties shall also be entitled to an award of reasonable attorneys'
fees. Any such arbitration shall permit, and the parties hereto
expressly reserve their rights to conduct discovery pursuant to and in
accordance with the discovery rules set forth in the California Code
of Civil Procedure and other applicable state laws, to the same extent
as if the parties were not agreeing to arbitration.
7.2 The Vendors will execute and deliver all such further documents and
instruments and do all acts and things the Purchaser may require to
carry out the full intent and meaning of this Agreement and to assure
the Purchaser the transfer of the Interests.
[Initials]
<PAGE>
- 6 -
7.3 This Agreement, and other written agreements associated herewith,
constitute the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings of the parties with respect to the
subject matter hereof.
7.4 This agreement will be binding upon and inure to the benefit of, and
be enforceable by, the parties hereto and their respective permitted,
where applicable, successors, assigns, heirs, executors and
administrators.
7.5 The Vendors will not assign their rights or obligations provided by
this Agreement without the prior written consent of the Purchaser.
Prior to payment of the Purchase Price in full, the Purchaser will not
be entitled to assign any of its respective rights and obligations
provided by this Agreement without prior written consent of the
Vendors.
7.6 Any notice or other communication required or permitted to be given
hereunder shall be in writing and delivered or sent by telefax and, if
telefaxed, shall be deemed to have been received on the next business
day following transmittal and acknowledgment of receipt by the
recipients telefax machine or if delivered by hand shall be deemed to
have been received at the time it is delivered. Notices addressed to
an individual shall be validly given if left on the premises indicated
below. Notice of change of address shall also be governed by this
Subsection 7.6. Notices shall be delivered or addressed as follows:
If to the Purchaser, Lari Co. and Lari, to:
2424 North Federal Highway
Boca Raton, Florida 33431
Fax: (561) 367-9763
If to the Vendors:
At the addresses set forth in Schedule 'A' and Schedule 'E'.
With a copy to:
Keith Zimmet, Esq.
Lewitt, Hackman, Hoefflin
Shapiro, Marshall & Harlan
16633 Ventura Blvd., Eleventh Floor
Encino, CA 91436-1870
Fax: (818) 981-4764
And to:
[Initials]
<PAGE>
- 7 -
Mark S. Novak, Esq.
Novak & Bases, LLP
16633 Ventura Blvd., Suite 1200
Encino, CA 91436
Fax: (818) 905-1864
7.7 In the event that any one or more of the provisions of this Agreement
should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby
7.8 Time will be of the essence of this Agreement.
7.9 The captions and headings of the sections and the subsections in this
Agreement have been inserted as a matter of convenience and reference
only.
7.10 Whenever the singular or the masculine are used in this Agreement the
same will be deemed to include the plural or the feminine or the
corporate where the context or the parties so require.
7.11 This Agreement may be executed in any number of counterparts, each of
which will be treated as an original but all of which, collectively,
will constitute a single instrument. This Agreement will be binding
once signed and delivered and a signature by facsimile, will be deemed
to be execution and delivery.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first herein above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
------------------------------------
Authorized Signatory
LARI CORP.
Per: /s/ Suzanne L. Wood
------------------------------------
Authorized Signatory
NEPTUNE MANAGEMENT CORP.
Per: /s/ Suzanne L. Wood
------------------------------------
Authorized Signatory
[Initials]
<PAGE>
- 8 -
/s/ Emanuel Weintraub
- --------------------------------------
EMANUEL WEINTRAUB as attorney-in-fact
for each of the vendors listed
in Schedule "A" attached hereto
/s/ Marvin Falikoff /s/ Stuart M. Solomon
- ----------------------------------- -----------------------------------
MARVIN FALIKOFF (an individual) STUART M. SOLOMON (an individual)
/s/ Mervyn K. Kalman /s/ Marcia Deifik
- ----------------------------------- -----------------------------------
MERVYN K. KALMAN (an individual) MARCIA DEIFIK (an individual)
EXHIBIT 10.8
INTEREST PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 31st day of March, 1999 between
Heritage Alternatives Inc., a company incorporated under the laws of the State
of California (the "Purchaser") and the limited partners as described in
Schedule "A" and in Schedule "E" attached to this Agreement (collectively, the
"Vendors") of Heritage Alternatives, L.P., a limited partnership under the laws
of the State of California (the "Partnership"), Lari Acquisition Company, Inc.,
a company incorporated under the laws of the State of California ("Lari Co.")
and Lari Corp., a company incorporated under the laws of the State of Florida
("Lari").
WHEREAS:
A. The Purchaser is the general partner and a 50% owner of the Partnership;
B. Each of the Vendors is the registered and beneficial owner of those number
limited partnership units in the Partnership as set forth beside each of their
names in Schedule "A" and in Schedule "E" (collectively, the "Interests");
C. The Partnership has been established pursuant to limited partnership
agreement (the "Partnership Agreement") which sets forth, among other things,
the manner in which the Interests may be sold, assigned or transferred;
D. The Purchaser is being purchased by Lari Co and Lari pursuant to two
purchase agreements dated March 3 1, 1999 (the "Share Purchase Agreements"); and
E. The Vendors have agreed to sell their respective Interests to the Purchaser
and the Purchaser has agreed to purchase the Interests from the Vendors.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF INTERESTS
Each of the Vendors hereby sells and transfers to Lari through the Purchaser,
and Lari through the Purchaser hereby purchases and acquires from each of the
Vendors, all of each of the Vendors' right, title and interest in and to the
Interests.
2. PURCHASE PRICE
The Purchaser hereby agrees to pay to the Vendors $663,648.00 (the "Purchase
Price") for the Interests.
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3. PAYMENT OF PURCHASE PRICE
3.1 The Purchaser will pay the Purchase Price on March 31, 1999, or such
other date as the parties may agree (the "Closing Date"), as follows:
(a) the sum of $27,439.00 by way of wire transfer to City National
Bank, 400 North Roxbury Drive, Beverly Hills, CA, 90210 (the "Escrow Agent"), in
trust for the Vendors (the "Escrow Agent");
(b) 22,976 shares of common stock of Lari (the "Lari Shares") issued
by Lari to each of the Vendors and delivered to the Escrow Agent, in trust for
the Vendors; and
(c) the sum of $521,329.00 by way of an undivided 2.7438368% interest
to the Vendors in a promissory note ("Note"), in the form attached as Schedule
"B" to this Agreement, delivered to the Escrow Agent, in trust for the Vendors.
3.2 The Purchase Price payable to each of the Vendors is set out in
Schedule "A" and Schedule "E" of this Agreement.
4. ACKNOWLEDGMENT UNDER THE PARTNERSHIP AGREEMENT
The parties acknowledge that all conditions required in the Partnership
Agreement for the sale, assignment or transfer of the Interests as contemplated
herein, including, but not limited to, any right of first refusal offerings and
any consents, have been satisfied or hereby waived and that any sale, assignment
or transfer of the Interests as contemplated herein does not violate any
provision of the Partnership Agreement
5. VENDORS' WARRANTIES AND REPRESENTATIONS
5.1 Each of the Vendors represent, warrant and covenant on behalf of each
of themselves only and on behalf of no other partners, limited or general, to
the Purchaser, Lari and Lari Co. as follows:
(a) each of the Vendors is the registered and beneficial owner of
those number of limited partnership units of the Partnership as set forth beside
each of their names in Schedule "A" and Schedule "E";
(b) all of the Interests are validly issued and outstanding as fully
paid and non-assessable in the limited partnership units of the Partnership and
are free and clear of all liens, charges and encumbrances;
(c) the Purchaser is not indebted to any of the Vendors and none of
the Vendors is indebted to the Purchaser;
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(d) each of the Vendors has good and sufficient right and authority to
enter into this Agreement and to transfer legal and beneficial title and
ownership of the Interests to the Purchaser;
(e) none of the Vendors has previously entered into a binding
agreement for the sale of, or the granting of an option to purchase their
respective Interests;
(f) none of the Vendors has relied on any representations,
understandings or other inducements not expressly set forth in this Agreement;
(g) each of the Vendors has been fully advised by independent legal
counsel concerning the terms and effect of this Agreement;
(h) each of the Vendors enter into this Agreement voluntarily, without
duress or undue influence;
(i) each of the Vendors has the legal capacity, power and authority to
hold the Lari Shares and the Note to be owned by them on the Closing Date (the
"Securities");
(j) each of the Vendors acknowledge that Lari Co. and Lari are newly
formed companies which were formed in part for the purpose of acquiring the
Interests and that the Vendors have not been provided with any offering
memorandum or similar disclosure document, including financial information, in
respect of the current or proposed business activities of Lari Co. and Lari,;
(k) each of the Vendors is accepting the Securities as the Purchase
Price as set out in subsection 3 only for investment purposes on their own
account and not for the purpose of selling the Securities in connection with any
distribution of the Securities. Each of the Vendors acknowledge that the
Securities are subject to resale restrictions and, for this reason, the
Securities shall display the legend, substantially in the form as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE
144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT
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PRIOR TO SUCH SALE THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF
COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO
IT, AS TO THE AVAILABILITY OF AN EXEMPTION."
(1) each of the Vendors acknowledge that the Securities to be received
by them on the Closing Date were not advertised in printed media of general and
regular paid circulation, radio or television;
(m) each of the Vendors is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (U.S.); and
(n) the Vendors are resident at the addresses set forth beside their
names in Schedule "A" and Schedule "E".
5.2 Each of the Vendors indemnify the Purchaser against any loss or damage
sustained by the Purchaser, directly or indirectly, by reason of a breach of
their respective warranties or representations (and not the warranties and
representations of others) set forth in this Section 5. Each of the Vendors
acknowledge that the Purchaser has entered into this Agreement relying on the
warranties and representations and other terms and conditions of this Agreement
and that no information which is now known or which may hereafter become known
to the Purchaser or its professional advisers will limit or extinguish the
obligation to indemnify hereunder.
5.3 The respective representations, warranties, covenants and agreements of
the parties hereto, which are contained in this Agreement and in any
certificates and documents delivered in connection herewith will be true at and
as of the Closing Date and will survive the Closing Date, the purchase and sale
contemplated herein and any re-organization or amalgamation of any party hereto
6 CONDITIONS OF CLOSING
The obligation of the Purchaser, Lari Co. and Lari to complete the sale and
purchase of the Interests is subject to the following terms and conditions for
the exclusive benefit of the Purchaser, Lari Co and Lari, to be fulfilled or
performed at or prior to the Closing Date or said terms and conditions may be
waived by the Purchaser, Lari Co. and Lari at their sole discretion:
(a) The transactions contemplated in the Share Purchase Agreements
have been completed and Lari Co is the registered and beneficial owner of all
the issued and outstanding shares of the Purchaser;
(b) Each of the Vendors has entered into an escrow arrangement with
the Escrow Agent on terms and conditions which are satisfactory to the
Purchaser, Lari Co. and Lari;
(c) Each of the Vendors has executed a Certificate of Accredited
Investor in the form attached as Schedule "C" to this Agreement, and
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(d) Each of the Vendors listed in Schedule "A" has executed a release
agreement in the form attached as Schedule "D" to this Agreement.
(e) Each of the Vendors listed in Schedule "E" has executed release
agreements attached as Schedule "F" to this Agreement.
7 MISCELLANEOUS
7.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of California. Any dispute arising out of or in connection
with this Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration under the
rules of the American Arbitration Association which rules are deemed to be
incorporated by reference into this clause. The number of arbitrators shall be
one. The place of arbitration shall be Los Angeles. The language of arbitration
shall be English. This provision is not intended to apply to any award of
arbitration costs to a party to compensate for dilatory or bad faith conduct in
the arbitration pursuant to this paragraph. The prevailing parties shall also be
entitled to an award of reasonable attorneys' fees. Any such arbitration shall
permit, and the parties hereto expressly reserve their rights to conduct
discovery pursuant to and in accordance with the discovery rules set forth in
the California Code of Civil Procedure and other applicable state laws, to the
same extent as if the parties were not agreeing to arbitration.
7.2 The Vendors will execute and deliver all such further documents and
instruments and do all acts and things the Purchaser may require to carry out
the full intent and meaning of this Agreement and to assure the Purchaser the
transfer of the Interests.
7.3 This Agreement, and other written agreements associated herewith,
constitute the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings of the parties with respect to the subject matter hereof
7.4 This agreement will be binding upon and inure to the benefit of and be
enforceable by, the parties hereto and their respective permitted, where
applicable, successors, assigns, heirs, executors and administrators.
7.5 The Vendors will not assign their rights or obligations provided by
this Agreement without the prior written consent of the Purchaser. Prior to
payment of the Purchase Price in full, the Purchaser will not be entitled to
assign any of its respective rights and obligations provided by this Agreement
without prior written consent of the Vendors.
7.6 Any notice or other communication required or permitted to be given
hereunder shall be in writing and delivered or sent by telefax and, if
telefaxed, shall be deemed to have been received on the next business day
following transmittal and acknowledgment of receipt by the recipient's telefax
machine or if delivered by hand shall be deemed to have been received at the
time it is delivered. Notices addressed to an individual shall be validly given
if left on the premises indicated
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below. Notice of change of address shall also be governed by this Subsection
7.6. Notices shall be delivered or addressed as follows:
If to the Purchaser, Lari Co. and Lari, to:
2424 North Federal Highway
Boca Raton, Florida 33431
Fax: (561) 367-9763
If to the Vendors:
At the addresses set forth in Schedule "A" and Schedule "E"
With a copy to:
Keith Zimmet, Esq.
Lewitt, Hackman, Hoefflin
Shapiro, Marshall & Harlan
16633 Ventura Blvd, Eleventh Floor
Encino, CA 91436-1870
Fax (818) 981-4764
7.7 In the event that any one or more of the provisions of this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein will
not in any way be affected or impaired thereby.
7.8 Time will be of the essence of this Agreement.
7.9 The captions and headings of the sections and the subsections in this
Agreement have been inserted as a matter of convenience and reference only.
7.10 Whenever the singular or the masculine are used in this Agreement the
same will be deemed to include the plural or the feminine or the corporate where
the context or the parties so require.
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7.11 This Agreement may be executed in any number of counterparts, each of
which will be treated as an original but all of which, collectively, will
constitute a single instrument. This Agreement will be binding once signed and
delivered and a signature by facsimile, will be deemed to be execution and
delivery.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first herein above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
--------------------------------
Authorized Signatory
LARI CORP.
Per: /s/ Suzanne L. Wood
--------------------------------
Authorized Signatory
HERITAGE ALTERNATIVES, INC.
Per: /s/ Suzanne L. Wood
--------------------------------
Authorized Signatory
/s/ Emanuel Weintraub
- -------------------------------------
EMANUEL WEINTRAUB as attorney-in-fact
for each of the Vendors listed in
Schedule "A" Attached hereto
/s/ Marvin Falikoff
- -------------------------------------
MARVIN FALIKOFF (an individual)
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EXHIBIT 10.9
CONSULTING CONTRACT
THIS AGREEMENT is dated for reference the 31st day of March 1999 between Lari
Acquisition Company, Inc., a company incorporated under the laws of the State of
California (the "Company") and Emanuel Weintraub, a businessman, resident in the
State of California (the "Consultant").
WHEREAS:
(a) A subsidiary of the Company has purchased from the Consultant and other
parties, a funeral cremation business known and operated as the "Neptune
Society" including a pre-need marketing business operated under Neptune
Pre-Need Plan, Inc. (the "Business");
(b) The Consultant is familiar with the Business and has valuable marketing and
finance expertise, experience and abilities which the Company wishes to
avail itself; and
(c) As part of the consideration in purchasing the Business from the
Consultant, and other parties, the Company wishes to use the consulting
services of the Consultant for the Business and the Consultant has agreed
to provide such services, subject to the terms and conditions of this
Agreement.
