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........................................................................................1
ITEM 2. SELECTED FINANCIAL INFORMATION.................................................................16
ITEM 3. PROPERTIES.....................................................................................24
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................24
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS...............................................................26
ITEM 6. EXECUTIVE COMPENSATION.........................................................................28
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................33
ITEM 8. LEGAL PROCEEDINGS..............................................................................34
ITEM 9 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................................................35
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES........................................................36
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED........................................38
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................39
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................40
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........40
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS..............................................................40
SIGNATURES
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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 our
strategic plans, capital expenditures, industry trends and our financial
position. Such forward-looking statements reflect our current views with respect
to future events and are subject to certain risks, uncertainties and
assumptions, including competition for and availability of crematory
acquisitions, our ability to manage an increasing number of sales offices and
crematories, our 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. We
do not intend to update these forward-looking statements and information.
Our management has included projections and estimates in this Registration
Statement, which are based primarily on management's experience in the industry,
assessments of our 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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ITEM 1. BUSINESS
Overview
The Neptune Society, Inc., a Florida corporation, is the holding company
for the Neptune Society of America, Inc., a California corporation. Neptune of
America is the holding company for Neptune Management Corp. and Heritage
Alternatives, Inc., which are engaged in marketing and administering Pre-Need
and At-Need cremation services in California, Florida, New York and Washington.
We also operate a crematory in Los Angeles, California to provide cremation
services in the Los Angeles area, and we acquired a crematory in Spokane,
Washington on December 31, 1999 to provide cremation services in Eastern
Washington. We use the services of third-party crematories in other areas of the
United States. See "History of the Neptune Society."
Our principal executive offices are located at 100 N. First Street, Suite
#205, Burbank California 91502. Neptune Society maintains corporate offices at
102 N.E. 2nd Street, Suite 777, Boca Raton, Florida 33432.
Unless the context otherwise requires, (i) "Neptune Society" refers to The
Neptune Society, Inc., (ii) "Neptune of America" refers to Neptune Society of
America, Inc., and (iii) "Neptune Management" refers to Neptune Management Corp.
and (iv) "Heritage Alternatives" refers to Heritage Alternatives, Inc. "We,"
"us," and "our" refers to Neptune Society, and its subsidiaries and associated
entities.
All dollar amounts are in United States dollars unless otherwise indicated.
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 information available on the National Funeral Directors
Association's web site at www.nfda.org:
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.
o There were 2,338,078 deaths in the United States during the 12-month
period ending December, 1998, or 8.65 deaths per thousand population.
(source: U.S. Department of Health & Human Services, 1998).
o Of more than 2.3 million deaths nationwide in 1998, nearly 76%
resulted in earth burial or entombment and approximately 24% resulted
in cremation.
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o In 1998, the average cost of an adult funeral was approximately
$5,000.
o Death rates are projected to rise to:
o 8.82 deaths per thousand in 2000;
o 9.32 deaths per thousand in 2010;
o 10.24 deaths per thousand in 2020.
We believe 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 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 in the
United States, ranging from a low of 5.13% in Mississippi to 58.51% in
Hawaii.
o In 1998, cremation services were chosen for only approximately 23.75%
of total deaths in the United States, representing approximately
550,000 cremations.
o Cremation services are expected account for approximately 25.7% of
death services in 2000 and for approximately 38.18% of death services
in 2010 (based on a 5 year compound average growth rate).
o The demand for cremation services as a percentage of death services
grew on average approximately 5% over the last ten years from 1989 to
1998 and approximately 3.8% over the last five years from 1994 to
1998.
We cannot assure you that the trend towards cremation will continue or that
we will benefit from the growth demand for cremation services, if any. Our
business strategy is to provide Pre-Need and At-Need cremation services. A
decline in the demand for such services may have a material adverse affect on
our business and our results of operations.
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;
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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
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.
We intend to compete by focusing on the Pre-Need cremation segment of the
death care industry. We believe that we can effectively market cremation
services on a Pre-Need basis by offering a lower cost alternative to burial
funerals. We do not intend to offer traditional funeral services and, therefore,
do not intend to compete with traditional funeral service providers.
We cannot assure you that we 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 us and have long
established reputations in the markets they serve.
The Neptune Society Business
Our business strategy is to pursue revenue and growth opportunities in the
cremation sector of the death care service industry. We operate all our
locations under one nationally branded name, "The Neptune Society," and offer
only cremation services and products related to cremation services. We do not
intend to evolve into a traditional funeral burial services company and do not
intend to compete directly with the larger corporate consolidators in the death
care service industry by providing burial services.
Services
Our primary business is marketing and administering Pre-Need and At-Need
cremation services in California, Florida and New York. On December 31, 1999, we
acquired the operations of a crematory in Spokane, Washington and intend to
begin marketing and administering Pre-Need and At-Need cremation services in
Washington beginning in the first quarter 2000. We also operate a crematory in
Los Angeles, California, and a telemarketing call center in Tempe, Arizona.
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The Neptune Society Pre-Need Program
We started our 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.
Since we began our Pre-Need program, approximately 70,000 individuals have
become members of our Pre-Need program, some of which have since died or
cancelled their membership. As of December 31, 1999, we had approximately 52,000
active Pre-Need members. We spend approximately 40% of the Pre-Need services
payments collected from each member immediately to cover the cost of
merchandise, which is either delivered to the member or is stored by us until
the member's death. We deposit the balance of the payments to a trust fund,
which is administered by us in accordance with applicable state regulations. See
"Industry Regulation - Pre-Need Trust Fund."
The Neptune Society At-Need Programs
We also provide cremation services to non-members on an At-Need basis.
These services are generally less expensive than burials. We provide a full
range of cremation services and handle 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
We offer a registration service that allows individuals to record and
register their request to be cremated, and we maintain a record of information
necessary for us to provide cremation services at the time of death.
Crematory Services
We operate a crematory in Los Angeles, California, and recently acquired a
crematory in Spokane, Washington. We also use the services of third-party
crematories in other areas of the United States to service our Pre-Need and
At-Need programs in those areas.
Other Services and Products
We believe that we can increase the revenues of our 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 our 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 our Fort Lauderdale office, our current offices do
not have the facilities to offer premium or upgraded services and products. We
intend to offer the full range
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of premium services and products by installing fixtures to display a selection
of urns and caskets and to build chapels in each of its existing locations.