NOW THEREFORE in consideration of the payment of covenants herein and for other
good and valuable consideration (the receipt and sufficiency of which is hereby
acknowledged) the parties hereto covenant and agree as follows:
Appointment
1. The Company hereby retains and appoints the Consultant, effective the 31st
day of March, 1999 (the "Effective Date"), to provide the following
assistance and advise with respect to the Business:
(a) Activities as a Spokesperson - Consultant will be available on a
reasonable basis, not to exceed seven (7) days per month for meetings
and presentations to potential investors in the Company;
(b) Consulting Services With Respect to Expansion of the Business - Under
the direction of the President of the Company, Consultant will assist
with research, investigation and implementation of business start-ups
in areas where Company does not currently conduct business. Consultant
will also assist in prospecting, investigation and due diligence with
respect to other existing cremation companies in North America which
Company may have an interest in acquiring;
(c) Consulting Services With Respect to Pre-Need Sales - Consultant will
assist in the development and implementation of marketing strategy for
the sale of pre-need agreements throughout North America, including
the identification of target markets, the
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best ways to reach those target markets, the location of new markets
in States outside of California, Florida and New York and the training
of sales personnel in new offices which may be established by Company;
(d) Consulting Services With Respect to Pre-Need Trust Funds - Consultant
will respond to requests from the board of directors of the Company
and the trustees of the pre-need trust funds regarding investment and
strategy and security for the pre-need trust funds in order to ensure
the integrity of the pre-need trust funds, all within the applicable
regulations of the State of California, Florida, New York and any
other State in which Company may establish a pre-need program,
(the "Services").
2. The Company will use its best commercial efforts to facilitate the
Consultant's ability to fulfill the Consultant's obligations under this
Agreement including providing timely responses to the Consultant's
comments, providing Company personnel to assist the Consultant in providing
written communication to the board of directors, diligently assessing the
Consultant's advice and recommendations with respect to the Business and
providing decisions with respect to the advice and recommendations on a
timely basis.
Term
3. Subject to the provisions of paragraphs 17 to 19 of this Agreement, the
Consultant shall provide the Services to the Company in accordance with the
provisions of this Agreement for a period of 36 months commencing on the
Effective Date of this Agreement (the "Term").
Payment
4. Subject to paragraphs 17 and 19 herein, the Company agrees to pay to the
Consultant for the Services an amount of $27,775.00 per month, payable on
the last day of the month with the first payment due on April 30, 1999. The
Consultant acknowledges that such payment is to be full payment and
reimbursement for providing the Services.
Expenses
5. Having first obtained written approval from the Company to incur expenses,
the Consultant shall be reimbursed for all reasonable traveling and other
expenses actually and properly incurred by him in connection with the
Services hereunder, including the reasonable cost of an office, comparable
to the Consultant's existing standard of offices, provided that for all
these approved expenses, the Consultant shall furnish to the Company
statements and vouchers at the end of each month in which the approved
expenses were actually incurred (unless the contrary is agreed upon in
writing by the Company and the Consultant) and
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provided further that the Consultant shall observe any reasonable limits
from time to time fixed by the Company in respect of the approved expenses.
Records
6. In connection with the provisions of the Services, the Consultant shall:
(a) establish and maintain books of account of all expenses incurred; and
(b) maintain invoices, receipts, and vouchers for the expenses referred to
in Section 5 to this Agreement,
(c) and a Company appointed auditor shall have free access at all
reasonable times to these books of account, invoices, receipts and
vouchers for the purposes of copying or auditing them (or both).
Independent Contractor
7. The Consultant shall be an independent contractor and not the partner,
servant, employee or agent of the Company.
8. The Company may from time to time give any instructions to the Consultant
that it considers necessary in connection with the provisions of the
Services but the Consultant shall not be subject to the control of the
Company in respect of the manner in which these instructions are carried
out.
Reports
9. The Consultant shall upon the request, from time to time, of the Company:
(a) fully inform the Company of the work done and to be done by the
Consultant in connection with the provision of the Services; and
(b) permit the Company at all reasonable times to inspect, examine, review
and copy any and all findings, data, specifications, drawings, working
papers, reports, documents, and material whether complete or otherwise
(collective the "Material") that has been produced, received, or
acquired by or provided by the Company to the Consultant as a result
of this Agreement.
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Ownership
10. The Material produced, received, or acquired by the Consultant, or provided
by the Company to the Consultant, as a result of this Agreement and any
equipment, or other property provided by the Company to the Consultant as a
result of this Agreement shall:
(a) be the exclusive property of the Company; and
(b) immediately be delivered by the Consultant to the Company on the
Company giving notice to the Consultant requesting delivery of the
Material, equipment or other property, whether that notice is given
before, upon, or after the expiration (or earlier termination) of this
Agreement and the Consultant shall execute and deliver such
assignments, acknowledgments and waivers as may be reasonably required
by the Company to preserve its interest in the Material, or other
property.
Confidentiality
11. The Consultant shall treat as confidential and shall not without the prior
written consent of the Company publish, release, or disclose or permit to
be published, released, or disclosed either before or after the expiration
or early termination of this Agreement the Material or any information
supplied to, obtained by, or which comes to the knowledge of the Consultant
as a result of this Agreement except insofar as that publication, release,
or disclosure is necessary to enable the Consultant to fulfill his
obligations under this Agreement.
Assignment and Sub-Contracting
12. The Consultant shall not without the prior written consent of the Company:
(a) assign, either directly or indirectly, this Agreement or any right of
the Consultant under this Agreement; or
(b) sub-contract any obligation of the Consultant under this Agreement.
13. No sub-contract entered into by the Consultant shall relieve the Consultant
from any of the obligations under this Agreement or impose any obligation
or liability upon the Company to any sub-contractor.
Conflict
14. The Consultant shall not during the Term perform a service for or provide
advice to any person, firm, or corporation where the performance of that
service or the provision of that advice may or does, in the reasonable
opinion of the Company, give rise to a conflict of
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interest between the obligation of the Consultant to the Company under this
Agreement and the obligations of the Consultant to any other person, firm,
or corporation.
Indemnity
15. The Company will indemnify the Consultant from and against any and all
losses, claims, damages, actions, causes of action, costs and expenses that
may arise from the Consultant providing the Services to the Company
pursuant to the Agreement.
16. The Company will name the Consultant as an additional insured for the
Company's Business at no cost to the Consultant, subject to the Company's
ability to obtain such insurance at premiums comparable to those paid by
the previous owners of the Business.
Termination
17. The Company may terminate this Agreement forthwith, without notice upon any
of the following:
(a) the failure or refusal of the Consultant to provide the Services under
this Agreement as directed by the board of directors of the Company;
(b) any dishonesty on the part of the Consultant affecting the Business or
the Company;
(c) the conviction of the Consultant for an indictable offence or for any
crime involving moral turpitude, fraud or misrepresentation;
(d) excessive use of alcohol or illegal drugs by the Consultant
interfering with the performance of his obligations under this
Agreement;
(e) any willful and intentional act on the part of the Consultant having
the effect of materially injuring the reputation, business or business
relationships of the Business or the Company;
(f) on the death or disability of the Consultant; or
(g) any material breach (not covered by any of the above clauses (a)
through (f)) of any of the provisions of this Agreement.
18. If the Company terminates the Consultant during the Term for a reason set
forth in paragraph 17, the Company shall not owe or be obligated to the
Consultant for any payment other for payments already due and owing for
Services already performed pursuant to this Agreement.
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19. If the Company fails to make payment to the Consultant of moneys owed,
within fifteen (15) business days of the Company's receipt of invoices for
Services rendered, the Consultant may after, providing written notice to
the Company terminate this Agreement only if the Company does not make
payment to the Consultant within thirty (30) days of the Company's receipt
of such notice. In the event of termination under this paragraph 19, all
monies remaining to be paid hereunder shall become immediately due and
payable.
Non-Waiver
20. No provision of this Agreement and no breach by the Consultant of any
provision shall be deemed to have been waived unless the waiver is in
writing signed by the Company.
21. The written waiver by the Company of any breach of any provision of this
Agreement by the Consultant shall not be deemed to be permanent waiver of
the provision or of any subsequent breach of the same or any other
provision of this Agreement.
Non Competition
22. Weintraub covenants and agrees with the Company that for a period of 15
years from the Effective Date, save with the prior written consent of the
Company, he will not, either individually or in partnership or conjunction
with any other person or persons, including without limitation any firm,
association, syndicate, company or corporation, as principal, agent,
shareholder, consultant, employee or in any other manner whatsoever carry
on, or be engage in, or concerned with, or advise, lend money to, guarantee
the debts or obligations of, or permit his name to be used in connection
with the provision of funeral, burial and cremation services, including the
provision and sale of pre-need cremation services, in the States of
California, Florida or New York; provided that nothing herein shall
preclude Weintraub from being a security holder of a public company, the
securities of which are listed on any public stock exchange or over the
counter market, if the number of securities beneficially held by Weintraub,
directly or indirectly, are such that he is not in a position to materially
influence the conduct of its affairs.
23. Notwithstanding the foregoing, if any restriction as to time, area,
capacity or activity imposed on the Consultant by this Agreement is
determined to be unreasonable or unenforceable pursuant to an arbitration
proceeding as contemplated in paragraph 30 herein (the "Restriction"), the
Consultant agrees that upon receiving notice from the Company specifying
inclusion in this Agreement of a lesser time or area, fewer capacities or
activities or lesser scope than now contained herein (the "Lesser
Restriction"), this Agreement will be deemed to be amended by the
substitution of the Lesser Restriction for the Restriction, with the
retroactive effect to the Effective Date.
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24. Weintraub acknowledges that the provisions of paragraphs 22 to 27 of this
Agreement have been considered by him and are, with respect to his
interests and the interests of the Company, reasonable as to time, area and
extent, having regard to all circumstances of the transaction contemplated
by this Agreement.
25. The parties to this Agreement acknowledges that a breach by Weintraub of
any of the covenants in this paragraph 22 would result in damages to the
Company and the Company would not adequately be compensated for such
damages by monetary award. Accordingly, Weintraub agrees that in the event
of such breach, in addition to all other remedies available to the Company
at law or in equity, the Company is, notwithstanding paragraph 30 of this
Agreement, entitled to apply to a court of competent equitable jurisdiction
in the Consultant's domicile, except in the case of a material breach of
this Agreement by the Company, for such relief by way of restraining order,
injunction, decree or otherwise, as may be appropriate to ensure compliance
with the provisions of paragraph 22.
26. The parties agree that paragraphs 22 to 27 of this Agreement are binding
and enforceable and will survive the expiration of the Term or any
termination of this Agreement under paragraph 17 herein.
27. The parties agree that all restrictions in paragraphs 22 to 27 are
necessary and fundamental to the protection of the Business by the
Operating Entities and are reasonable and valid, and all defenses to the
strict enforcement thereof by the Company are hereby waived by Weintraub.
Notices
28. Any notice, payment, or any or all Material or other instruments that
either party may be required or may desire to give or deliver to the other
shall be conclusively deemed validly given or delivered to and received by
the addressee, if delivered personally on the date of such personal
delivery or, if mailed, on the third business day after the mailing in
British Columbia, by prepaid post addressed, or if delivered via facsimile
transmission, on the day following the day on which it was sent:
(a) if to the Company:
Lari Corp.
2424 North Federal Highway
Boca Raton, Florida 33431
Fax: (561) 367-9763
with a copy to then registered office of the Company;
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(b) if to the Consultant:
Stein & Flugge, LLP
9200 Sunset Boulevard, Suite 825
Los Angeles, California 90069-3686
Fax: (310) 273-8706
Attention: Valerie Flugge, Esq.
29. Either party may, from time to time advise the other, by notice in writing,
of any change of address of the party. From and after the giving of that
notice, the address therein specified shall be deemed to be the address of
the party giving that notice.
General
30. This Agreement shall be governed by and construed in accordance with the
laws of the State of California. Any dispute arising out of or in
connection with this Agreement, including any question regarding its
existence, validity or termination, shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration
Association which rules are deemed to be incorporated by reference into
this clause. The number of arbitrators shall be one and the place of
arbitration shall be Los Angeles, California. The language of the
arbitration shall be English. The parties expressly waive and forego any
right to punitive, exemplary or other similar damages unless an applicable
statute requires the award of such damages or that compensatory damages be
increased in a specified manner. This provision is not intended to apply to
any award of arbitration costs to a party to compensate for dilatory or bad
faith conduct in the arbitration pursuant to this paragraph.
31. Save and except as provided for in paragraph 23 of this Agreement, if any
covenant, obligation or agreement of this Agreement, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement or the application of such
covenant, obligation or agreement to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby and each covenant, obligation and agreement of this
Agreement shall be separately valid and enforceable to the fullest extent
permitted by the law
32. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
33. All currency is in United States of America dollars unless otherwise
specifically stated.
34. The headings appearing in this Agreement have been inserted for reference
and as a matter of convenience and in not way define, limit, or enlarge the
scope of any provision of this Agreement.
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35. Time is of the essence of this Agreement.
36. This Agreement may be executed in any number of counterparts, each of which
when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or
telecopied copy of this Agreement shall be effectual and valid proof of
execution and delivery.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of
the day and year first above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
-------------------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
EMANUEL WEINTRAUB in the presence )
of: )
)
/s/ Valerie Flugge )
- ---------------------------------------- )
Witness )
9200 Sunset Blvd., #825 )
Los Angeles, CA 90069 ) /s/ Emanuel Weintraub
- ---------------------------------------- ) --------------------------------
Address ) EMANUEL WEINTRAUB
)
Attorney )
- ---------------------------------------- )
Occupation )
)
EXHIBIT 10.10
AMENDMENT TO THE CONSULTING AGREEMENT DATED FOR
REFERENCE MARCH 31, 1999 (THE "CONSULTING CONTRACT")
BETWEEN LARI ACQUISITION COMPANY, INC (THE "COMPANY")
AND EMANUEL WEINTRAUB (THE "CONSULTANT")
- --------------------------------------------------------------------------------
This Amendment is dated for reference the 1st day of August, 1999
WHEREAS:
A As presently structured, the Company is obligated to pay to the Consultant
the sum of $27,775 per month pursuant to the Consulting Contract;
B. The Company wishes to lower its monthly payments under the Consulting
Contract and the Consultant has agreed to accommodate the Company's request
on the terms and conditions of this Amendment; and
C. The parties to this Amendment have agreed that the Consultant will defer
$7,775 of the present monthly compensation under the Consulting Contract
with a balloon payment of all of said deferred compensation, with interest
thereon, to be paid by the Company to the Consultant upon expiration or
sooner termination of the Consulting Contract;
NOW THEREFORE, in consideration of the mutual covenants, agreements, warranties
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree with each other as follows:
1. All capitalized terms in this Amendment shall have the meaning as defined
in the Consulting Contract.
2. Sections 4 and 18 of the Consulting Contract are amended such that,
effective as of August 1, 1999, the Company agrees to pay the Consultant
for the Services, subject to paragraphs 17 through 19 of the Consulting
Contract, as follows:
a. $20,000 per month, for each month the Consultant provides the Services
for the Company, payable on the last day of the month with the first
payment due on August 31, 1999; and
b. an amount equal to $7,775 for each month, commencing on August 1,
1999, that the Consultant provides the Services for the Company,
together with interest at the rate of 9% per annum, calculated as
simple annual interest, to accrue monthly from August 1, 1999 until
fully paid, all payable upon expiration or sooner termination of the
Consulting Contract By way of example, if the Consulting Contract is
validly terminated on July 31, 2000, the amount due shall be 12 X
$7,775 plus the interest accruing on each respective monthly sum.
<PAGE>
3. In the event that the Consulting Contract should terminate for any reason,
including, without limitation, those reasons set forth in paragraph 17 of
the Consulting Contract, the amount set forth in paragraph 2(b) of this
Amendment shall be immediately due and payable to the Consultant.
4. The Consultant acknowledges that the payment provided for in Section 2 of
this Amendment is to be full payment and reimbursement for providing the
Services.
5. Except as otherwise expressly modified herein, the Consulting Contract
remains in full force and effect.
6. All dollar amounts referred in this Amendment are stated in United States
of America currency.
7. This Amendment may be executed in any number of counterparts, each of which
when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or
telecopied copy of this Amendment shall be effectual and valid proof of
execution and delivery.
IN WITNESS WHEREOF the parties hereto have duly executed this Amendment as of
the day and year first above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Illegible
-------------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
EMANUEL WEINTRAUB in the presence )
of: )
)
)
- ----------------------------------- ) /s/ Emanuel Weintraub
Witness ) -------------------------------------
) EMANUEL WEINTRAUB
- ----------------------------------- )
Address )
EXHIBIT 10.11
DATED: MARCH 31, 1999 $19,000,000.00
PROMISSORY NOTE
NUMBER: 0001
FOR VALUE RECEIVED, THE UNDERSIGNED (the "Payor") PROMISES TO PAY to SEE
ATTACHED SCHEDULE "A" TO THIS NOTE, (the "Lenders"), or order, the principal sum
of $19,000,000.00 (the "Principal Sum") with interest at the rate of 9% per
annum to accrue from July 31, 1999 until fully paid, calculated as simple annual
interest to be paid on any unpaid sum of the Principal Sum, monthly in arrears
on the last day of each month commencing on August 31, 1999, until fully paid.
Payment shall be applied first to the payment of all accrued and unpaid interest
and then to the payment of the principal.
The Principal Sum together with all accrued and unpaid interest, if any, will be
due and payable, at the option of the Payor, as follows:
(i) $19,000,000.00 on or before July 31, 1999; or
(ii) $9,000,000.00 on or before July 31, 1999 and $10,000,000.00 together
with all accrued and unpaid interest payable on or before July 31,
2000.
The Principal sum and all interest and expenses, if any, owing under this Note
pursuant to those certain Share Purchase Agreements and Interest Purchase
Agreements ("Purchase and Sale Agreements") are secured by that certain Security
Agreement ("Security Agreement"), each of such foregoing agreements being of
even date herewith and each by and between the Payor and the Lenders, or
Portions thereof, (such Security Agreement, Purchase and Sale Agreements, and
all documents executed in connection with the foregoing, as such may be amended,
modified, supplemented, or restated from time to time, the "Acquisition
Documents"), which Acquisition Documents provide, among other things, for a
security interest in all of the Payor's right, title, and interest in all
properties and assets, including, without limitation, those purchased from the
Lenders of and pertaining to the business or providing funeral, burial and
cremation services and the provision and sale of pre-need cremation services
carried on by the Payor, its affiliates and/or subsidiaries.
If the Payor fails to make any payments due under this Note when such payments
are due, save and except for any non-payments due to any set-off rights the
Payor may have against the Lenders, or in the event of any breach of the terms
or agreements of the Security Agreement, without the Payor satisfying any cure
provisions thereunder, the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest, shall become immediately due and
payable prior to the specified due date of this Note, all of the foregoing
without prejudice to any other rights, recourses or remedies which may have
accrued in favor of the Lenders as a result of the default of the Payor,
including, without limitation, the Lenders' rights pursuant to the Acquisition
Documents. Provided, however, that in the event any installment is not paid as
of the due date and there is no other default by the Payor under the Acquisition
Documents, the Payor shall have the right to cure such default by payment to the
Lenders of the amount of the installment as to which a payment default has
occurred together with any accrued interest from the date of default until the
date of cure, provided, further, that such right of cure shall lapse
automatically on the date that is 30 days after the date the Lenders deliver to
the Payor written notice of such default. In the event that such cure is not
timely made, the prior acceleration by the Lenders, if any, shall remain
effective and the entire accelerated amount due, with interest from the date of
default computed as the accelerated amount, shall be immediately due and paying,
and the Lender shall be entitled to pursue all of their other rights and
remedies. If an action is instituted to collect this Note, the Payor promises to
pay all costs and expenses (including reasonable attorneys' fees) incurred in
connection with such action.
A waiver of any term of this Note, the Acquisition Documents or of any of the
obligations secured thereby must be made in writing and signed by a
duly-authorized officer of the Lenders and any such waiver shall be limited to
its express terms. No delay by the Lenders in acting with respect to the terms
of this Note or the Acquisition Documents or any of the obligations secured
thereby shall constitute a waiver of any breach, default or failure of a
condition under this Note, the Acquisition Documents or the obligations secured
thereby.
The Payor waives presentment, demand, notice of dishonor, notice of default or
delinquency, notice of acceleration, notice of protest and non-payment, notice
of costs, expenses or losses and interest thereon, notice of interest on
interest and diligence in taking any action to collect any sums owing under this
Note or in proceeding against any of the rights or interests in or to properties
securing payment of this Note. The foregoing waiver of defenses shall not be
construed to limit or impair the Payor's right to cure as provided above.
The undersigned, if not in default under this Note, or under the terms of any
security for the repayment of the monies evidenced hereby, may prepay all or any
amount owing hereunder, upon payment to the Lenders of interest at the rate
aforesaid to the date of such prepayment, on the amount so prepaid, without
notice or bonus.
All dollar amounts referred to in this Agreement are stated in United States of
America currency, unless otherwise expressly stated.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE 144 UNDER THE
SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS,
PROVIDED THAT PRIOR TO SUCH SALE THE CORPORATION SHALL HAVE RECEIVED AN OPINION
OF COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS
TO THE AVAILABILITY OF AN EXEMPTION.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
----------------------------------------
Authorized Signatory
EXHIBIT 10.12
AMENDMENT TO THAT CERTAIN PROMISSORY NOTE DATED MARCH 31, 1999
IN THE AMOUNT OF $19,000,000.00 EXECUTED BY LARI ACQUISITION COMPANY, INC.
(THE "PAYOR") IN FAVOR OF THOSE PERSONS LISTED ON SCHEDULE "A"
ATTACHED TO THE NOTE (THE "LENDERS") (THE "NOTE")
- --------------------------------------------------------------------------------
This Amendment is dated for reference the 1st day of August, 1999
WHEREAS:
A. As presently structured, the Payor is required to pay to the Lenders,
pursuant to the Note, the sum of $9,000,000.00 on or before July 31, 1999,
representing a portion of the principal of the Note; and additionally, is
required to pay interest at the rate of 9% per annum on the unpaid portion
of the Note to accrue from July 31, 1999 monthly in arrears commencing on
August 31, 1999 until fully paid;
B. The Payor wishes to defer the payment of a portion of the July 31, 1999
principal payment under the Note and to lower its monthly interest payments
under the Note;
C. Two of the Lenders have agreed to restructure their payments under the Note
on the terms and conditions of this Amendment;
D. Accordingly, the Payor wishes to change its payment obligations as
reflected in the Note, in respect of payments to be made to the following
Lenders:
i. Weintraub, Emanuel - Intervivos Trust, as to Neptune/Heritage general
partnership interest ("Weintraub"); and
ii. Zicklin, Stanley, as to Neptune general partnership interest
("Zicklin"); and
E. Emanuel Weintraub and Leo Robert Dennis, who, pursuant to those Joint
Written Instructions to Escrow Agent dated April 22, 1999 have been deemed
holders of the Note and fully empowered to enforce the Note for the benefit
of the Lenders, have agreed to amend the Note on the terms and conditions
of this Amendment.
NOW THEREFORE, in consideration of the mutual covenants, agreements, warranties
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree with each other as follows:
1. All capitalized terms in this Amendment shall have the meaning as defined
in the Note.
2. By reference, Exhibit "A" of this Amendment is incorporated into the Note
3. The first two paragraphs of the Note shall deleted in their entirety and
replaced with the following language:
<PAGE>
"FOR VALUE RECEIVED. THE UNDERSIGNED (the "Payer") PROMISES TO PAY to SEE
ATTACHED SCHEDULE "A" TO THIS NOTE, (the "Lenders"), or order, the
principal sum of $19,000,000.00 (the "Principal Sum") as follows:
a. To THOSE LENDERS SET FORTH IN EXHIBIT "A" TO THIS NOTE, or order,
$7,439,466.00 (the "First Sum") with interest at the rate of 9% per
annum to accrue from July 31, 1999 until fully paid, calculated as
simple annual interest to be paid on any unpaid sum of the First Sum,
monthly in arrears on the last day of each month commencing on August
31, 1999 until fully paid. Payment shall be applied first to the
payment of all accrued and unpaid interest and then to payment of the
principal of the First Sum. The First Sum will be due and payable as
follows:
i. $3,523,957.58 on or before August 11, 1999; and
ii. $3,915,508.42, together with all accrued and unpaid interest, on
or before July 31, 2000.
b. To Emanuel Weintraub Intervivos Trust, as to Neptune/Heritage general
partnership interest, or order, $9,625,088.00 due and payable as
follows:
i. $386,776.56 on or before August ii, 1999;
ii. $4,172,475.64 on or before January 3, 2000; and
iii. $5,065,835.80 on or before July 31, 2000.
c. To Stanley Zicklin, as to Neptune general partnership interest, or
order, $l,935,446.00 due and payable as follows:
i. $215,049.82 on or before August11, 1999;
ii. $701,740.18 on or before January 3, 2000, together with interest
on such amount at the rate of 9% per annum to accrue from July
31, 1999 and to be fully paid on January 3, 2000, calculated as
simple annual interest to be paid on any unpaid sum of such
amount. Payment shall be applied first to the payment of all
accrued and unpaid interest and then to payment of the principal
of such amount; and
iii. $1,018,656.00 on or before July 31, 2000 with interest at the
rate of 9% per annum to accrue from July 31, 1999 until fully
paid, calculated as simple annual interest to be paid on any
unpaid sum of such amount, monthly in arrears on the last day of
each month commencing on August
2
<PAGE>
31, 1999 until fully paid. Payment shall be applied first to the
payment of all accrued and unpaid interest and then to payment of
the principal of such sum."
4. With respect to the payments due under this Amendment on or before January
3, 2000 (i.e. as set forth in paragraphs 3.b.ii and 3.c.ii above), the 30
day right of cure for nonpayment as provided in the Note is reduced to 5
calendar days.
5. Except as otherwise expressly modified herein, the Note remains in full
force and effect.
6. As of the date of execution of this Amendment, the Payor respresents that
it is not aware of any facts giving rise to any set-off rights against any
of the Lenders.
7. It is expressly acknowledged that the Note, as amended, continues to be
secured by that security interest granted pursuant to that certain security
agreement between the Payor , the Lenders and other parties dated March 31,
1999.
8. All dollar amounts referred in this Amendment are stated in United States
of America currency.
9. This Amendment may be executed in any number of counterparts, each of which
when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or
telecopied copy of this Amendment shall be effectual and valid proof of
execution and delivery.
IN WITNESS WHEREOF the parties hereto have duly executed this Amendment as of
the day and year first above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Illegible
----------------------------------
Authorized Signatory
EMANUEL WEINTRAUB INTER VIVOS TRUST
Per: /s/ Emanuel Weintraub
----------------------------------
Emanuel Weintraub, Trustee
3
<PAGE>
SIGNED, SEALED AND DELIVERED by )
EMANUEL WEINTRAUB in the presence )
of: )
)
)
- ----------------------------------- ) /s/ Emanuel Weintraub"
Witness ) -------------------------------------
) EMANUEL WEINTRAUB
- ----------------------------------- )
Address )
SIGNED, SEALED AND DELIVERED on )
behalf of STANLEY ZICKLIN in the )
presence )
of: ) STANLEY ZICKLIN
)
)
- ----------------------------------- ) By:
Witness ) ---------------------------------
) William F. Tisch, Esq.
) Sandler & Rosen, LLP.
) Attorneys for Stanley Zicklin
- ----------------------------------- )
Address )
SIGNED, SEALED AND DELIVERED by )
LEO ROBERT DENNIS in the presence )
of: )
)
)
- ----------------------------------- ) -------------------------------------
Witness ) LEO ROBERT DENNIS
)
)
- ----------------------------------- )
Address )
The undersigned hereby acknowledges that it approves this Amendment and it is
expressly acknowledged by the undersigned that this Amendment does not change
any of its obligations.
4
EXHIBIT 10.13
DATED: MARCH 31,1999 $2,000,000.00
PROMISSORY NOTE
NUMBER: 0002
FOR VALUE RECEIVED, THE UNDERSIGNED (the "Payor") PROMISES TO PAY to Emanuel
Weintraub Inter Vivos Trust (the "Lender"), or order, the principal sum of
$2,000,000.00 (the "Principal Sum") to be paid in equal monthly installments on
the last day of each month commencing on April 30, 1999, until fully paid with
the last payment due on March 31, 2002.
The Principal sum and all interest and expenses, if any, owing under this Note
pursuant to that certain Share Purchase Agreement ("Share Purchase Agreement")
are secured by that certain Security Agreement ("Weintraub Security Agreement"),
each of such foregoing agreements being of even date herewith and each by and
between the Payor and the Lender (such Weintraub Security Agreement, Share
Purchase Agreement, and all documents executed in connection with the foregoing,
as such may be amended, modified, supplemented, or restated from time to time,
the "Acquisition Documents'), which Acquisition Documents provide, among other
things, for a security interest, subordinated to a first position security
interest granted by the Payor in the Share Purchase Agreement, in all of the
Payor's right, title, and interest in all properties and assets, including,
without limitation, those purchased from the Lender of and pertaining to the
business or providing funeral, burial and cremation services and the provision
and sale of pre-need cremation services carried on by the Payor, its affiliates
and/or subsidiaries.
If the Payor fails to make any payments due under this Note when such payments
are due, save and except for any non-payments due to any set-off rights the
Payor may have against the Lender, or in the event of any breach of the terms or
agreements of the Weintraub Security Agreement, without the Payor satisfying any
cure provisions thereunder, the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest, shall become immediately due and
payable prior to the specified due date of this Note, all of the foregoing
without prejudice to any other rights, recourses or remedies which may have
accrued in favor of the Lender as a result of the default of the Payor,
including, without limitation, the Lender's rights pursuant to the Acquisition
Documents. Provided, however, that in the event any installment is not paid as
of the due date and there is no other default by the Payor under the Acquisition
Documents, the Payor shall have the right to cure such default by payment to the
Lender of the amount of the installment as to which a payment default has
occurred together with any accrued interest from the date of default until the
date of cure, provided, further, that such right of cure shall lapse
automatically on the date that is 30 days after the date the Lender delivers to
the Payor written notice of such default. In the event that such cure is not
timely made, the prior acceleration by the Lender, if any, shall remain
effective and the entire accelerated amount due, with interest from the date of
default computed as the accelerated amount, shall be immediately due and paying,
and the Lender shall be entitled to pursue all of its other rights and remedies.
If an action is instituted to collect this Note, the Payor promises to pay all
costs and expenses (including reasonable attorneys' fees) incurred in connection
with such action. A waiver of any term of this Note, the Acquisition Documents
or of any of the obligations secured thereby must be made in writing and signed
by the Lender and any such waiver shall be limited to its express terms. No
delay by the Lender in acting with respect to the terms of this Note or the
Acquisition Documents or any of the obligations secured thereby shall constitute
a waiver of any breach, default or failure of a condition under this Note, the
Acquisition Documents or the obligations secured thereby.
The Payor waives presentment, demand, notice of dishonor, notice of default or
delinquency, notice of acceleration, notice of protest and non-payment, notice
of costs, expenses or losses and interest thereon, notice of interest on
interest and diligence in taking any action to collect any sums owing under this
Note or in proceeding against any of the rights or interests in or to properties
securing payment of this Note. The foregoing waiver of defenses shall not be
construed to limit or impair the Payor's right to cure as provided above.
The undersigned, if not in default under this Note, or under the terms of any
security for the repayment of the monies evidenced hereby, may prepay all or any
amount owing hereunder, upon payment to the Lender of interest at the rate
aforesaid to the date of such prepayment, on the amount so prepaid, without
notice or bonus.
All dollar amounts referred to in this Agreement are stated in United States of
America currency, unless otherwise expressly stated.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT OR RULE 144 UNDER THE
SECURITIES ACT, IF APPLICABLE, OR (D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS,
PROVIDED THAT PRIOR TO SUCH SALE THE CORPORATION SHALL HAVE RECEIVED AN OPINION
OF COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS
TO THE AVAILABILITY OF AN EXEMPTION.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Suzanne L. Wood
----------------------------------------
Authorized Signatory
EXHIBIT 10.14
AMENDMENT TO THAT CERTAIN PROMISSORY NOTE DATED
MARCH 31, 1999 IN THE AMOUNT OF $2,000,000.00 EXECUTED BY LARI
ACQUISITION COMPANY, INC. (THE `PAYOR") IN FAVOR OF EMANUEL
WEINTRAUB INTER VIVOS TRUST (THE "LENDER") (THE "NOTE")
- --------------------------------------------------------------------------------
This Amendment is dated for reference the 1st day of August, 1999.
WHEREAS:
A. As presently structured, the Payor is obligated to pay to the Lender the
sum of $55,555.55 per month under the Note;
B. The Payor wishes to lower its monthly payments under the Note and the
Lender has agreed to accommodate the Payor's request on the terms and
conditions of this Amendment; and
C. The parties to this Amendment have agreed that the Lender will defer
$15,555.55 of the present monthly payment under the Note with a balloon
payment of $497,777.60, plus interest as set forth below in Section 2(b),
all said deferred sums with interest thereon, to be paid by the Payor to
the Lender on March 31, 2002;
NOW THEREFORE, in consideration of the mutual covenants, agreements, warranties
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree with each other as follows:
1. All capitalized terms in this Amendment shall have the meaning as defined
in the Note.