Pricing
We define our pricing strategy as a simple, dignified and economical
alternative to traditionally more expensive and elaborate funerals and burials.
Our strategy is to maintain a simple product and pricing structure to assist
customer decision making. For example:
o Our current membership fee for registration is $25.
o Our current basic cremation service costs approximately $1,300.
o We currently charge 8% interest on outstanding amounts for our
extended payment plans.
o We offer a travel plan to Pre-Need members for $200-$300, which
guarantees service coverage throughout the continental United States.
We include services, such as burial at sea, rose garden scattering and
delivery of remains to family members in the cost of our standard services.
Our cremation services are generally less expensive than traditional
funeral services.
Facilities
Our offices have been generally located in clusters within a given
geographic area. We believe that clustering offices in the geographic areas we
serve may provide us with opportunities to share personnel, vehicles and other
resources, reduce per location operating and administrative costs reductions and
implement integrated marketing programs.
We currently have locations in California, Florida, New York and Washington
State. See "Properties."
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We believe that we can acquire existing cremation service providers with
established market presence as an avenue of growth. The cremation segment within
the death care industry is highly fragmented, and we believe that there are many
small owner-manager operations throughout North America which are possible
acquisition targets.
We intend to acquire cremation services companies with existing operational
licenses and offices with At-Need operations. Our strategy is to acquire such
operations in states with large population centers where cremation rates are 25%
to 50%. Based on our experience, we anticipate that very few acquisition targets
will have established a prearranged sales program, thus enabling us to institute
our Pre-Need program.
We also intend to grow by establishing new offices. We intend to apply
specific selection criteria when evaluating new locations, including:
o areas with a higher than average death rate;
o forecasted growth in cremation rates; and
o favorable trust laws.
Our management is currently investigating locations in Texas, Illinois,
Pennsylvania, Michigan, Indiana, Connecticut, New Jersey, Ohio, Massachusetts
and Washington. All of these States are highly populated and have current
cremation rates that range from 15% to 25%. We intend 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 our crematories will have the capacity to service our own needs
and the needs of other agencies, potentially increasing our operating
efficiencies.
We cannot assure you that we will acquire any additional death care service
providers or that acquisitions, if any, will result in increased operating
efficiencies or revenues to us.
Marketing
We currently market our services in all locations under the name "The
Neptune Society." Our marketing strategy is focused on maintaining and further
developing the strength of our brand name and creating consumer awareness of its
death care services and products. We promote our death care services and
products using targeted advertising campaigns, including, for example:
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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 we have operations;
o Local television and radio advertisements; and
o A Web site providing up-to-date, on-line information related to our
death care services and products.
We market our Pre-Need programs using a combination of sales and direct
marketing programs to generate sales.
Direct Mail: We use a monthly direct mail campaign to generate leads. We
currently mail approximately 3.6 million pieces of direct mail marketing
materials per year in the geographic areas we serve. We generally receive a
response rate of approximately 1% from our direct mail campaigns. We anticipate
we can sell Pre-Need plans to approximately 30% of these leads through our
direct sales efforts. We are planning to integrate and improve the performance
of our marketing strategy by introducing new automated systems to decrease
mailing costs and manage increased primary lead generation. We intend to
increase our direct marketing sales forces in Florida and New York.
Telemarketing: We established a telemarketing center in Tempe, Arizona,
which is staffed by 12 telemarketers. Our current telemarketing program is
targeted at primary leads who have responded to our direct mail campaigns. We
anticipate that telemarketing will become an integral part of our plan to
increase the number of Pre-Need plans we sell to leads generated by our direct
mail marketing campaign.
The goal of our telemarketing strategy is to double the sales of our
Pre-Need plans resulting from direct mail leads, which is currently
approximately 7,000 Pre-Need plan sales per annum. Based on our research of the
telemarketing industry, we believe we can achieve this goal by using our call
center as a convenient forum for providing information to potential members and
for setting appointments for our sales consultants. Our call center is
anticipated to allow us to consolidate our telemarketing efforts and appointment
scheduling of our sales consultants in one centralized location. We believe this
will allow us to implement a uniform telemarketing and promotional strategy
using professional telemarketers. We anticipate that will relieve our sales
consultants of some of their prior administrative duties, which may facilitate
an increased number of sales calls and increase our sales productivity. We
cannot assure you that we will successfully implement our telemarketing programs
or that the number of Pre-Need plans we sell to leads generated by our direct
mail marketing campaign will increase as a result of our call center.
Personal Sales: We use commissioned sales consultants to sell Pre-Need
contracts. Each of our Pre-Need sales offices has a sales manager who recruits,
trains and engages sale consultants. These sales consultants are provided leads
generated from our direct mail
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campaigns and telemarketing efforts, 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 our sales
consultants perform services in California and have worked with our subsidiaries
for over four years.
Internet Web Site: We retained the services of a New York based consultancy
and web development company that specializes in building Internet-based
businesses, to assist us in developing a fully integrated and comprehensive web
site targeted at the baby boomer generation. We believe 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. We launched our web site on September 30, 1999, and
consumers may purchase Pre-Need plans on-line. We plan 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.
Our 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 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 our 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, we entered into a Stipulation
and Settlement and Decision which ordered that our 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. In addition, we were ordered to have its
crematory facilities inspected and not to accept any cases beyond its ability to
handle appropriately. In particular, we were 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, we applied for an
assignment of licenses in connection with closing of the sale of the business.
California approved the
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assignment, subject to amending the Stipulation and Settlement and Decision to
incorporate a requirement for us 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 we fail to comply with the terms and conditions of the Stipulation and
Settlement and 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 us 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 September 30, 1999, the
balance of the trust fund was approximately $33.4 million with over 52,000
active members. We anticipate that the Pre-Need trust fund may increase to
approximately $100 million by 2004 if the trend toward cremation services
continues and we successfully implement our growth strategy as planned. We
cannot assure you that we will successful increase our Pre-Need membership to
levels that would result in a growth the Pre-Need trust or that the Pre-Need
trust will not decline as a result of increased death rates of our membership.
Although applicable laws vary from state to state, typically we 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, we are 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 us at the time the
cremation service is performed and historically have allowed is 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 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, we employed approximately 109 people comprised of 43
commission sales people, 40 full time counselors and mortuary personnel and 12
administrative personnel at our corporate offices. In November 1999, we hired 14
employees to staff our call center in Tempe, Arizona. Management believes that
our relationship with our employees is good. None of our employees are members
of collective bargaining units.