2. The first paragraph of the Note is amended such that, effective as of
August 1, 1999, the Payor agrees to pay the Lender, or order, the Principal
Sum, until fully paid, as follows:
a. $40,000 per month, payable on the last day of the month commencing on
August 31, 1999 and continuing through and including March 31, 2002;
and
b $15,555.55 per month for 32 months payable on March 31, 2002, together
with interest at the rate of 9% per annum, calculated as simple annual
interest, to accrue monthly from and after August 31, 1999, until
fully paid, on any unpaid sum of such amount.
3. Except as otherwise expressly modified herein, the Note remains in full
force and effect.
4. As of the date of execution of this Amendment, the Payor represents that it
is not aware of arty facts giving rise to any set-off rights against the
Lender.
<PAGE>
5. It is expressly acknowledged that the Note, as amended, continues to be
subject 10 that security interest granted pursuant to that certain security
agreement between the Payor, the Lender and other parties dated March 31,
1999.
6. All dollar amounts referred in this Amendment are stated in United States
of America currency.
7. This Amendment may be executed in any number of counterparts, each of which
when delivered shall be deemed to be an original and all of which together
shall constitute one and the same document. A signed facsimile or
telecopied copy of this Amendment shall be effectual and valid proof of
execution and delivery.
IN WITNESS WHEREOF the parties hereto have duly executed this Amendment as of
the day and year first above written.
LARI ACQUISITION COMPANY, INC.
Per: /s/ Illegible
----------------------------------
Authorized Signatory
EMANUEL WEINTRAUB INTER VIVOS TRUST
Per: /s/ Emanuel Weintraub
----------------------------------
Emanuel Weintraub, Trustee
The undersigned hereby acknowledges that it approves this Amendment and it is
expressly acknowledged by the undersigned that this Amendment does not change
any of its obligations pursuant to that certain guaranty executed by the
undersigned in favor of the Lender and dated March 31, 1999.
THE NEPTUNE SOCIETY, INC.
(formally, Lari Corp.)
Per:
----------------------------------
Authorized Signatory
EXHIBIT 10.15
PRENEED FUNERAL TRUST AGREEMENT
THIS PRENEED FUNERAL TRUST AGREEMENT is made as of this 1st day of October,
1993, by and between NEPTUNE MANAGEMENT CORP, a California corporation
("Senior"), with its principal office at 930 W. Alameda Avenue, Burbank, CA
91506 and SUNBANK/SOUTH FLORIDA, NA. ("Trustee"), whose address is 501 East Las
Olas Boulevard, Ft Lauderdale, FL 33301.
ARTICLE I
NAME OF TRUST
The trust and trust fund created hereunder shall be known, respectively, as
the 1993 NEPTUNE TRUST MASTER FUND ("Trust") and the PRENEED FUNERAL TRUST FUND
OF NEPTUNE MANAGEMENT CORP. ("Fund"), and it shall be sufficient that they be
referred to as such in any instrument of transfer, deed or assignment.
ARTICLE II
PURPOSE OF TRUST
This Trust is established by Senior the purpose of managing sums deposited
in the Fund in prepayment of the sale of preneed funeral services, merchandise
and/or supplies in connection with the commemoration of the memory of a deceased
human being pursuant to the requirements of Chapter 497, Florida Statutes
("Act") and the terms and provisions of this Trust shall be construed in
accordance therewith. Any conflict between the terms of this Trust and the Act,
the regulations promulgated thereunder, or any other applicable Florida or
Federal statute or regulation shall be construed in accordance with such statute
or regulation. Furthermore, it is the purpose of this Trust to establish a
method by which Settlor may comply with the requirements of the Act and the
rules promulgated thereunder, and to further provide financial stability and
security for the trusted funds.
1
<PAGE>
ARTICLE III
TRUST FUND
3.1 It is Senior's intent to enter into contracts to sell funeral services,
merchandise or supplies related thereto (sometimes hereinafter referred to as
"Service and Merchandise") in connection with disposing of human remains or
commemorating the memory of a deceased human being and to receive payment for
Service and Merchandise as may be set forth in such contracts. Senior hereby
agrees to deliver to Trustee, not absolutely, but in trust, a sum equal to
seventy percent (70%) of all funds paid to or collected by or forwarded to
Senior under a contract for funeral services, one hundred percent (100%) of all
funds paid to or collected by Settlor for all cash advance items paid by
purchaser, the greater of thirty percent (30%) of all funds paid to or collected
by Senior, or one hundred ten percent (110%) of the wholesale cost of all
Merchandise sold. Deposits to the Fund shall be made within thirty (30) days
after the end of the calendar month in which any payment for Service and
Merchandise sold for future use is received by Settlor. Settlor may, at its sole
discretion, deposit into the Fund amounts received pursuant to a preneed
contract in excess of the amounts set forth above which are required to be
deposited with Trustee pursuant to the Act provided that such amounts do not
exceed one hundred percent (100%) of the funds collected. It is understood
between the parties that it is the sole responsibility of the Settlor to
determine the percentages and to calculate the amount to be deposited with the
Trustee. Amounts deposited with Trustee shall not be loaned to Settlor, an
affiliate of a certificate holder, or any other certificate holder, or any
person directly or indirectly engaged in the burial, funeral home or cemetery
business.
3.2 Expenses related to the cost of the operation of the Trust may be
deducted from the income thereon earned, including the payment of a reasonable
Trustee's fec as agreed upon herein. All principal and all other income shall
remain intact.
3.3 Disbursements of funds discharging any preneed contract shall be made
by Trustee to Settlor upon receipt of a certified copy of the death certificate
of the contract beneficiary and evidence satisfactory to Trustee that the
preneed contract has been fully performed.
3.4 If Settlor has entered into a contract for the sale of personal
property or services and has made the deposit to the Fund as required pursuant
to the Act and this Trust and Senior subsequently cannot or does not provide the
personal property or perform the services called for by the contract after
written request to do so, the preneed contract purchaser ("Purchaser"),
2
<PAGE>
his heirs, assigns or duly authorized representatives shall have the right to
provide such personal property or services arid, having provided the property or
services, shall be entitled to receive the deposits to the credit of that
particular contract. Written instruction to Trustee by Settlor, directing
Trustee to refund the amount of money on deposit, or an affidavit by either the
Purchaser or one of his heirs, assigns or duly authorized representative stating
that he has fully performed under the preneed contract and that the personal
property or services were not provided because the Senior cannot perform or
refuses to perform as provided therein, shall be sufficient authority for
Trustee to refund the deposit monies credited to that particular contract to the
person submitting such affidavit. Trustee shall not be held responsible for any
refunds made on account of Senior's written direction or an affidavit submitted
in accordance with this paragraph. A contract entered into by Senior pursuant to
the Act, shall be subject to cancellation in accordance with Section 497.4 19
and the rules promulgated in connection thereunder and refunds may be made on
the preneed contract as follows: (1) if the Purchaser cancels the preneed
contract within thirty (30) days of the date that the contact was executed,
Purchaser shall be entitled to a complete refund of sums paid except for the
amounts allocable to any burial rights, Merchandise and/or Serviccs that have
been used; or (2) if the Purchaser cancels the preneed contract after thirty
(30) days of the date that the preneed contract was executed (a) the Purchaser
shall be entitled to a full refund of the funds received by Senior which are
allocable to Services, facilities and cash advance items (which Services,
facilities and cash advance items have not been used), provided that any
accumulated earnings allocable to the cancelled preneed contract shall be paid
to Settlor and (b) the Purchaser shall be entitled, at Settlor's sole
discretion, to delivery of the Merchandise sold pursuant to the cancelled
preneed contract or a full refund ol the funds received by Settlor which are
allocable to the specific items of Merchandise that Senior cannot or does not
deliver, provided that any accumulated earnings allocable to the cancelled
preneed contract shall be paid to Settlor. Trustee shall remit to Senior all
deposit monies placed in the Fund pursuant to such a cancelled contract, within
thirty (30) days after receipt by Settlor of the request for refund.
3.5 If a purchaser is 90 days past due in making payments on a preneed
contract, the contract shall be considered to be in default, and Senior shall be
entitled to cancel the contract, withdraw all funds in trust allocable to
Merchandise items sold, and retain such funds as liquidated damages. Upon making
such withdrawal, Settlor shall return all funds in trust allocable to Services,
facilities or cash advance items to the purchaser, provided that Senior has
provided the purchaser with 30 days' written notice of its intention to exercise
any of its rights under this provision.
3
<PAGE>
3.6 Upon the execution hereof, Senior shall deposit with Trustee those
assets more particularly set forth on Schedule A, attached hereto and made a
part hereof.
ARTICLE IV
ACCOUNTINGS AND FINANCIAL REPORTS
4.1 Trustee shall furnish adequate financial reports with respect to the
Fund to the Department of Banking and Finance of the State of Florida
("Department") as the Department may require from time to time. Trustee shall
make such additional financial reports to the Department and to such
governmental agencies having jurisdiction over companies holding certificates of
authority as the Department or such agencies may require. Furthermore, Trustee
shall make available to the agents of the Department or such other governmental
agency as may have jurisdiction over cemeteries such records, reports and
accountings of this Trust as may be requested by the Department or such
governmental agency for the purpose of examining the status of the Fund during
the Fund's existence.
4.2 Trustee shall render to Senior monthly reports of income, cash,
principal and disbursements, i.e., a listing of all journal transactions
occurring in the account of the Trust on a monthly basis, and a list or schedule
of the assets held. Trustee shall also make regular asset evaluations based on
current fair market value not less often than quarterly giving values as is
customary according to the nature of the assets held in the Fund.
ARTICLE V
POWERS OF TRUSTEE
5.1 Trustee shall have, except as otherwise restricted by the terms of this
Trust Agreement and the provisions of the Act, full and unrestricted power and
authority, without order of court and without any duty upon any person dealing
with it to see to the application of any money or other property delivered to
it, to hold, manage, control, invest, reinvest, sell (upon contract or
otherwise), exchange, grant, convey, assign, transfer, deliver, lease, option,
mortgage, pledge, borrow upon the credit of, contract with respect to or
otherwise deal with or dispose of the property of the Trust in the manner in
which men of prudence, discretion and
4
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intelligence exercise the management of their own affairs; not in regard to
speculation, but in regard to the permanent disposition of their funds,
considering the probable income as well as the probable safety of their funds,
considering the probable income as well as the probable safety of their capital.
Within the limitation of the foregoing standard, Trustee is authorized to
acquire and retain every kind of property, real, personal and mixed, and every
kind of investment specifically including, but not by way of limitation, bonds,
debentures, and other corporate obligations, savings accounts in insured savings
and loan associations, stocks, preferred or common, securities of any open
and/or closed management company or investment trust, and participations in
common trust funds, which men of prudence, discretion and intelligence would
acquire or retain for their own account. Notwithstanding anything contained
herein to the contrary, Trustee's powers shall not exceed those powers set forth
in Section 497.417(4) of the Act and Florida Statues Section 215.47.
5.2 Authority is hereby reserved in Settlor to select an advisory or
investment committee or investment council to advise Trustee in making a
retention of any investment. Said advisory or investment committee or investment
council, in advising Trustee to deal with the property of the Trust, shall use
the prudent man's standard as set forth in Section 5.1 above. Senior shall
designate in writing the name of the advisory or investment committee or
investment council selected and shall submit the name to Trustee, and such
notice shall be effective until revoked by Settlor by written notice thereof to
Trustee.
5.3 Trustee hereby agrees to consult with the advisory committee created by
Senior prior to dealing with the property of the Trust in the manners permitted
hereunder. Notwithstanding the foregoing, any decision concerning the
disposition of the trust property as permitted by the terms of this Trust shall
be made by Trustee, as Trustee determines subject to the provisions of the Act.
ARTICLE VI
RESERVATION OF RIGHTS BY SETTLOR
6.1 Settlor hereby reserves the following powers:
(a) To request the Trustee to invest in tax-free investments.
(b) To alter or amend this Trust Agreement, either wholly or in part
with the prior written approval of the Board of Funeral and Cemetery Services;
provided, however,
5
<PAGE>
that no such alteration or amendment shall be contrary to the provisions of the
Act, and the regulations promulgated thereunder, as the provisions of the Act
and regulations exist at the time of such alteration or amendment.
(c) To amend or modify this Trust with the approval of the Board of
Funeral and Cemetery Services or any other Florida state agency having
supervisory authority of this Trust at the time of such amendment or
modification.
(d) To amend or modify this Trust in the event the Act or the statute
requiring the funds of contracts of the type contemplated herein be placed in
trust is ever declared unconstitutional by the Florida Supreme Court, or any
other court of last resort, or in the event the Act or such statute shall be
repealed or amended so that such funds are not required to be placed in trust.
(e) Upon obtaining approval of the Board of Funeral and Cemetery
Services if required, to remove Trustee then serving and appoint any national
bank or state bank having trust powers or any ttuist company operating pursuant
to Chapter 660, Florida Statutes, to serve as successor trustee.
6.2 In the event Settlor desires to remove Trustee as aforesaid, Settlor
shall give Trustee thirty (30) days written notice thereof and, at the end of
such thirty (30) day period, or as soon thereafter as is possible to do so;
provided such amendment or removal has been approved by the Board of Funeral and
Cemetery Services, Trustee, after deducting its reasonable costs, charges arid
expenses, shall deliver all of the Trust property then in its bands to the
successor trustee, whereupon Trustee shall be discharged upon obtaining
Settlor's receipt or the receipt of the successor trustee. In such event Trustee
shall have no duty or liability to convert the Trust assets to cash, but may
deliver the same in kind or in their then existing form. At the time of delivery
of the Trust property, Trustee shall prepare a final accounting in the manner
called for under Article IV hereof and the successor trustee shall prepare a
similar accounting of the Trust Property received by it.
6.3 Any amendment of this Trust or removal of Trustee upon receipt of Board
of Funeral and Cemetery Services approval shall be by an instrument in writing
executed by Settlor arid delivered to Trustee; provided, however, that no
amendment which increases or alters the duties and obligations of Trustee may be
made without Trustee's written consent thereto.
6
<PAGE>
ARTICLE VII
RESIGNATION OF TRUSTEE
Trustee may resign at any time upon the giving of at least sixty (60) days
written notice to Senior prior to the effective date of such resignation. In the
event of such resignation, or if for any other reason there is not trustee of
this Trust, Settlor shall designate a successor trustee in writing and, upon
Board of Funeral and Cemetery Services approval of such successor trustee and
the acceptance of the Trust by the successor trustee, Trustee shall transfer all
property of the Trust to the successor trustee, In the event that Settlor has
not designated a successor trustee, the successor trustee has not been approved
by the Board of Funeral and Cemetery Services or the successor trustee has not
accepted the Trust within the sixty (60) day period following written notice of
resignation by Trustee, then Trustee shall prepare an accounting of the Trust
property and transfer all assets of the Trust into the registry of the court
and, thereafter, Trustee shall be absolved of any and all further responsibility
with regard to the Trust.
ARTICLE VIII
SUCCESSOR TRUSTEE
8.1 Any successor trustee shall accept the office by written instrument and
shall assume the duties thereof immediately upon receipt of the Trust property
from Settlor or from the trustee then serving. The title to the Trust property
shall vest forthwith in any successor trustee acting pursuant to the forgoing
provisions hereof, and any resigning or removed trustee shall execute all
instruments and do all acts necessary to vest such title in any successor
trustee.
8.2 A successor trustee shall have no duty to examine the accounts, records
arid acts of any previous trustee, and shall in no way or mariner be responsible
for any act or omission on the part of any previous trustee or trustees.
However, upon a transfer of the Trust property, a successor trustee shall
prepare an accounting of the Trust property received by said trustee arid such
accounting shall be submitted to the Department as may be required.
8.3 Each successor trustee, including a successor to any corporate trustee
by consolidation, merger, transfer of Trust business or otherwise, shall have,
exercise and enjoy
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all the rights, privileges and powers, both discretionary and ministerial, given
to the original Trustee, and shall incur all of the duties and obligations
imposed upon the original Trustee.
ARTICLE IX
COMPENSATION OF TRUSTEE
9.1 Trustee shall be entitled to reasonable compensation for services
rendered hereunder, which shall be in accordance with the schedule of fees as
set forth on Schedule B annexed hereto and made a part hereof. No fees shall be
increased by Trustee unless approved in writing by Settlor, or unless Trustee
provides ninety (90) days notice of such change to Settlor in writing.
9.2 The fees and other expenses of the Fund shall be paid by Trustee from
the net income of the Fund and shall not be paid from the corpus subject to the
provisions of Section 3.2 above. To the extent the net income earned on deposits
held by Trustee is insufficient for the payment of expenses, including such
compensation as is set forth on Schedule B, Settlor shall reimburse Trustee for
such expenses within fifteen (15) days of written demand therefor.
ARTICLE X
MISCELLANEOUS
10.1 Trustee acknowledges its responsibility for preparing and timely
filing Form 1041, United States Fiduciary Income Tax Return, for each taxable
year. Trustee shall furnish Settlor with copies of all such tax returns at least
fifteen (15) days prior to the filing thereof'. Any other tax return required by
any taxing authority, with the exception of Florida Intangible Tax, shall be the
responsibility of Settlor.
10.2 The records of Trustee with respect to the Trust shall be open for
inspection by Settlor at all business hours of Trustee.
10.3 This Trust is established and accepted by Trustee under the laws of
the State of Florida, arid all questions concerning its validity, construction
and administration shall be determined under the laws of the State of Florida.
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<PAGE>
10.4 The principal of the Trust plus any accumulated income shall nor be
alienable by Senior, any purchaser or contract beneficiary under contracts
entered into for Service and Merchandise as contemplated herein and the
principal and accumulated income shall be free from anticipation, assignment,
attachment or pledge, and free from control by the creditors or spouse (as the
case may be) of Settlor, purchaser or contract beneficiary.
10.5 This Trust Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have each caused this Trust Agreement to be
executed by their respective officers lawfully and duly authorized as of the day
and year first above written.
NEPTUNE MANAGEMENT CORP., a
California Corporation
By: /s/ Emanuel Weintraub
-----------------------------------------
EMANUEL WEINTRAUB
Title: President
SUNBANK/SOUTH FLORIDA, N.A.
By: /s/ Michelle Raulerson
-----------------------------------------
MICHELLE RAULERSON
Title: Vice President and Trust Officer
9
EXHIBIT 10.16
ASSET PURCHASE AGREEMENT
This Agreement is made as of this 31st day of March, 1992, by and among
HERITAGE CREMATION SERVICES, INC. ("SELLER"); JOSEPH ESTEPHAN and ELIE ESTEPHAN
("collectively Estephan") and EMANUEL WEINTRAUB or Nominee ("BUYER") and is made
with reference to the following facts:
1. SELLER is a California corporation, duly incorporated and validly
existing and in good standing under California law.
2. ESTEPHAN are the sole directors, officers and shareholders of SELLER.
3. SELLER wishes to sell and BUYER wishes to buy certain equipment and
certain tights of SELLER.
4. BUYER additionally wishes to obtain the nonexclusive consulting
services of JOSEPH ESTEPHAN and to obtain ESTEPHAN's agreement not to compete
with BUYER.
WHEREFORE, the parties agree as follows:
1. Closing Defined. As used herein, the term "Closing" shall be defined as
the last day of the month in which each of the following events has occurred:
(1) a new retort has been manufactured and placed in the Leased Premises (as
defined in paragraph 3, infra); (2) one refrigerated box has been moved from
BUYER's Gardena facility to the eased Premises; (3) all licenses and permits
necessary to operate a crematory from the Leased Premises have been obtained;
and (4) the new retort is functioning according to standard requirements.
2. Property Sold. At the Closing, SELLER shall sell, transfer and deliver
to BUYER, all right, title and interest in and to that equipment set forth in
Exhibit "A" attached hereto and incorporated by reference.
3. Leasehold Interest Assigned. At the Closing, SELLER shall transfer and
assign all of its tight, title and interest in and to that Lease Agreement
relating to that certain real property located at 3223 East Pico Boulevard, Los
Angeles, California ("Leased Premises") attached hereto as Exhibit "B" and
incorporated herein by reference. BUYER shall assume all obligations under said
Lease.
<PAGE>
4. Permits And Licenses Assigned. At the Closing, SELLER shall transfer and
assign to BUYER all of its right, title and interest in and to all permits and
licenses necessary to operate a crematorium from the Leased Premises.
5. Assignment Of Rights In And To The Name "Heritage Cremation Services.
Inc.". At the Closing, SELLER shall transfer and assign to BUYER all of its
right, title and interest in and to the name "Heritage Cremation Services, Inc."
6. Purchase Price. BUYER shall pay to SELLER for the equipment and rights
identified in paragraphs 1-5, inclusive, above:
(a) One Hundred Fifty Thousand Dollars ($150,000) payable as follows:
(1) Fifty Thousand Dollars ($50,000.00) on or before thirty days
after Closing;
(2) Fifty Thousand Dollars ($50,000.00) on or before one hundred
eighty (180) days after Closing;
(3) Fifty Thousand Dollars ($50,000.00) on or before three
hundred sixty-five (365) days after Closing; and
(b) For a period of ten years after Closing, compensation based on the
number of cremations performed by BUYER at the Leased Premises to be calculated
as follows: $10 for every cremation performed at the Leased Premises for any
Neptune Society; $15 for every cremation performed at the Leased Premises for
any other individual or entity. Said monies shall be paid to SELLER for any
given month on or before the 15th day of the month following the performing of
the cremations.
<PAGE>
Notwithstanding the foregoing, in the event the conditions set forth infra in
paragraph 10 have not been fulfilled at the time any of the foregoing sums would
otherwise be due and payable to SELLER, said sums shall be placed by BUYER into
a trust account and released to SELLER only at such time as when the conditions
have been fulfilled.
7. Services of Joseph Estephan. For a period of one year after Closing,
Joseph Estephan will serve as a non-exclusive consultant to BUYER. Joseph
Estephan shall devote sufficient time in his capacity as a consultant to train a
manager for the crematory and other personnel of BUYER as shall be designated by
BUYER and under BUYER's supervision. As compensation for said consulting
services, Joseph Estephan shall receive compensation in the amount of Five
Thousand Dollars ($5,000) monthly for twelve months. Joseph Estephan will devote
at least sixty (60) hours per month as a consultant for BUYER.
8. Non-competition Agreement. For a period of three (3) years after
Closing, ESTEPHAN agree that they will not, directly or indirectly, hold more
than a five percent (5%) ownership interest in any crematory or work for a
crematory (other than for BUYER) in any capacity in Los Angeles County, Ventura
County and/or Orange County. The parties agree that, given the nature of the
cremation industry, these counties represent counties in which ESTEPHAN could
potentially be in direct competition with BUYER if they were to engage in the
cremation business. The parties expressly acknowledge that the restrictions set
forth in this paragraph are reasonable both as to duration and territory and
will not have the effect of preventing ESTEPHAN from pursuing their profession.
ESTEPHAN's agreement not to compete is a material inducement to BUYER's entering
into this Agreement.
9. No Assumption Of Obligations By BUYER. With the sole exception of that
Lease Agreement attached hereto as Exhibit "B", BUYER is not assuming any
liability or obligation of SELLER, either directly or indirectly, expressly or
impliedly.
10. Conditions To BUYER's Obligations. BUYER's obligations under this
Agreement are expressly conditioned on the following conditions being satisfied
in full:
(a) Angelus Metal Finishing and Polishing Co., Inc. consents in
writing to an addendum of the Lease Agreement in the form
attached hereto as Exhibit "C",
<PAGE>
(b) All necessary governmental and regulatory bodies consent in
writing to the transfer of all permits and licenses necessary for
BUYER to operate a crematory from the Leased Premises, without
the imposition of any additional material obligations on BUYER
other than those obligations of SELLER previously disclosed to
BUYER.
If the foregoing conditions have not been fulfilled on or before December
31, 1992, BUYER shall have the option to void this Agreement.
11. Representations by SELLER. SELLER represents and warrants to BUYER, and
this Agreement is made in reliance on, each and all of the following:
(a) SELLER is a California corporation, duly incorporated and validly
existing and in good standing under California law.
(b) SELLER has the full power and authority to enter into this
Agreement and nothing set forth herein or any obligation
undertaken by SELLER herein shall be violative of any law or
statute.
(c) From the date of this Agreement and continuing through and as of
Closing, none of the equipment identified in Exhibit "A" is
subject to any liens or encumbrances of any kind or nature
whether consensual or by operation of law and SELLER has good and
marketable title to each of said assets.
(d) SELLER is not now a party to any litigation whether in a court,
arbitration, tribunal or before any governmental agency. SELLER
has previously been a party to litigation but said litigation has
been terminated and SELLER has no judgment against it of any
kind. Further, SELLER has no outstanding obligation to anyone as
the result of said litigation or any other litigation.
(e) SELLER does not have any claims or demands asserted or made
against it and knows of no basis on which any claim or demand may
be made against it. As the sole exception to the foregoing
representation, SELLER has disclosed to BUYER the existence of a
potential claim
<PAGE>
against it by the Hammond family. SELLER has represented to BUYER
that, if this claim is asserted, the claim will be covered by
SELLER's existing insurance policy and the limits of SELLER's
existing insurance policy are sufficient to cover the claim
(including all defense costs) in its entirety.
(f) SELLER does not have any judgments entered against it.
(g) SELLER has duly filed all federal, state and local tax returns
and documents required to be filed and has paid all federal,
state and local taxes on a timely basis. SELLER has not received
any delinquency or assessment notices from any taxing authority
and neither SELLER nor any property of SELLER is subject to any
state or federal tax liens.
(h) BUYER will enjoy ownership of those assets identified in Exhibit
"A" free and clear of any claims, liens or demands of SELLER or
SELLER's creditors.
SELLER hereby indemnifies and holds BUYER harmless against any claim,
demand, cause of action, judgment, damages or costs (including reasonable
attorney's fees) arising out of any breach or threatened breach of the aforesaid
warranties and representations.
12. SELLER's Right To Audit. SELLER shall have the right to audit BUYER's
case log at BUYER's place of business during normal business hours upon
reasonable notice to BUYER. Said right to audit may not be exercised by SELLER
more frequently than once every six months.
13. BUYER's Undertaking. BUYER covenants to use its best effort to obtain,
not later than 90 days after Closing ("Neptune Agreement Deadline"), a binding
agreement with The Neptune Society of Los Angeles, Ltd. ("Neptune-L.A.") that
provides, in part, that Neptune-L.A. will provide BUYER with the lesser of 100
cases per month or 50% of Neptune-L.A.'s total number of cremation cases for any
given month for at least ten years after Closing. In the event such agreement is
not obtained by BUYER, SELLER shall have the option for a period of thirty (30)
days after the Neptune Agreement Deadline within which to serve written notice
voiding this Agreement.
<PAGE>
14. BUYER's Reimbursement Of SELLER's Expenses. BUYER agrees to reimburse
SELLER for those expenses incurred by SELLER on BUYER's behalf in contemplation
of this Agreement, as set forth in Exhibit "1)". BUYER further agrees to
reimburse SELLER for any additional expenses incurred by SELLER on BUYER's
behalf provided that SELLER receives BUYER's written authorization prior to
incurring said expense. BUYER agrees to advance the deposit for the new retort
to be ordered and installed in the Leased Premises, as well as to pay the cost
of installation and related expenses with respect to the new retort.
15. Voiding Of Agreement By BUYER. In the event this Agreement is voided by
either BUYER or SELLER pursuant to the provisions of paragraph 10 or 13,
respectively, any sums paid by BUYER to SELLER under paragraphs 6(a), 6(b) and
14 shall be immediately returned to BUYER and, conditioned on BUYER's receipt of
said funds, BUYER shall immediately reassign and transfer to SELLER all right,
title and interest in and to that Equipment set forth in Exhibit "A", that Lease
Agreement attached hereto as Exhibit "B", and all permits and licenses assigned
to BUYER. Additionally, SELLER shall purchase from BUYER, at BUYER's actual
cost, the new retort purchased by BUYER in contemplation of this Agreement, as
well as any other equipment or inventory purchased by BUYER in contemplation of
or in furtherance of this Agreement. Notwithstanding the foregoing, in the event
this Agreement is voided, BUYER shall retain all income earned in operating a
crematory on the Leased Premises from the time of Closing through the time the
Agreement is voided and Joseph Estephan shall retain all monies paid to him as a
non-exclusive consultant to BUYER under paragraph 7 hereof from the time of
Closing through the time the Agreement is voided.
16. Survival of SELLER's Representations Warranties and Indemnity. The
representations, warranties and covenants of SELLER herein shall remain in full
force regardless of any investigation or approval by BUYER and shall survive
Closing.
17. Assignment. This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the heirs, administrators, executors, and assigns of
SELLER and of BUYER.
18. Further Documents. Each party agrees to execute any further documents
reasonably necessary to effectuate the purpose of this Agreement.
<PAGE>
19. This Agreement shall be governed by the laws of the State of
California.
20. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto, and supersedes any prior written or oral agreements between them
concerning the subject matter contained herein. There are no representations,
agreements, arrangements, or understandings, oral or written, between and among
the parties hereto, which are not fully expressed herein. This Agreement may not
be modified except by an instrument in writing signed by both parties.
IN WITNESS WHEREOF, this Agreement has been executed by the parties in Los
Angeles, California.
HERITAGE CREMATION SERVICES, INC.
DATED: March 31, 1992 BY: /s/ Joseph Estephan
-------------------------------------
JOSEPH ESTEPHAN, its President
DATED: March 31, 1992 BY: /s/ Joseph Estephan
-------------------------------------
JOSEPH ESTEPHAN
DATED: March 31, 1992 BY: /s/ Elie Estephan
-------------------------------------
ELIE ESTEPHAN
DATED: March 31, 1992 BY: /s/ Emanuel Weintraub
-------------------------------------
EMANUEL WEINTRAUB
EXHIBIT 10.17
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is made ,and entered into as of the _____ day of
____________________, by and between Neptune Pre-Need Plan Inc. (hereinafter
called "Neptune") and _____________ (hereinafter called "Salesperson").
WHEREAS, Salesperson is engaged in the business of selling goods and
services manufactured or furnished by others; and
WHEREAS, Neptune has the need for such services in its business of selling
pre-need cremation contracts; and
WHEREAS, the parties to this Agreement intend to create the relationship of
company and independent contractor, not that of employer and employee;
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto agree as follows:
1. Salesperson as Independent Contractor. Salesperson is and will be
considered an independent contractor under this Agreement. Nothing contained
herein is intended by the parties to create an employment relationship, a
partnership, or a joint venture. Salesperson hereby assumes all responsibility
for any and all tax obligations arising from Salesperson's status as an
independent contractor.
2. Salesperson's Duties. Salesperson shall have the following duties under
this Agreement:
(a) Salesperson shall attempt to sell the services offered by Neptune
Society of Los Angeles, Ltd. (hereinafter referred to as "Neptune Society") by
procuring the signatures of third persons on pre--need cremation contracts to be
performed by Neptune Society at a future date. Salesperson shall solicit members
of Neptune Society and other leads provided by Neptune. Salesperson may also,
and is encouraged to, procure and solicit the Salesperson's own leads.
(b) Salesperson shall provide any and all equipment, -supplies and
materials as may be necessary to fulfill Salesperson's duties under this
Agreement. Salesperson is also responsible for the payment of any and all
business or traveling expenses incurred in performing Salesperson's duties under
this Agreement. Salesperson understands that he/she may suffer a loss in the
event that the expenses associated with the items described in this Paragraph
(b) exceed the Salesperson's compensation under Section 5 of this Agreement.
(c) Salesperson shall hire, supervise and pay the assistants, if any, that
Salesperson feels are necessary or desirable to fulfill his/her duties under
this Agreement.
3. Salesperson's Rights.
(a) Salesperson retains the right to contract to provide similar services
to other individuals and other businesses.
(b) Salesperson shall have no obligation to work any particular hours or
any particular amount of hours.
(c) Salesperson shall have no obligation to perform any services other than
those required to complete its duties under this Agreement.
-1-
<PAGE>
(d) Neptune agrees that it shall have no right to control or direct the
details, manner or means by which Salesperson accomplishes the results of the
work required of Salesperson under this Agreement. Neptune, however, will sever
its relationship with Salesperson upon learning that Salesperson has utilized
any illegal, fraudulent, deceptive or misleading methods of sales.
(e) Salesperson may perform the duties required under this Agreement at any
location selected by Salesperson. Salesperson shall not be limited to any
designated territory or route.
(f) Salesperson may perform the duties required under this Agreement in
such order or sequence determined by Salesperson without interference from
Neptune or any other person.
(g) Salesperson need not submit reports to Neptune. Completed pre--need
cremation contracts, however, must be submitted for the purpose of calculating
the commissions due to Salesperson.