History of the Neptune Society
We began our operations in the death care industry in 1973, and operated as
a private company until we acquired and reorganized the company in April 1999.
In 1992, we acquired
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Heritage Alternatives, Inc., a crematory located in Los Angeles, California. We
agreed to pay to the former owners of the business $10 to $15 per cremation
until March 1, 2003.
In April 1999, we, through our subsidiary Neptune of America, acquired
Neptune Management, Heritage Alternatives and various limited partnerships that
conducted business as the "Neptune Society" in California, Florida and New York.
In connection with the acquisition, we paid the Emanuel Weintraub Inter Vivos
Trust, Jill Schulman, Stanley Zicklin, Marvin Falikoff, Helen Kramer, Milton
Kramer, Paul Shields, Nancy Leferman, Norman Leferman, Sam Perlow, Joan Perlow,
Stuart Solomon, Marilyn Tenzer, Arlene Zicklin, Linda Stark, Ted Boock, Marlene
Burdman, James Freedman, Freedman Family Trust, Dennis Family Trust-Leo Robert
and Lorraine Dennis, Leo Robert Dennis-IRA Smith Barney, Dennis Family Trust-Ron
Dennis, Dennis Family Turst-Richard and Jessica Dennis, JPS Associates, Marcia
Deifik, Connie King, Herm Warme, Jon Warme, Judith Glaser, Steve Brown, Irving
Steinfield, Steve Schwartz, Zorinee Schwartz Mervyn Kalman, Jerry Lertzman, and
RER, the former owners of Neptune Management, Heritage Alternatives and the
various operating entities, a total of $1,000,000 in cash and issued them a
total of 1,000,000 shares of our common stock. In addition, our subsidiary,
Neptune of America, issued to the former owners two promissory notes in the
amounts of $19,000,000 and $2,000,000, respectively, which we guaranteed. These
notes are secured by the assets and business of Neptune Management and Heritage
Alternatives. As of January 5, 2000, we have repaid $9,245,000 on the promissory
notes.
In connection with the acquisition, we entered into a three-year consulting
agreement with Emanuel Weintraub, the founder and former President and CEO of
Neptune Management and Heritage Alternatives. Pursuant to the terms of the
consulting agreement, we agreed to pay Mr. Weintraub $1,000,000 over the
three-year term of the agreement. See "Certain Relationships and Related
Transactions."
On December 31, 1999, we acquired all of the assets of the business of
Cremation Society of Washington, Inc. in Spokane, Washington pursuant to the
terms of an asset purchase agreement dated December 31, 1999. Under the terms of
the agreement, we agreed to pay Cremation Society of Washington, $500,000 in
cash and to issue it 22,727 shares of our common stock. In addition, we agreed
to pay Cremation Society of Washington the following amounts:
o on or before March 2, 2001, (i) 3% of gross revenues and (ii) 12.5% of
the earnings before income tax, depreciation and amortization
("EBITDA") of the Cremation Society of Washington during the twelve
month period ending December 31, 2000;
o on or before March 2, 2002, (i) 2.75% of gross revenues and (ii) 12.5%
of EBITDA of the Cremation Society of Washington during the twelve
month period ending December 31, 2001;
o on or before March 2, 2003, (i) 1% of gross revenues and (ii) 7.5% of
EBITDA of the Cremation Society of Washington during the twelve month
period ending December 31, 2002; and
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o on or before March 1, 2004, (i) 1% of gross revenues and (ii) 7.5% of
EBITDA of the Cremation Society of Washington during the twelve month
period ending December 31, 2003.
We agreed to pay an additional $125,000 in cash or additional shares of our
common stock, at the option of Cremation Society of Washington, if the average
trading price of our shares for the 30 day period from December 1 to December
31, 2000 declines below $5.50 per share. We also agreed to pay a bonus equal to
10% of EBITDA of the Cremation Society of Washington to Cremation Society of
Washington during each of the twelve month periods ending December 31 after
December 31, 2004, provided that John C. Ayres, the founder and sole shareholder
of Cremation Society of Washington, and/or Charles S. Wetmore, the general
business manager of Cremation Society of Washington, continue to be employed by
us. In connection with our acquisition of Cremation Society of Washington, we
entered into an employment and non-competition agreement with Mr. Wetmore and
issued Mr. Wetmore 22,727 shares of our common stock as consideration for
entering into such agreement.
RISK FACTORS
We have included information in this Registration Statement that contains
"forward looking statements." Our actual results may materially differ from
those projected in the forward looking statements as a result of risks and
uncertainties. Although we believe that the assumptions made and expectations
reflected in the forward looking statements are reasonable, we 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 our 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.
We will not be able to execute our business strategy to acquire existing
crematory service providers unless we have additional financing available in the
event our shares are not accepted as consideration for future acquisitions.
Our business strategy is to grow through acquisitions of cremation service
providers, open new offices and increase the performance of our existing
operations. We may finance future acquisitions through bank indebtedness, cash
from operations, issuing common stock or other securities, or any combination of
these. In the event that our common stock does not maintain a sufficient market
value, or potential acquisition candidates are otherwise unwilling to accept our
common stock or other securities as part of the consideration for the sale of
their businesses, we may be required to use more of our cash resources or incur
substantial debt in order to finance future acquisitions. If we do not have
sufficient cash resources, our ability to make acquisitions could be limited
unless we are able to obtain additional capital through debt or equity
financings. We cannot assure you that we will be able to obtain the financing we
will need in the future on terms we deem acceptable, if at all.
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We will not be able to execute our business strategy to acquire existing
crematory service providers unless we are able to effectively target
acquisitions in a competing environment.
We cannot assure you that our current management, personnel and other
corporate infrastructure will be adequate to effectively target acquisitions and
then integrate them into our business without substantial costs, delays or other
operational or financial problems.
In terms of selecting acquisition targets, we will be competing with
several publicly held North American death care companies, including Service
Corporation International, Stewart Enterprises, Inc. and Carriage Services, Inc.
Each of these other companies has greater financial and other resources than us
and 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. Because we are seeking to acquire only cremation
service providers, we limit the number of potential acquisition targets
available to us and consequently may not be able to execute our business
acquisition strategy.
We may not be a profitable business unless we are able to fully integrate our
business acquisitions into our existing infrastructure.