4. Salesperson's Expenses. As full and complete compensation for the
services required under this Agreement, Salesperson shall be entitled to only
the payments described in Section 5 of this Agreement. Salesperson shall not be
entitled to bonuses , sick pay, fringe benefits, or any additional compensation.
Salesperson shall be responsible for all expenses incurred in fulfilling
Salesperson's duties under this Agreement.
5. Payment. Salesperson shall be entitled to the following compensation,
but only upon completing the sale of a pre--need cremation or related service to
the satisfaction of Neptune which shall not occur prior to the receipt of good
funds from the pre-need client.
(a) For each completed basic pre-need cremation contract that Salesperson
procures, the Salesperson shall be paid $____________. A basic pre-need
cremation contract includes the sale of a cremation container, cremation urn,
crematory cost, membership fee, professional services fee and sales tax.
(b) Additional compensation is available for the sale of the following
services:
(1) For the sale of a travel option, Salesperson shall be paid, in addition
to the other amounts set forth herein, the sum of $_____________;
(ii) If the basic pre-need cremation contract is procured through a
self--generated lead which is secured by the Salesperson and which is neither a
lead provided by Neptune nor a sale to an existing member of Neptune Society,
the Salesperson shall be paid, in addition to the other amounts set forth
herein, the sum of $_____________; and
(iii) If the basic pre-need cremation contract is paid in full upon
execution by the pre-need client, the Salesperson shall be paid, in addition to
the other amounts set forth herein, the sum of $____________.
Amounts owed to Salesperson on all properly executed pre-need cremation
contracts submitted to Neptune prior to the 15th day of each month will be paid
on or before the 20th day of such month. Payments due to Salesperson on all
properly executed preneed
-2-
<PAGE>
cremation contracts submitted to Neptune prior to the last day of each month
will be paid to Salesperson on or before the 5th day of the following month.
6. Salesperson's Equipment.
(a) Salesperson will provide any and all vehicles, telephones and other
equipment necessary to perform Salesperson's services hereunder at Salesperson's
sole cost and expense.
(b) Salesperson shall be solely responsible for repairs, maintenance and
all other expenses associated with all vehicles and other equipment which are
used in fulfilling the terms of this Agreement.
7. Neptune's Duties. Neptune shall pay Salesperson compensation in
accordance with Section 5 of this Agreement. No other duties are assumed by
Neptune under this Agreement, including but not limited to the following:
(a) Neptune shall not instruct Salesperson as to the time, place or method
of performing Salesperson's duties under this Agreement.
(b) Neptune shall not train Salesperson to perform the services required
under this Agreement in any particular method or manner.
(c) Neptune shall not hire, supervise or pay any assistants which the
Salesperson deems necessary or advisable for fulfilling Salesperson's duties
under this Agreement.
(d) Neptune shall not provide Salesperson with any tools or equipment which
may be necessary or desirable to fulfill Salesperson's duties under this
Agreement.
8. Complete Agreement. This is the complete agreement between the parties
and supersedes all prior contracts, correspondence, negotiations, and
discussions.
9. Construction.
(a) This Agreement prevails over any conflicting parts of any pre--need
cremation contract or other document or agreement (whether handwritten, typed,
printed or oral).
(b) This Agreement constitutes the product of negotiation of the parties
hereto, and the enforcement hereof shall be interpreted in a neutral manner, and
not more strongly for or against any party based upon the source of
draftsmanship hereof.
10. Partial Invalidity. If any part or parts of this Agreement are held
invalid, illegal or unenforceable, the rest will remain valid and enforceable.
11. Notices. Any and all notices between or among the parties to this
Agreement shall be in writing and shall be deemed made or given when personally
served or within three days after being placed in the United States mail,
postage prepaid, registered or certified, return receipt requested, and
addressed as follows: Notices to Salesperson shall be addressed in the manner
indicated following Salesperson's signature on this Agreement; Notices to
Neptune shall be addressed to Neptune Pre-Need Plan, Inc., ___________________.
The
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<PAGE>
address of any of the parties hereto may be changed by giving notice as required
in this paragraph.
12. Modification. This Agreement may not be modified except in a writing
signed by both parties.
13. Non-Waiver of Rights and Breaches. No failure or delay of a party
hereto in the exercise of any right given to such party hereunder or by law
shall constitute a waiver thereof, nor shall any single or partial exercise of
any of such rights preclude any other further exercise thereof or of any other
right. The waiver by a party hereto of any breach of any provision hereof shall
not be deemed to be a waiver of any subsequent breach thereof, or any breach of
any other provision.
14. Term.
(a) This Agreement shall be effective for a term of one year, and shall
continue for successive one-year terms, unless it is terminated pursuant to
subsection (b) below.
(b) Due to the extremely sensitive nature of the duties required of
Salesperson under this Agreement, this Agreement may be terminated by either
party, at any time, with or without cause, and with or without notice. Services
provided before the termination of this Agreement will continue to be subject to
the terms hereof.
15. Choice of Law. This Agreement shall be enforced and governed by and
construed under the laws of the State of California.
16. Trade Secrets. Salesperson acknowledges that, pursuant to this
Agreement, Salesperson will have access to trade secrets and confidential
information about Neptune and Neptune Society, their services, customers and
business operations. Salesperson agrees that, while this Agreement is in effect
and for a period of one year after its termination, Salesperson will not use
such confidential information or trade secrets for any purpose other than as
specifically provided in this Agreement and will not, directly or indirectly,
disclose to any third person any such confidential information or trade secrets.
IN WITNESS WHEREOF, Neptune and Salesperson have executed this Independent
Contractor Agreement as of the date and year first above written.
SALESPERSON NEPTUNE PRE-NEED PLAN, INC.
By:
Signature Its:
Print Name
Street Address
City/State/Zip Code
Telephone Number
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EXHIBIT 10.18
- --------------------------------------------------------------------------------
Agency Agreement
- --------------------------------------------------------------------------------
This Agreement is dated for reference July 22, 1999.
BETWEEN
THE NEPTUNE SOCIETY, INC. of 102 N.E. 2nd Street, Suite #777, Boca
Raton, Florida, 33432
(the "Company")
AND
STANDARD SECURITIES CAPITAL CORPORATION, 24 Hazelton Avenue, Toronto,
Ontario M5R 2E2
(the "Agent")
WHEREAS:
A. The Company wishes to privately sell 1,166,666 common shares at $6.00 USD
per share;
B. The Company intends to file with the United States Securities and Exchange
Commission a Form S-1 registration statement to register the resale of the
Common Shares; and
C. The Company wishes to appoint the Agent to distribute the 1,166,666 common
shares and the Agent is willing to accept the appointment on the terms and
conditions of this Agreement.
THE PARTIES to this Agreement therefore agree:
DEFINITIONS
1. In this Agreement:
(a) "1933 Act" means the United States Securities Act of 1933, as amended;
(b) "Closing Dates" means each of the First Closing Date, the Second
Closing Date and the Final Closing Date;
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(c) "Common Shares" means the 1,166,666 common shares in the capital of
the Company to be offered and sold in the Private Placement;
(d) "Directed Selling Efforts" means "Directed selling efforts" as defined
in Rule 902(c) of Regulation S of the 1933 Act;
(e) "Effective Date" means the first day that the Registration Statement
becomes effective to register the resale of the Common Shares;
(f) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended;
(g) "Final Closing Date" means January 31, 2000 or such other date as the
Company and the Agent may agree;
(h) "First Closing Date" means August 6, 1999 or such other date as the
Company and the Agent may agree;
(i) "First Tranche" means a 666,666 of the Common Shares to be purchased
by the Subscribers and issued by the Company on the First Closing
Date;
(j) "Initial Filing Date" means the date which is 60 days from the date of
the Final Closing Date;
(k) "Issue Price" means $6.00 USD per Common Share;
(l) "Private Placement" means the sale of the Common Shares on the terms
and conditions of this Agreement;
(m) "Registration Statement" means a Form S-1 under the 1933 Act;
(n) "Regulation S" means Regulation S adopted by the SEC under the 1933
Act;
(o) "Reset Price" means the average closing bid price of the Company's
common shares during the period from the 1st to the 90th day following
the Effective Date but in any event will not be less than $3.00 USD
per common share;
(p) "Reset Share" means the common shares of the Company that may be
issuable pursuant to the formula as set out in paragraph 13 of this
Agreement;
(q) "Restricted Period" means the one year period commencing on the
Closing Date;
(r) "SEC" means the United States Securities and Exchange Commission;
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<PAGE>
(s) "Second Closing Date" means October 31, 1999 or such other date as the
Company and the Agent may agree;
(t) "Second Tranche" means 166,667 of the Common Shares to be purchased by
the Subscribers and issued by the Company on the Second Closing Date;
(u) "Securities" means the Common Shares and the Reset Shares, if any;
(v) "Share Certificates" means the certificates of the Company
representing the Common Shares to be issued on each of the Closing
Dates in the names and denominations reasonably requested by the Agent
or the Subscribers;
(w) "Subscribers" means the purchasers of the Common Shares in the Private
Placement;
(x) "Subscription Agreement" means the agreement to be duly completed and
signed by the Purchasers in connection with the sale of the Common
Shares;
(y) "Third Tranche" means 333,333 of the Common Shares to be purchased by
the Subscribers and issued by the Company on the Final Closing Date;
and,
(z) "United States" means the United States of America, its territories
and possessions, any State of the United States, and the District of
Columbia; and,
(aa) "U.S. Person" means "U.S. Person" as that term is defined in Rule
902(o) of Regulation S of the 1933 Act.
APPOINTMENT OF AGENT
2. The Company appoints the Agent as its exclusive agent and the Agent accepts
the appointment and agrees to act as the exclusive agent of the Company to
use its best efforts to find and introduce to the Company potential
investors to purchase the Common Shares at a purchase price of $6.00 USD
per common share.
3. The Company will reserve or set aside sufficient shares in its treasury to
issue the Common Share and Reset Shares, if any.
AGENT'S FEE
4. The Company shall pay to the Agent a fee of 10% of the gross proceeds of
the Private Placement payable by the Company to the Agent as follows:
(a) USD $500,000.00 on the Second Closing Date; and,
(b) USD $200,000.00 on the Final Closing Date.
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<PAGE>
OFFERING RESTRICTIONS
5. The Company represents and warrants to, and covenants and agrees with, the
Agent as follows:
(a) Neither the Company nor any of its affiliates, nor any person acting
on their behalf, has made or will make:
i. any offer to sell, or any solicitation of an offer to buy any
Securities to a U.S. Person or a person in the United States, or
ii. any sale of Securities unless, at the time the buy order was or
will have been originated, the purchase was outside the United
States or the Company, its affiliates, and any person acting on
its or their behalf reasonably believed that the purchaser was
outside the United States;
(b) During the period in which the Securities are offered for sale,
neither the Company nor any of its affiliates, nor any person acting
on its or their behalf has made or will make any Directed Selling
Efforts in the United States, or has taken or will take any action
that would cause the exemptions afforded by Regulation S to be
unavailable for offers and sales of the Securities;
(c) The Company undertakes and agrees that it will refuse to register any
transfer of any Securities offered and sold pursuant to this Agreement
in reliance upon Regulation S unless such Securities are transferred
in accordance with the provisions of Regulation S, pursuant to
registration under the 1933 Act or pursuant to an available exemption
for the registration under the 1933 Act;
(d) Neither the Company nor any of its predecessors or affiliates has been
subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminary or permanently enjoining such
person for failure to comply with Rule 503 of Regulation D concerning
the filing of a notice of sales on Form D;
(e) Neither the Company, any of its affiliates nor any person acting on
its or their behalf have engaged or will engage in any form of general
solicitation or general advertising (as the terms are used in
Regulation D under the 1933 Act) with respect to offers or sales of
the Securities in the United States, including advertisements,
articles, notices or other communications published in any newspaper,
magazine or similar media, or broadcast over radio or television, or
any seminar or meeting whose attendees have been invited by general
solicitation or general advertising;
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<PAGE>
(f) The Company is not an "investment company" within the meaning of the
United States Investment Company Act of 1940; and
(g) Except with respect to the offer and sale of the Securities offered
hereby, the Company has not, since January 1, 1999, sold, offered for
sale or solicited an offer to buy any of its securities in the United
States or to a U. S Person in a transaction which, if integrated with
this offering of Securities, would result in a violation of this
registration requirement of applicable U.S. securities laws.
6. The Agent represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) The Agent acknowledges that the Securities have not been registered
under the 1933 Act and that such securities are being offered and sold
outside the United States in reliance upon Rule 903 of Regulation S or
in reliance upon an exemption from registration provided under Rule
506 or Regulation D under the 1933 Act;
(b) Neither the Agent nor any of its affiliates nor any person acting on
the Agent's behalf or on behalf of any of their affiliates has made or
will make:
i. any offer to sell or any solicitation of an offer to buy, any
Securities to any U.S. Person or person in the United States, or
any sale of Securities to any purchaser unless, at the time the
buy order was or will have been originated, the purchaser was
outside the United States, or such Agent, affiliate or person
acting on behalf of either reasonably believed that such
purchaser was outside the United States;
ii. any Directed Selling Efforts in the United States with respect to
the Securities; or,
iii. any offer to sell or any solicitation of an offer to buy, by any
form of general solicitation or general advertising (as those
terms are used in Regulation D under the 1933 Act) or in any
manner involving a public offering within the meaning of Section
4(2) of the 1933 Act, any of the Securities;
(c) At or prior to confirmation of sale of the Securities, the Agent will
send to each distributor (as defined in Regulation S) , dealer or
person receiving a selling concession, fee or other remuneration that
purchases Securities during the Restricted Period a confirmation or
notice to substantially the following effect:
"The Securities have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of
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<PAGE>
a U.S. persons (i) as part of their distribution at any time or
(ii) otherwise until one year after the later of the commencement
of the offering and the closing date, except in either case in
accordance with Regulation S (or Rule 144A, if available) under
the Securities Act. Terms used herein have the meaning given to
them in Regulation S."
(d) The Agent agrees that neither it nor any of its affiliates will engage
in any hedging transactions with respect to the Securities during the
Restricted Period.
7. The Company and the Agent agree that the Common Shares offered will be
issued in three tranches with the First Tranche to be issued on the First
Closing Date, the Second Tranche to be issued on the Second Closing Date;
and the Third Tranche to be issued on the Final Closing Date.
REGISTRATION PROVISION
8. The Company shall use its best efforts to file on or before the Initial
Filing Date, a Registration Statement with the SEC to register the resale
of the Common Shares without restriction, except that, the selling
shareholders must provide a buyer with the prospectus contained within the
Registration Statement.
9. The Company shall use its best efforts to cause the Registration Statement
to be effective as soon as possible from the Initial Filing Date, but in
any event within 120 days for the Initial Filing Date.
10. The Company shall provide the Subscribers a copy or copies of the
prospectus, as reasonably requested, or to the Agent on behalf of the
Subscribers, at the sole expense of the Company
11. The Company shall file amendments to the Registration Statement with the
SEC that may be required from time to time to maintain the effectiveness of
the Registration Statement from the Effective Date to and including January
31, 2001 or such earlier date when the Company receives written notice from
the Agent that all of the Common Shares have been sold.
RESALE RESTRICTIONS
12. The Agent further acknowledges and agrees that the Securities may also be
subject to resale restrictions in jurisdictions outside of the United State
and Canada of which the Company makes no representations or promises to
qualify the Common Shares and/or the Reset Shares, if any, for sale or
resale in or from such jurisdictions.
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<PAGE>
13. The Agent acknowledges and agrees that the Share Certificates and the
certificates representing the Reset Shares, if any, will bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"), AND MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904
OF REGULATION S UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN
COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS, OR (D) WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY, PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
RESET RIGHTS
14. The Issue Price will be subject to reset which may result in the Company
issuing additional shares to the Subscribers according to the following
formula:
<TABLE>
<S> <C>
1,166,666 Common Shares x [(Issue Price x 125%) - Reset Price] = Total Reset Shares
- -------------------------------------------------------------
Reset Price
</TABLE>
15. If the Total Reset Shares as calculated using the formula above is
negative, it shall be deemed to be zero.
16. The Company will issue the Reset Shares, if any, to the Agent on or before
the 120th day following the Effective Date be delivery of share
certificates of the Company in the name and denominations reasonably
specified by the Agent in writing to the Company. Such notice must be
received by the Company on or before the 100th day following the Effective
Date.
CLOSING AND CLOSING DOCUMENTS
17. The Closing will take place at 1:00 p.m. (Toronto time) on each of the
Closing Dates.
18. If the Company has satisfied all of its obligations under this Agreement,
the Agent will, on the Closing, pay the Proceeds to the Company against
delivery of the Share Certificates.
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<PAGE>
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENT
19. The Agent covenants with the Company that it will:
(a) not solicit offers to purchase or sell the Common Shares so as to
require registration thereof or filing of a prospectus with respect
thereto under, or as to knowingly breach in any material respect, the
laws of any jurisdiction including, without limitation, the United
States of America, or any state there of, Canada or the United
Kingdom, and not solicit offers to purchase or sell the Common Shares
in any jurisdiction outside of the USA where the solicitation or sale
of the Common Shares would result in any ongoing disclosure
requirements in such jurisdiction, or any registration requirements in
such jurisdiction, except for the filing of a notice or report of
solicitation or sale, or where the Company may be subject to liability
in connection with the sale of the Common Shares which is materially
more onerous than its liability under the 1933 Act;
(b) obtain from each Purchaser an executed Subscription Agreement in a
form reasonably acceptable to the Company and to the Agent relating to
the transaction herein contemplated, together with all documentation
as may be necessary in connection with the subscription for the Common
Shares; and
(c) refrain from advertising the Offering in printed media of general and
regular paid circulation, radio or television.
20. The Agent represents and warrants to the Company that:
(a) it is a valid and subsisting entity under the laws of the Province of
Ontario;
(b) it is a securities dealer registered under the Ontario Securities Act;
and
(c) it will only effect sales under the offering to persons outside the
United States of America and outside of Canada, and in jurisdiction
where the Securities may be lawfully offered and sold.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
21. The Company hereby represents, warrants and covenants to and with the Agent
that:
(a) the Company and each of the subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under the laws of
the jurisdictions in which they are incorporated , continued or
amalgamated;
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<PAGE>
(b) the Company and each of the subsidiaries is conducting its business in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on and, except for
Neptune Management Corp's funeral establishment licenses and Heritage
Alternatives Inc. crematory license which are pending transfer from
their previous owners by the State of California, the Company and each
of the subsidiaries is duly licensed, registered or qualified in all
jurisdictions in which it owns, leases or operates its property or
carries on business to enable its business to be carried on as now
conducted and its property and assets to be owned, leased and operated
and all such licences, registrations and qualifications are valid and
subsisting and in good standing, except in respect of matters which do
not and will not result in any material adverse change to the
business, business prospects or condition (financial or otherwise) of
the Company and its Subsidiaries, taken as a whole;
(c) the Company legally and beneficially owns, directly or indirectly, all
of the issued and outstanding shares in the capital of each of its
subsidiaries and in each case, except for the pledge of the shares of
Neptune Management Corp., Heritage Alternatives Inc. and Neptune
Pre-need Plan Inc. under the terms and condition of a Purchase
Agreement dated for reference March 26, 1999, such shares are free and
clear of all mortgages, liens, charges, pledges, security interest,
encumbrances, claims or demand of any kind whatsoever. All of such
shares have been duly authorized and validly issued and are
outstanding as fully paid and non-assessable shares and no person has
any right, agreement or option, present or future, contingent or
absolute or any right capable of becoming a right, agreement or
option, for the purchase from the Company or any of its subsidiaries
an interest in any such shares or for the issue or allotment of any
unissued shares in the capital of any of its subsidiaries or any other
security convertible into or exchangeable or excisable for any such
shares;
(d) the authorized capital of the Company is 50,000,000 common shares and
the issued capital of the Company is 12,000,000 common shares, and
except for options to purchase commons shares currently outstanding to
employees of the Company and its subsidiaries, no person has any
right, agreement or option, present or future, contingent or absolute
or any right capable of becoming a rights, agreement or option, for
the issue or allotment of any unissued shares in the capital of the
Company or any other security convertible into or exchangeable or
exercisable for any such shares or to require the Company to purchase,
redeem or otherwise acquire any of the issued and outstanding common
shares;
(e) there has not been any material change in the assets, liabilities or
obligations (absolute, accrued, contingent or otherwise) of the
Company or any of the subsidiaries that has not been publicly
disclosed;
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<PAGE>
(f) there has not been any material change in the capital stock or
long-term debt of the Company or any of the subsidiaries that has not
been publicly disclosed;
(g) there has not been any material change in the business, business
prospects, condition (financial or otherwise) or results of the
operations of the Company or any of the subsidiaries that has not been
publicly disclosed;
(h) the Company and each of the subsidiaries have carried on business in
the ordinary course;
(i) the audited combined financial statements for the year ended December
31, 1998 and the unaudited financial statement for any subsequent
period in respect of which such statements have been delivered by the
Company to its security holders prior to the Closing Date present
fairly the financial condition of the Company and its subsidiaries for
the period then ended;
(j) the Company has complied and will come fully with the requirements of
all applicable corporate and securities laws, including without
limitation, the 1933 Act in relation to the issue and trading of its
securities and in all matters relating to the Private Placement;
(k) neither the Company nor any of its subsidiaries is in breach or
violation of or default under (and no event has occurred and is
continuing which with the giving of notice or lapse of time or both
would constitute an event of default under), and neither the execution
and delivery by the Company of this Agreement or the Subscription
Agreements, nor the consummation of the transactions contemplated
hereby or thereby nor the due observance and performance by the
Company of its covenants or in breach or violation of, or constitutes
or will constitute a default (or any event which with the giving of
notice or lapse of time or both would constitute an event of default)
under, any of the terms or provisions of the constating documents
resolutions of the directors or shareholders of the Company or any of
its subsidiaries, or any of the terms or provisions of any agreement
or instrument of which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of their respective properties or assets are subject, the
effect of any of which breaches, violations, conflicts or defaults,
singularly or in the aggregate, might materially adversely affect the
financial condition, results of operations, business or prospects of
the Company and its subsidiaries, taken as a whole, or would impair
the ability of the Company to consummate the transactions contemplated
hereby or to duly observe and perform any of its covenants or
obligations contained herein or in the Subscription Agreements;
(l) except as disclosed in Schedule "A" to this Agreement, the Company nor
its subsidiaries is a party to any actions, suits or proceedings which
could materially
10
<PAGE>
affect its business or financial condition, and no such actions, suits
or proceeding have been threatened or, to the best of the knowledge of
the Company are contemplated;
(l) this Agreement has been authorized by all necessary corporate action
on the part of the Company; and
(m) the Company shall deliver to the Agent and the Subscriber on the first
Closing Date a legal opinion in a form satisfactory to the Agent and
the Company.
EXPENSES OF AGENT
22. The Company will pay all of the expenses of the Private Placement and the
Registration Statement and all the expenses reasonably incurred by the
Agent in connection with the Private Placement and the Registration
Statement including, without limitation, the fees and expenses of the
solicitors for the Agent.
23. The Agent, may from time to time, render accounts for its expenses incurred
in connection with the Private Placement to the Company for payment on or
before the dates set out in such accounts.
24. The Company authorizes the Agent to deduct its reasonable expenses in
connection with the Private Placement from the proceeds of the Private
Placement, including expenses for which an account has not yet been
rendered.
INDEMNITY
25. The Company will indemnify the Agent, its affiliates and its officers,
directors, employees and agents and save them harmless against all losses,
claims, damages, or liabilities:
(a) existing (or alleged to exist) by reason of an untrue statement
contained in the Registration Statement, Subscription Agreement or
other written or oral representation made by the Company to an
investor or potential investor in connection with the Private
Placement or by reason of the omission to state any fact necessary to
make the statement not misleading (except for information and
statement referring solely to the Agent);
(b) arising directly or indirectly out of any order made by any regulatory
authority based upon an allegation that any such untrue statement or
omission exists (except information and statement referring solely to
the Agent), that trading in or distribution of the Securities is to
cease;
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<PAGE>
(c) resulting from the Company's failure to obtain the requisite
regulatory approval to the Private Placement or to the Registration
Statement;
(d) resulting form the breach by the Company of any of the terms of this
Agreement;
(e) resulting from any representation or warranty made by the Company
herein not being true or ceasing to be true;
(f) if the Company fails to issue and deliver the certificates for the
Securities in the form and denominations satisfactory to the agent at
the time and place required by the Agent with the result that the
completion of a sale of the Common Shares does not take place; or
(g) if, following the completion of a sale of any of the Securities, a
determination is made by any competent authority setting aside the
sale, unless that determination arises out an act or omission of the
Agent.
26. If any action or claim is brought against the Agent in respect of which
indemnity may be sought from the Company pursuant to this Agreement, the
Agent will promptly notify the Company in writing.
27. The Company will assume the defence of the action or claim, including the
employment of counsel and the payment of all expenses.
28. The Agent will have the right to employ separate counsel, and the Company
will pay the fees and expenses of such counsel.
NOTICE
29. Any notice under this Agreement will be given in writing and must be
delivered, sent by telex, telegram or telecopier or mailed by prepaid post
and addressed to the party to which notice is to be given at the address
indicated above, or an another address designated by either party in
writing.
30. If notice is sent by telex, telegram or telecopier or is delivered, it will
be deemed to have been given at the time of transmission or delivery.
31. If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
TIME
32. Time is of the essence of this Agreement.
12
<PAGE>
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
33. The representations, warranties, covenants of the Company contained n this
Agreement will survive the closing of the purchase and sale of the
Securities.
ENUREMENT
34. This Agreement enures to the benefit of and is binding on the parties to
this Agreement and their successors and permitted assigns.
HEADINGS
35. The headings in this Agreement are for convenience or reference only and do
not affect the interpretation of this Agreement.
COUNTERPARTS
36. This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original and all of which will constitute one
agreement, effective as of the reference dated given above.
GOVERNING LAW
37. This Agreement shall be construed with, and the rights of the parties shall
be governed by, the laws of the Province of Ontario, and each of the
parties irrevocably attorns to the jurisdictions of the court of Ontario.
This document was executed and delivered as of the date given above.
THE NEPTUNE SOCIETY, INC.
Per: /s/ Suzanne L. Wood
-------------------------------------------
Suzanne Wood, President and Director
STANDARD SECURITIES CAPITAL CORPORATION
Per: /s/ [Illegible]
-------------------------------------------
Authorized Signatory
13
<PAGE>
Schedule A
Agency Agreement between The Neptune Society, Inc. and
Standard Securities Capital Corp. dated for reference July 22, 1999
Listing of Actions, Suits or Proceedings
Actions/Claims
Case No. BC201045 Filed November 19, 1998 between Karen Vogtpowell and Kenna
Figueroa v. Neptune-Los Angeles, Ltd., Neptune-San Pedro Ltd., Heritage
Alternatives, Ltd. Emanuel Weintraub
Case No. BC202774 File December 22, 1998 between Neptune Society of Orange
County, Neptune Society of Fresno, Neptune Society of Central California v.
Neptune Management Corporation, A California Corporation; Neptune Society of Los
Angeles, Ltd., A California Ltd. Partnership, Emanuel Weintraub, Larry Miller
Case No. 233025-R4 File January 23, 1997 between The People of the State of
California v. Neptune Society of Los Angeles, Ltd., Neptune Society of Los
Angeles, San Pedro, Neptune Society of Los Angeles, Burbank, Neptune Society of
Santa Barbara, Heritage Crematorium, Heritage Alternatives, Inc. and Does 1
through 10 inclusive
Pending Actions/Claims
Neptune Society of Los Angeles - Joreen Long claimant, Gaylord Long decedent,
DOD June 15, 1999, Insurer: Evanston Insurance
EXHIBIT 10.19
- --------------------------------------------------------------------------------
Amendment to the Agency Agreement dated for reference July 22, 1999 (the "Agency
Agreement") between The Neptune Society, Inc. (the "Company") and Standard
Securities Capital Corporation (the "Agent")
- --------------------------------------------------------------------------------
WHEREAS:
A. The Company wishes to amend certain terms and conditions of the Agency
Agreement; and,
B. The Agent is willing to amend the Agency Agreement on the terms and
conditions of this Amendment,
THE PARTIES to this Amendment therefore agree:
1. All capitalized terms in this Amendment shall have the same meaning as
defined in the Agency Agreement.
2. Paragraph 1(h) of the Agency Agreement shall be deleted in its entirety and
replaced as follows:
(h) "First Closing Date" means August 6, 1999 or such other date as
the Company and the Agent may agree;
3. Paragraph 21 (d) of the Agency Agreement shall be deleted in its entirety
and replaced as follows:
(d) the authorized capital of the Company is 50,000,000 common shares
and the issued capital of the Company is 12,000,000 common
shares, and except for options to purchase commons shares
currently outstanding to employees of the Company and its
subsidiaries and warrants issued in connection with the deferment
of loan and interest payments, no person has any right, agreement
or option, present or future, contingent or absolute or any right
capable of becoming a rights, agreement or option, for the issue
or allotment of any unissued shares in the capital of the Company
or any other security convertible into or exchangeable or
exercisable for any such shares or to require the Company to
purchase, redeem or otherwise acquire any of the issued and
outstanding common shares;
3. This Amendment shall be construed with, and the rights of the parties shall
be governed by, the laws of the Province of Ontario and each of the parties
irrevocably attorns to the jurisdictions of the court of Ontario.
1
<PAGE>
4. This Amendment may be executed in two or more counterparts, each of which
will deemed to be an original and all of which will constitute one
agreement, effective as of the date below.
Dated this 5th day of August 1999.
THE NEPTUNE SOCIETY, INC.
Per: /s/ Suzanne L. Wood
---------------------------------------
Suzanne Wood, President and Director
STANDARD SECURITIES CAPITAL CORPORATION
/s/ [Illegible]
- ----------------------------------------
Authorized Signatory
2
EXHIBIT 10.20
Exhibit A
SUBSCRIPTION AGREEMENT
THE NEPTUNE SOCIETY, INC.
COMMON SHARES
The undersigned purchaser ("Purchaser") hereby irrevocably subscribes for and
agrees to purchase the number of common shares (the "Common Shares") of The
Neptune Society, Inc., a Florida corporation ("Company"), indicated on the
signature page hereto in consideration of US$____ per share ("Purchase Price")
at the closings of the transactions contemplated hereby ("Transaction").
The execution by the Purchaser of this Subscription Agreement ("Subscription
Agreement") will constitute an offer by the Purchaser to the Company to
subscribe for the Common Shares. The Company's acceptance of such offer, as
evidenced by the signature of its authorized officer below, will constitute an
agreement between the Purchaser and the Company for the Purchaser to purchase
from the Company, and for the Company to issue and sell to the Purchaser, the
Common Shares upon the terms and conditions contained herein.
In connection with such subscription. Purchaser hereby agrees, represents and
warrants as follows:
1. Agreement to Purchase; Calculation of Number of Common Shares.
1.1 Subscription to Purchase.
Purchaser hereby subscribes for and purchases that number of Common Shares
set forth on the signature page hereto, at the times set forth therein, pursuant
to the terms of this Subscription Agreement.
Simultaneously with the execution of this Subscription Agreement, the
Purchaser shall pay to the Company the Purchase Price for the number of Common
Shares subscribed for in "Payment 1" by check payable to "The Neptune Society,
Inc." which shall be applied to payment for the Common Shares subscribed for
herein. Thereafter, the Purchaser shall pay to the Company the Purchase Price
for the Common Shares subscribed for in each succeeding tranche no later than
two days after the Company provides the Purchaser notice of a Closing (as that
term is defined herein).
The Company may accept or reject any subscription in whole or in part or
may elect to allot to any prospective investor less than the number of Common
Shares applied for by such investor.
1.2 Reset Rights Adjustments
The number of shares purchased pursuant to this Subscription Agreement
shall be subject to reset rights. The Company agrees to issue additional shares
to the Purchaser based an adjustment to the Purchase Price (" Reset Price") in
accordance with the formula set forth below:
<TABLE>
<S> <C>
Number of Common Shares Purchased x [($_____ x 125%)-Reset Price] = Total Reset Shares
- ----------------------------------------------------------------
Reset Price
</TABLE>
-1-
<PAGE>
For the purposes of calculating the Total Reset Shares, the Reset Price shall be
the average closing bid price of the Company's common shares during the period
from the 1st to the 90th day following the effective date of the Company's
resale registration statement (as provided for in Section 3 below), but in any
event will not be less than US$3.00 per common share. If the Total Reset Shares
as calculated using the above formula is negative, it shall be deemed to be
zero.