Assuming that we are successful in completing acquisitions, we may not be
able to effectively integrate them into our business due to the geographic
disparity of management personnel and the cost of centralizing operations in our
California head office. Part of our acquisition strategy will be to retain key
employees at locations acquired and our failure to do so may result in a decline
in the performance of the continuing operations at those newly acquired
locations. We may also experience increased costs related to the hiring and
training of new personnel, which may adversely affect our ability to operate our
newly acquired locations on a cost-effective basis.
A decline in death rates may impair our ability to be profitable in the future.
As we continue to see improvements in technology related to health care
that may prolong life expectancy, we may experience a decline in expected death
rates. Such a decline, coupled with our current business strategy to expand
through acquisitions and increased performance of our existing operations, may
result in a decrease in the demand for our cremation services and adversely
affect our ability to maintain profitability. A decline in demand and revenues
together with increased costs resulting from our acquisitions may result in
declines in profitability or losses.
A decline in the choice of cremation rather than burial services may impair our
ability to be profitable in the future.
Our business strategy is premised on the current trend in the death care
industry where consumers are selecting cremation services over the more
traditional burial services. We may be unable to achieve the growth in our
revenues necessary to operate profitably as we expand our operations and
increase our marketing and sales efforts. Our acquisition strategy is expected
to increase our costs of operations and a decline in the number of cremation
services may result in a decrease in our revenues, which may result in a decline
in our profitability and losses.
12
<PAGE>
Our ability to execute our business plan is predicated on our ability to retain
key personnel with experience in business acquisitions and in the death care
industry.
We depend to a large extent upon the abilities and continued efforts of
Marco P. Markin, our President and a director, and Gary R. Loffredo, a director
and the President of Heritage Alternatives Inc., to provide overall decision
making in targeting and negotiating terms of acquisitions. We may incur
additional acquisition costs and delays in our expected growth should we lose
these key personnel. In addition, our success is also determined by offering
quality Pre-Need and At-Need cremation services, which are supervised by our
senior management team. The loss of the services of the key members of our
senior management could have a material adverse effect on our continued ability
to compete in the death care industry through delivery of quality services to
consumers.
In the event that we are not able to comply with the substantial regulation in
which we operate, we may be subject to business operation closures, fines and
penalties.
The death care industry is 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 our business. The
impact of such regulations varies depending on the location of our offices and
facilities and failure to comply with such regulations may result in business
closures, fines and penalties; all of which may effect the profitability of our
business.
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 and in particular our ability to be profitable. 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 we operate, these and other possible proposals could have a
material adverse effect on our profitability as we would be required to refund
more Pre-Need sales than we are presently required to refund.
Any substantial sale of our common stock or even the possibility of such sales
may decrease the market price of our common stock due to the insufficient demand
for the common stock being or proposed to be sold.
As of January 5, 2000, we had 13,195,453 shares of common stock issued and
outstanding. Any substantial sale of our common stock or even the possibility of
such sales occurring may have an adverse effect on the market price of our
common stock should the corresponding demand for the common stock be limited.
Your investment in our shares may be diluted in the event that we may be
required to sell additional common stock or parties may exercise options and
warrants.
We have an aggregate of approximately 1,800,000 shares of our common stock
reserved for issuance to our employees, directors and consultants under our
option plan. We have also
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<PAGE>
issued warrants exercisable to acquire up to 675,000 shares of our common stock
at a price between $5.21 and $6.25 per share. We also granted options
exercisable to acquire up to 853,500 shares of our common stock at $5.875 per
share to our employees, officer, directors and sales consultants. Holders of the
options and warrants are likely to exercise them when, in all likelihood, we
could obtain additional capital on terms more favorable than those provided by
the options. This will increase the supply of common stock and dilute your
investment in our shares. However, we cannot assure you that such options will
be exercised. Further, while the options are outstanding, our ability to obtain
additional financing on favorable terms may be adversely affected as investors
may not invest given the possibility of dilution through exercise of options.
In the event that your investment in our shares is for the purpose of deriving
dividend income or in expectation of an increase in market price of our shares
from the declaration and payment of dividends, your investment will be
compromised because we do not intend to pay dividends.
We have never paid a dividend to our shareholders and we intend to retain
our cash for the continued development of our business. We do not intend to pay
cash dividends on the common stock in the foreseeable future. As a result, your
return on investment will be solely determined by your ability to sell your
shares in a secondary market.
You may not be able to attract broker-dealers from effecting transactions in our
shares because our shares are considered penny stocks and are subject to the
penny stock rules.
The additional sales practice and disclosure requirements imposed upon
brokers-dealers pursuant to penny stock regulations under the Securities
Exchange Act of 1934, as amended, may discourage broker-dealers from effecting
transactions in our shares, which could severely limit the market liquidity of
the shares and impede the sale of our shares in the secondary market. These
impose substantial requirements on broker-dealers and effect transactions in
penny stocks, non-NASDAQ shares with a market price of less than $5.00,
including requirements to assess the suitability of the purchaser and to make
monthly disclosures to the purchaser.
Our ability to be profitable is premised on our ability to compete effectively
in a highly competitive industry.
The death care service industry is intensely competitive and rapidly
evolving with the consolidation efforts of our competitors. Unless we can be
competitive, we will lose revenue to our competitors and not be able to be
profitable. Our competitors are small independent death care service providers
and large publicly traded companies, including Carriage Services which owns or
operates more than 176 funeral homes and over 38 cemeteries in the United
States, 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 our services and
products. We also compete on the local basis to provide services in each
community it serves with service providers that have established reputations and
long histories of operations.
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<PAGE>
ITEM 2. SELECTED FINANCIAL INFORMATION
Set forth below is certain of our selected combined financial and operating
information for nine month period ended September 30, 1999 and September 30,
1998, and the three years ended December 31, 1998, 1997 and 1996. The selected
combined financial information is derived from our combined financial statements
for such periods. The information set forth below should be read in conjunction
with Management's Discussion and Analysis of Financial Conditions and Results of
Operations and our 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
Condition and Results of Operations" for additional information on the
acquisition.
<TABLE>
NINE MONTHS ENDED SEPTEMBER
30 YEAR ENDED DECEMBER 31
------------------------------ -----------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(in thousands, (in thousands,
except per share information) except per share information)
<S> <C> <C> <C> <C> <C>
Revenue $ 7,689 $ 6,167 $ 8,438 $ 9,757 $ 9,043
Gross Profit $ 3,960 $ 2,595 $ 3,566 $ 5,071 $ 4,054
Net Income (Loss) $ 939 $ (825) $ (948) $ 1,400 $ 1,619
Net Income (Loss) per share, $ 0.08 $ (0.07) $ (0.08) $ 0.12 $ 0.13
basic and diluted
</TABLE>
<TABLE>
AT SEPTEMBER 30 AT DECEMBER 31
1999 1998 1997
--------------------------------- ---------------------------------
(in thousands) (in thousands)
--------------------------------- ---------------------------------
<S> <C> <C> <C>
Working Capital $ (16,568) $ (32) $ 1,317
Total Current Assets $ 774 $ 835 $ 2,008
Total Property and Equipment $ 303 $ 218 $ 267
Prearranged Cremation Contracts $ 33,401 $ 32,055 $ 30,172
Total Current Liabilities $ 17,342 $ 867 $ 691
Deferred Prearranged Cremations $ 33,401 $ 32,055 $ 30,172
Stockholders' equity $ 13,560 $ 7,982 $ 9,091
</TABLE>
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<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
We sell 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 us 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 us 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, we perform cremation services for non-members on an At-Need
basis. This revenue is recorded at the time of performing the service.
Additional revenue earned by us 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 installment plan in
California.
We provide a full range of cremation services. In California, we operate
the Heritage Crematorium located in Los Angeles which handles our cases in
southern California. In Florida and New York, we contract our cremations to
third party crematories. On December 31, 1999, we acquired the operation of a
crematory in Spokane, Washington, and we intend to begin marketing and
administering Pre-Need and At-Need services in Washington during the first
quarter of 2000. Volume and contracting costs dictate when it becomes
economically feasible for us to establish our own crematorium in any given
location.
Nine Month Period Ended September 30, 1999 Compared to the Nine Month Period
Ended September 30, 1998:
Results of Operations
Revenues
Cremation services revenues were $6,191,599 for the 9 month period ended
September 30, 1999, compared to $5,405,980 for the same period in 1998, a 14.5%
increase. On February 25, 1998, our California operations were suspended for
March and April pursuant to a Department of Consumer Affairs order in connection
with our failure to comply with appropriate storage procedures at our crematory
facility. As a result, we lost two months of revenue in 1998 compared to the
full nine months being operational in 1999. See Item 1 "Death Care Service
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<PAGE>
Industry Regulation." In the nine month period ended September 30, 1999, we also
recognized revenue of $525,224 from the liquidation of a merchandise trust fund.
We had originally established the trust fund to pay for merchandise; however,
California state regulators required us to liquidate this fund and actually
purchase and deliver the merchandise to our customers at the time that the
contract for the Pre-Need service is made. We recorded revenue during the nine
month period ended September 30, 1999 pursuant to the terms of the trust
agreement, which entitled us to release the funds during the period. We believe
that our increase in revenue for 1999 over 1998 is not an accurate indicator of
growth in our business due to the closure of our operations in 1998 and due to
the non-recurring item resulting from the liquidation of the merchandise trust
fund.
In California, we earn a management fee up to a maximum of 4% of the trust
funds on Prearranged Cremations Contracts. In addition, we earn an 8% finance
charge on Pre-Need contracts purchased on an installment plan. Revenues earned
from these sources were $971,910 in 1999 compared to $760,787 in 1998, a 28%
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.
As of September 30, 1999, we maintain a trust fund with a market value of
approximately $33.4 million for approximately 52,000 active members in our
Pre-Need programs, compared to approximately $32 million at September 30, 1998.
The increased value in the trust fund is a result of the general economic growth
and our investment of the funds in public markets. We anticipate that our trust
fund may grow to approximately $100 million by 2004 based on our efforts to
increase membership in our Pre-Need plans and general economic growth. We cannot
assure you that we will successfully increase membership or that our management
of the trust fund will result in appreciation in value.
Costs and Expenses, and Gross Profit
Direct costs and expenses were $3,728,806 for the 9 month period ended
September 30, 1999, compared to $3,571,371 for the same period in 1998, a 4.4%
increase.
The gross profit percentage (excluding the non-recurring items) in 1999 is
47.9%, compared to 42.1% 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. Our crematory in California is currently operating and we
anticipate our gross profit percentage to remain stable at approximately
50%-55%.
Other expenses
General and administrative expenses were $1,404,959 for the 9 month period
ended September 30, 1999, compared to $936,597 for the same period in 1998.
General and administrative costs were lower than expected during the 9 month
period ended September 30, 1998 because our California operations were temporary
suspended by regulatory action. During the same period in 1999, general and
administrative expenses increased as our California
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<PAGE>
operations were operational and we incurred additional expenses related to
restructuring our business operations and corporate structure.
Depreciation and amortization has increased to $308,839 in 1999 from
$38,046 in 1998 due to a charge of $288,375 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 $380,183 in the 9 month period ended September 30,
1999 and $603,204 in 1998 are not considered indicative of our ongoing costs. We
incurred unusually high legal fees defending ourselves against proceedings by
the Department of Consumer Affairs, Funeral and Cemetery Division. 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
ending March 31, 1999, these costs amounted to $513,091 and in the 9 month
period to September 30, 1998 $1,842,721. 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.
Net Income
Net income for the 9 month period ended September 30, 1999 was $939,093,
compared to a loss of $825,172 for the corresponding period in 1998. This loss
in 1998 resulted from unusual expenses for the period as described above. We
anticipate that net income will remain at levels achieved during the 9 month
period ended September 30, 1999.
Fiscal 1998 Compared to Fiscal 1997
Results of Operations
Revenues
Cremation service 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 our 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 $4,871,789 for the year ended December 31,
1998, compared to $4,686,244 for the same period in 1997, a 3.81% increase. The
gross profit percentage in 1998 is 42.26%, compared to 51.97% in 1997. The 1998
result is not considered a true
18
<PAGE>
representation of ongoing operations since we 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 were $668,894 in the year ended December 31, 1998
and $245,033 the year ended December 31, 1997. We were forced to defend
ourselves 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 $948,453, compared to net
income of $1,399,843 for the year ended December 31, 1997. The decline in net
income for the year ended December 31, 1998 was as a result of lower than
anticipated revenues caused by the temporary closure of our California
operations.
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 $4,686,244 for the year ended December 31,
1997, compared to $4,989,340 for the same period in 1997. The gross profit
percentage in 1997 is 51.97%, compared to 44.8% in 1996. The high level of
direct costs adversely effected the 1996 gross margin.