2. Delivery of Common Shares.
Payment of the purchase price for the Common Shares purchased hereby will
take place in three tranches. Subject to such earlier or later date as may be
agreed to between the Company and the Purchaser, "Payment 1" must be made to the
Agent no later than ______________; "Payment 2" must be made to the Agent no
later than ____________, 1999; and "Payment 3" must be made to the Agent no
later than ____________, 2000.
Upon receipt of each payment, the Company shall deliver to each Purchaser a
certificate (or certificates, if requested in writing by Purchaser representing
the number of Common Shares purchased, registered in the name of the Purchaser.
The Company and the Purchaser also hereby agree to execute and deliver at
Closing such other documents as may be necessary or appropriate.
3. Resale Registration.
The Purchaser and the Company undertake and agree to the terms and
conditions of the Registration Rights Agreement related to the Common Shares as
set forth on Schedule 1 attached to this Subscription Agreement.
4. Information Concerning the Company.
Purchaser acknowledges that he, she or it has received all such information
as Purchaser deems necessary and appropriate to enable him, her or it to
evaluate the financial risk inherent in making an investment in the Common
Shares and Reset Shares, if any, including but not limited to the Company's
Confidential Offering Memorandum, and the documents and materials included
therewith ("Disclosure Documents"). Purchaser further acknowledges that
Purchaser has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
5. Economic Risk and Suitability.
Purchaser represents and warrants as follows:
(a) Purchaser realizes that Purchaser's purchase of the Common Shares and
Reset Shares, if any, involves a high degree of risk and will be a
speculative investment, and that he, she or it is able, without
impairing Purchaser's financial condition, to hold the Common Shares
and Reset Shares, if any, for an indefinite period of time.
(b) Purchaser recognizes that there is no assurance of future profitable
operations and that investment in the Company involves substantial
risks, and that the Purchaser has taken full
-2-
<PAGE>
cognizance of and understands all of the risks factors related to the
purchase of the Common Shares and Reset Shares, if any.
(c) Purchaser has carefully considered and has, to the extent Purchaser
believes such discussion necessary, discussed with Purchaser's
professional legal, tax and financial advisors the suitability of an
investment in the Company for the particular tax and financial
situation of Purchaser and that Purchaser and/or Purchaser's advisors
have determined that the Common Shares and the Reset Shares, if any,
are a suitable investment for Purchaser.
(d) The financial condition and investment of Purchaser are such that he,
she or it is in a financial position to hold the Common Shares and the
Reset Shares, if any, for an indefinite period of time and to bear the
economic risk of, and withstand a complete loss of, the Purchase
Price.
(e) Purchaser alone, or with the assistance of professional advisors, has
such knowledge and experience in financial and business matters that
the undersigned is capable of evaluating the merits and risks of
Purchaser's purchase of the Common Shares and the Reset Shares, if
any, or has a pre-existing personal or business relationship with the
Company or any of its officers, directors, or controlling persons of a
duration and nature that enables the undersigned to be aware of the
character, business acumen and general business and financial
circumstances of the Company or such other person.
(f) Purchaser has carefully read the Disclosure Documents and the Company
has made available to Purchaser or Purchaser's advisors all
information and documents requested by Purchaser relating to
investment in the Common Shares, and has provided answers to
Purchaser's satisfaction to all of Purchaser's questions concerning
the Company and the Offering.
(g) Purchaser has relied solely upon the Disclosure Documents, advice of
his or her representatives, if any, and independent investigations
made by the Purchaser and/or his or her purchaser representatives, if
any, in making the decision to purchase the Common Shares subscribed
for herein and acknowledges that no representations or agreements
other than those set forth in the Disclosure Documents have been made
to the Purchaser in respect thereto.
(h) All information which the Purchaser has provided concerning Purchaser
himself, herself or itself is correct and complete as of the date set
forth below, and if there should be any material change in such
information prior to the acceptance of this subscription for the
Common Shares, he, she or it will immediately provide such information
to the Company.
(i) Purchaser confirms that Purchaser has received no general solicitation
or general advertisement and has attended no seminar or meeting (whose
attendees have been invited by any general solicitation or general
advertisement) and has received no advertisement in any newspaper,
magazine, or similar media, broadcast on television or radio regarding
the offering of the Common Shares.
(j) Purchaser is at least 21 years of age and resides at the address
indicated below.
-3-
<PAGE>
6. Restricted Securities.
Purchaser acknowledges that the Company has hereby disclosed to Purchaser
in writing:
(a) The Common Shares and the Reset Shares, if any, have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or the securities laws of any state of the United States, and
such securities must be held indefinitely unless a transfer of them is
subsequently registered under the 1933 Act, or such securities are
sold pursuant to Regulation S under the 1933 Act or pursuant to an
exemption from registration under the 1933 Act; and
(b) The Company will make a notation in its records of the above-described
restrictions on transfer and of the legend described below.
7. Legend.
Purchaser agrees that all of the certificates representing the Common
Shares and the Reset Shares, if any, shall have endorsed thereon a legend in
substantially the following form:
THESE COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES AND MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (I) TO THE COMPANY, (II) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (III) IN
COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED
BY RULE 144 THEREUNDER, OR (IV) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM
REGISTRATION, IN EACH CASE AFTER PROVIDING EVIDENCE SATISFACTORY TO THE
COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION UNDER THE 1933
ACT.
8. Further Limitations on Disposition.
Without in any way limiting its representations set forth above, Purchaser
further agrees that it shall in no event make any disposition of all or any
portion of the Common Shares or the Reset Shares unless:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(b) (i) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed
disposition; (ii) Purchaser shall have furnished the Company with an
opinion of his or her counsel to the effect that such disposition will
not require registration under the 1933 Act; and (iii) such opinion
shall be in form and substance reasonably acceptable to counsel for
the Company and the Company shall have advised Purchaser of such
acceptance.
-4-
<PAGE>
9. Offering Limited to Qualified Investors.
Purchaser hereby represents and warrants to the Company as follows:
(a) (i) the Purchaser is not a "U.S. Person," as such term is
defined by Rule 902 of Regulation S under the Act (the
definition of which includes, but is not limited to, an
individual resident in the United States and an estate or
trust of which any executor or administrator or trustee,
respectively, is a U.S. Person and any partnership or
corporation organized or incorporated under the laws of the
United States);
(ii) the Purchaser was outside the United States at the time of
execution and delivery of this Subscription Agreement;
(iii) no offers to sell the Common Shares or the Reset Shares, if
any, were made by any person to the Purchaser while the
Purchaser was in the United States;
(iv) the Common Shares and the Reset Shares, if any, are not
being acquired, directly or indirectly, for the account or
benefit of a U.S. Person or a person in the United States;
(v) the Purchaser agrees not to engage in hedging transactions
with regard to the Common Shares or the Reset Shares prior
to the expiration of the one-year distribution compliance
period set forth in Rule 903(b)(3) of Regulation S under the
1933 Act; and (vi) the Purchaser acknowledges and agrees
with the Company that the Company shall refuse to register
any transfer of the Common Shares or the Reset Shares not
made in accordance with the provisions of Regulation S,
pursuant to registration under the 1933 Act, or pursuant to
an available exemption from registration under the 1933 Act;
or,
(b) that the Purchaser satisfies one or more of the categories indicated
below (please place an "X" on the appropriate lines):
____ Category 1. An organization described in Section 501(c)(3)
of the United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Securities,
with total assets in excess of US$5,000,000;
-5-
<PAGE>
____ Category 2. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the date
hereof exceeds US$1,000,000;
____ Category 3. A natural person who had an individual income in
excess of US$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of
US$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year;
____ Category 4. A trust that (a) has total assets in excess of
US$5,000,000, (b) was not formed for the specific purpose of
acquiring the Securities and (c) is directed in its
purchases of securities by a person who has such knowledge
and experience in financial and business matters that he/she
is capable of evaluating the merits and risks of an
investment in the Common Shares and Reset Shares, if any;
____ Category 5. An investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act;
____ Category 6. A Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958;
____ Category 7. A private business development company as
defined in Section 202(a)(22) of the Investment Advisors
Acts of 1940; or
____ Category 8. An entity in which all of the equity owners
satisfy the requirements of one or more of the foregoing
categories.
10. Understandings.
Purchaser understands, acknowledges and agrees with the Company as follows:
(a) Except as set forth in paragraph 1 above, the Purchaser hereby
acknowledges and agrees that the subscription hereunder is irrevocable
by the undersigned, that, except as required by law, the undersigned
is not entitled to cancel, terminate or revoke this Subscription
Agreement or any agreements of the undersigned hereunder and that this
Subscription Agreement and such other agreements shall survive the
death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligations
of the undersigned hereunder shall be joint and several and the
agreements, representations, warranties and acknowledgments herein
contained shall be deemed to be made by and be binding upon each such
person and his/her heirs, executors, administrators, successors, legal
representatives and permitted assigns.
-6-
<PAGE>
(b) No federal or state agency has made any finding or determination as to
the accuracy or adequacy of the Disclosure Documents or as to the
fairness of the terms of this offering for investment nor any
recommendation or endorsement of the Common Shares or the Reset
Shares, if any.
(c) The representations, warranties and agreements of the undersigned
contained herein and in any other writing delivered in connection with
the transactions contemplated hereby shall be true and correct in all
respects on and as of the date of the sale of the Common Shares and
the Reset Shares, if any, as if made on and as of such date and shall
survive the execution and delivery of this Subscription Agreement and
the purchase of the Common Shares.
(d) THE COMMON SHARES AND THE RESET SHARES, IF ANY, MAY NOT BE
TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER
THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
11. Miscellaneous.
(a) On or after the date of this Agreement, each of the parties shall, at
the request of the other, furnish, execute and deliver such documents
and instruments and take such other action as the requesting party
shall reasonably require as necessary or desirable to carry out the
transactions contemplated herein.
(b) This Agreement, including all matters of construction, validity and
performance, shall be governed by and construed and enforced in
accordance with the laws of the State of Washington, as applied to
contracts made, executed and to be fully performed in such state by
citizens of such state, without regard to its conflict of law rules.
The parties hereto agree that the exclusive jurisdiction and venue for
any action brought between the parties under this Agreement shall be
the state and federal courts sitting in King County, Washington, and
each of the parties hereby agrees and submits itself to the exclusive
jurisdiction and venue of such courts for such purpose.
(c) This Agreement comprises the entire agreement between the parties. It
may be changed only by further written agreement, signed by both
parties. It supersedes and merges within it all prior agreements or
understandings between the parties, whether written or oral. In
interpreting or construing this Agreement, the fact that one or the
other of the parties may have drafted this Agreement or any provision
shall not be given any weight or relevance.
(d) This Agreement may be executed in counterparts, each of which will be
deemed to be an original and all of which will constitute one
agreement. A facsimile copy is deemed to be effective delivery of this
Agreement.
-7-
<PAGE>
Date: ____________________, 1999.
- -------------------------- $-------------------------------
Number of Common Shares purchased Aggregate Purchase Price
<TABLE>
Payment Number Number of Shares Price Per Share Purchase Price
- -------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Payment 1 $______
Payment 2 $______
Payment 3 $______
Totals
</TABLE>
- -------------------------- --------------------------------
Signature Name - Typed or Printed
--------------------------------
Title (if applicable)
- ------------------------------------------------------------------------------
Subscriber's Address
- -------------------------- --------------------------------
Telephone Number Social Security Number, if any
Manner in Which Title is to be Held. State precisely the name or names in which
the Common Shares and the Reset Shares, if any, are to be registered and whether
the Common Shares and the Reset Shares, if any, are to be held as joint tenants
with right of survivorship, as tenants in common, individually or otherwise:
---------------------------------------------
---------------------------------------------
ACCEPTANCE
The foregoing Subscription Agreement and the consideration reflected
therein are hereby accepted.
-8-
<PAGE>
DATE: __________________________, 1999.
THE NEPTUNE SOCIETY, INC.
By -------------------------------------
Its -----------------------------------
-9-
EXHIBIT 10.21
Schedule 1
Registration Rights Agreement
All terms within this Registration Rights Agreement shall have the same meaning
as defined in the Subscription Agreement.
For purposes of this declaration ("Registration Rights Declaration"),
"register," "registered," and "registration" refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the 1933 Act, and the declaration or ordering of effectiveness of such
registration statement or document.
1. Within sixty (60) days of the Closing Date of Payment 3 pursuant to the
Subscription Agreement by and between the Company and the Purchaser, the
Company will use its best efforts to:
a. Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 to register the
Common Shares for resale under the 1933 Act, and use its best efforts
to cause such registration statement to become effective, and prepare
and file with the Commission such amendments to such registration
statement and supplements to the prospectus contained therein as may
be necessary to keep such registration statement effective until the
earlier of (i) ________________, and (ii) such time as all the Common
Shares have been resold or may be resold by the holders thereof in a
three-month period in reliance upon Rule 144 under the 1933 Act;
b. Furnish to the Purchaser such reasonable number of copies of the
registration statement, preliminary prospectus and such other
documents as may be reasonably required in order to facilitate the
public offering of the Common Shares;
c. Use its best efforts to register or qualify the Common Shares under
such state securities or blue sky laws of such jurisdictions as the
holders may reasonably request in writing, except that the Company
shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
d. Notify the Purchaser promptly after it shall receive notice thereof,
of the time when such registration statement has become effective or a
supplement to any prospectus forming part of such registration
statement has been filed;
e. Notify the Purchaser as to any request by the Commission for the
amending or supplementing of such registration statement or prospectus
or for additional information;
f. Prepare and promptly file with the Commission and promptly notify the
holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the 1933 Act, any
event shall have occurred as the result of which any such prospectus
or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; provided,
however, that the Company may delay the filing of
1
<PAGE>
any such amendment or supplement (for a period not to exceed 90 days),
if the Company shall in good faith determine that such amendment or
supplement would require the Company to disclose a material
development or potential material development involving the Company,
the disclosure of which would have a material adverse effect on the
Company; provided, further, that the Company may suspend use of such
registration statement in such instance or as may be necessary to
update or amend such registration statement to correct any untrue
statement of a material fact in, or an omission of a material fact
from, such registration statement; and
g. Advise the Purchaser, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued;
2. All fees, costs and expenses of and incidental to the registration required
by this Registration Rights Agreement shall be borne by the Company,
provided, however, that any holders participating in such registration
shall bear their pro rata share of any underwriting discount and
commissions and transfer taxes. The fees, costs and expenses of
registration to be borne by the Company shall include, without limitation,
all registration, filing, and NASDAQ (or any other applicable quotation
system or exchange) fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of
any jurisdictions in which the securities to be offered are to be
registered or qualified, the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering,
and reasonable fees and disbursements of one counsel for the selling
security holders. Any other expenses incurred by the selling security
holders not expressly included above shall be borne by the selling security
holders.
2
EXHIBIT 21.1
The subsidiaries of The Neptune Society, Inc. are as follows:
o Neptune Society of America, Inc., a company incorporated under the
laws of the State of California;
o Neptune Management Corp., a company incorporated under the laws of the
State of California;
o Heritage Alternatives, Inc., a company incorporated under the laws of
the State of California;
o Neptune Pre-Need Plan, Inc., a company incorporated under the laws of
the State of California;
o Neptune Funeral Services, Inc.;
o Neptune Funeral Services of Westchester, Inc.;
o Neptune-Los Angeles, Ltd., a limited partnership under the laws of the
State of California;
o Neptune-Santa Barbara, Ltd., a limited partnership under the laws of
the State of California;
o Neptune-Miami, Ltd., a limited partnership under the laws of the State
of Florida;
o Neptune-St. Petersburg, Ltd., a limited partnership under the laws of
the State of Florida;
o Neptune-Ft. Lauderdale, Ltd., a limited partnership under the laws of
the State of Florida;
o Neptune-Nassau, Ltd., a limited partnership under the laws of the
State of California;
o Neptune-Westchester, Ltd., a limited partnership under the laws of the
State of California; and
o Heritage Alternatives, L.P., a limited partnership under the laws of
the State of California.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 818,221
<SECURITIES> 0
<RECEIVABLES> 156,372
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,010,068
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,044,295
<CURRENT-LIABILITIES> 10,900,537
<BONDS> 0
0
0
<COMMON> 1,089,000
<OTHER-SE> 9,096,265
<TOTAL-LIABILITY-AND-EQUITY> 65,044,295
<SALES> 4,091,433
<TOTAL-REVENUES> 5,246,581
<CGS> 2,364,817
<TOTAL-COSTS> 4,117,753
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<INCOME-TAX> 199,042
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<NET-INCOME> 933,641
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</TABLE>