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<PAGE>
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 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 $1,399,843,
compared to net income of $1,619,162 for the year ended December 31, 1996.
Liquidity and Capital Resources
At September 30, 1999, we had current assets of $774,241, including cash
and cash equivalents of $513,915, accounts receivable of $224,851 and other
current assets of $35,475. Other assets included a Pre-Need trust fund of
$33,401,367. Our total current liabilities were $17,341,867, including
$1,327,648 in accounts payable and accrued liabilities, $139,185 due to a former
principal shareholder, income taxes payable of $142,802, loans payable of
$377,954 and current portions of long-term debt of $15,354,278. We had long-term
debt of $1,217,254.
We had working capital of Cash flows from operating activities of
$1,384,623 for the 9 month period ended September 30, 1999. The principal
adjustments to net income in arriving at cash flow from operations is to add
back depreciation and amortization of $308,839 and a deduction of $584,952 for
the net increase in deferred contract procurement costs.
Cash flows from financing activities during the year ended December 31,
1999 were as follows:
Equity Financings
On January 19, 1999, we issued 2,000,000 shares of our common stock at a
price of $0.10 per share in a private placement. Attached to each share were
four share purchase warrants for an aggregate issue of 8,000,000 share purchase
warrants. Each share purchase warrant was exercisable into one common share at a
price of $0.10 per share. These share purchase warrants were exercised on April
7, 1999. We received total gross proceeds from the issue of the shares and the
exercise of the share purchase warrants of $1,000,000.
On July 22, 1999, we entered into a private placement Agency Agreement with
Standard Securities Capital Corporation for the sale of 1,166,667 shares of our
common stock at $6.00 per share for total gross proceeds of $7,000,000. Pursuant
to those subscription agreements, we issued 666,666 common shares for gross
proceeds of $4,000,000 on August 9, 1999; 223,333 common shares for gross
proceeds of $1,340,000 on October 12, 1999; and 260,000 shares for gross
proceeds of $1,560,000 on December 30, 1999.
20
<PAGE>
The final 16,667 of the common shares subscribed for by the purchasers will be
issued on or before January 31, 2000 for gross proceeds of $100,002. We paid
Standard Securities Capital Corporation an agency fee of $140,000 on October 12,
1999, and $270,000 on December 30, 1999, in connection with the transaction and
will pay an additional agency fee of $10,000 upon the final closing of the
transaction. We 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.
We used $4,000,000 of the gross proceeds of the July 22, 1999 payment to
repay part of our promissory notes on August 11, 1999. We used the proceeds from
the October 12, 1999 and the December 30, 1999 payments for working capital and
the acquisition of Cremation Society of Washington. See "History of the Neptune
Society."
Other Financings
In consideration for the acquisition of Neptune Management and Heritage
Alternatives, we 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 $9,245,000. We are
obligated to make a payment of $10,000,000 on July 31, 2000 in connection with
the promissory notes. We intend to procure the funds required to make the two
payments by issuance of convertible debt and equity financing.
On December 30, 1999, we issued $5,000,000 Convertible Debenture at an
interest rate of 13%, of which 6.5% is payable in arrears in monthly
installments on the first day of each month in each and every calendar year
until the principal amount and all accrued and unpaid interest is paid in full
and the remaining 6.5% is payable on the due date, February 24, 2004. The
debenture is convertible into 1,000,000 shares of our common stock upon the
election of the investor at any time after nine months from issuance to February
24, 2004.
In addition, we issued warrants exercisable for five years to purchase
200,000 shares of our common stock at an exercise price of $5.21 per share and
200,000 shares of our common stock at an exercise price of $6.25 per share. We
have the following obligations under the debenture purchase agreement and the
convertible debentures:
o We granted demand registration rights pursuant to which we agreed to
file a registration statement, at our expense, on a Form S-1, Form S-3
or other similar form upon the demand of the purchaser to register the
resale of the common stock issued or issuable upon the conversion or
exercise of the debenture, the warrant, options or other of our
securities owned by the purchaser or any transferee of the purchaser;
o We granted the purchaser piggy-back registration rights pursuant to
which we agreed to register the purchasers' common stock in the event
we filed a registration statement, at our expense, to register any of
our securities for our own account or for the account of other
security holders;
o We agreed to adjust the number of shares issuable under the
convertible debentures and warrants if we issue additional shares of
our common stock if (i) we issue shares
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<PAGE>
for less than $5.00 in cash, in which case the debenture shall be
convertible at the lower price or (ii) if we issued shares without
consideration in a transaction that results in the issuance of shares
for consideration of less than $5.00 per share, in which case the
debenture shall be convertible at a price adjusted to give effect to
the lower value of the share issuance.
We paid a due diligence fee of $100,000 in connection with the issuance. We
used the proceeds of the financings to make the $4,874,216 payment due on
January 3, 2000 related to the promissory notes issued to the former owners of
Neptune Management and Heritage Alternatives.
We expect adequate sources of funds to be available to finance our future
operations through internally generated funds. We anticipate that we will
finance additional acquisitions and growth, in part, by issuing equity and debt
securities.
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 have defaulted to
01/01/1900 instead of 01/01/2000, and calculations using or reporting the date
may not be correct and errors may arise. If this occurs, 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.
We completed tests of each of our systems on January 3, 2000 to ensure that
they will not fail due to the Year 2000 problem. The cost of Year 2000
compliance has been less than $10,000 to date.
All of our systems functioned properly and no remedial action was
necessary. We are continuing to monitor our systems for Year 2000 compliance,
and we do not anticipate that any additional remedial action will be required.
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<PAGE>
ITEM 3. PROPERTIES
We lease 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. We also lease two properties for holding facilities, one of which also
stores merchandise inventory and the other has the crematory. We also lease our
corporate offices in Florida and Los Angeles. We lease a call center in Tempe,
Arizona. All of our leases are on standard terms and conditions, and we do not
rely on any one lease for its continuing operations.
The operations are currently concentrated at the following locations:
Summary of our operational locations
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
Washington
Spokane Pre-Need/At-Need sales and administrative office,
holding facility, crematory and viewing room
We operate a call center in Tempe, Arizona, which conducts our
telemarketing programs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We are not, to the best of our knowledge, directly or indirectly owned or
controlled by another corporation or foreign government.
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<PAGE>
The following table sets forth our principal (more than 5%) stockholders as
of January 5, 2000:
<TABLE>
Identity of Number of Percent of
Title of Class Person or Group Addresses Shares Owned Class(1)
- -------------- --------------- --------- ------------ --------
<S> <C> <C> <C> <C>
Common CCD Commerce Consulting Glockegasse 4 1,173,333 8.9 %
4001 Basel
Switzerland
Common Officers and Directors 810,027(2)(3) 6.1%
</TABLE>
(1) Based on 13,195,453 issued and outstanding shares.
(2) Directors and named executive officers, as a group, as of January 5, 2000.
(3) Includes 62,500 common shares issuable upon exercise of warrants.
The following table sets forth the stockholdings, direct and indirect, of our
directors and named executive officers as of January 5, 2000:
<TABLE>
Name of Director/Officer Number of Common
or Key Employee Address Shares Owned
- --------------- ------- ------------
<S> <C> <C>
Suzanne L. Wood 210-580 Hornby St. 15,000
Vancouver, B.C. V6C 2B6
Gary R. Loffredo 102 NE 2nd St, Suite 777 None
Boca Raton, FL 33432
Gary I. Harris 102 NE 2nd St, Suite 777 None
Boca Raton, FL 33432
Marco P. Markin 100 N. First, Suite 205 125,000
Burbank, CA 91502
Peter Campbell 100 N. First, Suite 205 None
Burbank, CA 91502
Emanuel Weintraub(2) 100 N. First, Suite 205 588,424
Burbank, CA 91502
Jill Schulman 100 N. First, Suite 205 81,603(3)
Burbank, CA 91502
</TABLE>
(1) Suzanne Wood has served as Secretary, Treasurer and a Director since
December 1998.
24
<PAGE>
(2) Former CEO and President of the Neptune Management and Heritage Alternative
Alternatives prior to the acquisition of The Neptune Society. We have
retained Mr. Weintraub as a consultant.
(3) This includes 62,500 common shares issuable on exercise of warrants. See
"Certain Relationships and Related Transactions."
We have 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 our control.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
current directors, executive officers and key employees. 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 December 31, 1999.
<TABLE>
Director/
Name Position Officer Since Age
- ---- -------- ------------- -----
<S> <C> <C> <C>
Marco P. Markin President, CEO and Director of each of The June 1999 35
Neptune Society, Inc., Neptune Society of
America, Inc. (since October) and Neptune
Management Corp. (since June 1999)
Suzanne L. Wood Secretary, Treasurer and Director of each of December 1998 42
The Neptune Society, Inc. and Neptune
Society of America, Inc. (since October 1999)
Gary R. Loffredo Director of both The Neptune Society, Inc. April 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
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.
</TABLE>
25
<PAGE>
<TABLE>
Director/
Name Position Officer Since Age
- ---- -------- ------------- -----
<S> <C> <C> <C>
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 our Company full time as our 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
news-magazines.
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.
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.
26
<PAGE>
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 Management and Heritage
Alternatives prior to the acquisition by the Neptune Society. Mr. Weintraub is
now a Consultant to our 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 our business.
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 our Vice-President of Operations, Florida. He
has been with us 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 our 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
employed by us since March 1998. Mr. Duran is also the owner and President of
D&B Provisions, Inc., a 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.
None of our executive officers or key employees who are related by blood,
marriage or adoption to any director or other executive officers, except for
Jill Schulman whose father is Emanuel Weintraub.
To our knowledge, there are no arrangements or understanding between any of
our executive officers of Neptune Society and any other person pursuant to which
the executive officer was selected to serve as an executive officer.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation paid to each of the individuals
who served as our Chief Executive Officer and our four other most highly
compensated executive officers (the
27
<PAGE>
"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 Position 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(5) 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 Management and
Heritage Alternatives 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, we expect 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.
(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 our subsidiary
companies in April 1999. He was appointed as Neptune Society's President
and CEO in October 1999 at an annual salary of $120,000 per year.
(5) Mr. Miller retired on January 4, 2000.
28
<PAGE>
Options and Stock Appreciation Rights ("SARs")
We 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
We did not make any long-term incentive awards during the most recently
completed fiscal year.
Defined Benefit or Actuarial Plan Disclosure
We do not provide retirement benefits for the directors or officers.
Compensation of Directors
Our Directors received no compensation for the fiscal year ended December
31, 1998 and December 31, 1999.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
We currently do not have any employment contracts with any of the named
executive officers.
Report on Repricing of Options/SARs
We did not have any options or SARs outstanding during the most recently
completed fiscal year.
Compensation Committee
We had no compensation committee (or other board committee performing
equivalent functions) during the last completed fiscal year. Emanuel Weintraub,
the former President and CEO of Neptune Management and Heritage Alternatives,
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.
29
<PAGE>
Incentive Stock Option Plan
On October 8, 1999, our 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 our employees 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 employees and such other persons as the Plan
Administrator may select and to give such persons an equity incentive to achieve
the objectives of our 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. Except as otherwise specified by the Plan Administrator or the
employee's stock option agreement, 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 us for any reason whatsoever, including death or
disability.
On December 31, 1999, we granted stock options under the Option Plan to the
following persons set forth on the table below:
STOCK OPTION SUMMARY
THE NEPTUNE SOCIETY, INC.
<TABLE>
Name & Address # of Shares Date of Expiry Exercise Price
- -------------- ----------- -------------- --------------
<S> <C> <C> <C>
Bill Bailey(1) 11,000 shares Dec. 31, 2002 $5.875
Boris Bagdassarroff(1) 8,500 shares Dec. 31, 2002 $5.875
Ralph Brown(1) 8,000 shares Dec. 31, 2002 $5.875
Diane Citarella(1) 8,500 shares Dec. 31, 2002 $5.875
James Dunn(1) 8,500 shares Dec. 31, 2002 $5.875
Marty Hoffman(1) 11,000 shares Dec. 31, 2002 $5.875
Milt Kramer(1) 8,000 shares Dec. 31, 2002 $5.875
Dick Lask(1) 8,500 shares Dec. 31, 2002 $5.875
Ron Nilsen(1) 8,000 shares Dec. 31, 2002 $5.875
</TABLE>
30
<PAGE>
<TABLE>
Name & Address # of Shares Date of Expiry Exercise Price
- -------------- ----------- -------------- --------------
<S> <C> <C> <C>
Harvey Tolpin(1) 11,000 shares Dec. 31, 2002 $5.875
Toby Trifon(1) 8,500 shares Dec. 31, 2002 $5.875
Don Turney(1) 8,000 shares Dec. 31, 2002 $5.875
Lynn Weiss(1) 8,500 shares Dec. 31, 2002 $5.875
Leon Leonard(1) 8,500 shares Dec. 31, 2002 $5.875
Gerald Cave(1) 8,000 shares Dec. 31, 2002 $5.875
Jimmie Lykes(1) 11,000 shares Dec. 31, 2002 $5.875
Dave Matthews(1) 8,000 shares Dec. 31, 2002 $5.875
Tom Russo(2) 2,000 shares Dec. 31, 2002 $5.875
June Brisick(2) 2,000 shares Dec. 31, 2002 $5.875
Ed Fetscher(2) 2,000 shares Dec. 31, 2002 $5.875
John Spinning(2) 2,000 shares Dec. 31, 2002 $5.875
Louise Lader(2) 2,000 shares Dec. 31, 2002 $5.875
Roger Hendrick(2) 2,000 shares Dec. 31, 2002 $5.875
Pilar Hendrick(2) 2,000 shares Dec. 31, 2002 $5.875
Jerry Junkersfeld(2) 2,000 shares Dec. 31, 2002 $5.875
Bill Closter(2) 2,000 shares Dec. 31, 2002 $5.875
Louise Kohlman(2) 2,000 shares Dec. 31, 2002 $5.875
Chick Zuckerman(2) 2,000 shares Dec. 31, 2002 $5.875
Robert Acosta(2) 2,000 shares Dec. 31, 2002 $5.875
Stephen Sperling(2) 2,000 shares Dec. 31, 2002 $5.875
Marvin Flam(2) 2,000 shares Dec. 31, 2002 $5.875
David Hochstadt(2) 2,000 shares Dec. 31, 2002 $5.875
Ted Kohner(2) 2,000 shares Dec. 31, 2002 $5.875
Ben Demeo(2) 2,000 shares Dec. 31, 2002 $5.875
Edith Lewellyn(2) 2,000 shares Dec. 31, 2002 $5.875
Jack Brewster(2) 2,000 shares Dec. 31, 2002 $5.875
Joyce Hall(2) 2,000 shares Dec. 31, 2002 $5.875
Bud Ober(2) 2,000 shares Dec. 31, 2002 $5.875
Tom Grow(2) 2,000 shares Dec. 31, 2002 $5.875
Matt Berliner(2) 2,000 shares Dec. 31, 2002 $5.875
Bruce Sylvester(2) 2,000 shares Dec. 31, 2002 $5.875
Jerome Jaffe(2) 2,000 shares Dec. 31, 2002 $5.875
Wayne Miranda(2) 2,000 shares Dec. 31, 2002 $5.875
Dawn Wretlund(3) 15,000 shares Dec. 31, 2002 $5.875
Karen Melius(3) 10,000 shares Dec. 31, 2002 $5.875
Hara Ahrens(3) 20,000 shares Dec. 31, 2002 $5.875
Reg Duran(3) 20,000 shares Dec. 31, 2002 $5.875
Theresa Zapata(3) 20,000 shares Dec. 31, 2002 $5.875
John C. Ayres(4) 5,000 shares Dec. 31, 2002 $5.875
Charles S. Wetmore(4) 5,000 shares Dec. 31, 2002 $5.875
Peter Dobell(4) 20,000 shares Dec. 31, 2002 $5.875
Kathryn Williams(4) 50,000 shares Dec. 31, 2002 $5.875
Peter Campbell(4) 10,000 shares Dec. 31, 2002 $5.875
</TABLE>
31
<PAGE>
<TABLE>
Name & Address # of Shares Date of Expiry Exercise Price
- -------------- ----------- -------------- --------------
<S> <C> <C> <C>
Gary Harris(4) 25,000 shares Dec. 31, 2002 $5.875
Suzanne Wood(4) 75,000 shares Dec. 31, 2002 $5.875
Gary Loffredo(4) 75,000 shares Dec. 31, 2002 $5.875
Marco Markin(4) 300,000 shares Dec. 31, 2002 $5.875
TOTAL 853,500 shares
</TABLE>
(1) This person is a California Area Sales Representative. 8,000 options are
subject to yearly sales quotas as defined and determined by the Neptune
Society. Options granted in excess of 8,000 are eligible for vesting upon
terms and conditions set forth in the consultant's option agreement.
(2) This person is a Florida Area Sales Representative. 2,000 options are
subject to yearly sales quotas as defined and determined by the Neptune
Society.
(3) Executive Managers who are eligible to vest on the following basis: 1/3 of
options granted immediately; 1/3 of options eligible on first anniversary
of option grant; and 1/3 of options are subject to budget and/or sales
performance criteria as determined and defined by the Neptune Society.
(4) Executive Managers/Director options are all eligible for vesting on the
first anniversary of option grant.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the transactions described below, none of our directors, senior
officers or principal shareholders, 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 us.
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, we made purchases of $2,886 from D&B Provisions, Inc. ($nil in
1998). Further, we have 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 our former directors and our
former President, purchased on a private placement basis, a total of 15,000
common shares and 60,000 share purchase warrants for $1,500. Ms. Wood
subsequently disposed of the 60,000 share purchase warrants.
Also on January 19, 1999, Gary Loffredo, one of our directors and the
President of Heritage Alternatives Corp., purchased on a private placement
basis, a total of 100,000 shares and 400,000 share purchase warrants for
$10,000. Mr. Loffredo subsequently disposed of all of the 100,000 common shares
and all of the 400,000 share purchase warrants.
32
<PAGE>
On January 19, 1999, Marko Markin, our 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 for $25,000. Mr.
Markin subsequently disposed of the 1,000,000 share purchase warrants.
Effective March 31, 1999, we acquired Neptune Management and Heritage
Alternatives from its owners, including Emanuel Weintraub, one of our
consultants. In connection with the acquisition, we issued 1,000,000 shares of
our common stock to the following persons: Emanuel Weintraub Inter Vivos Trust,
Jill Schulman, Stanley Zicklin, Marvin Falikoff, Helen Kramer, Milton Kramer,
Paul Shields, Nancy Leferman, Norman Leferman, Sam Perlow, Joan Perlow, Stuart
Solomon, Marilyn Tenzer, Arlene Zicklin, Linda Stark, Ted Boock, Marlene
Burdman, James Freedman, Freedman Family Trust, Dennis Family Trust-Leo Robert
and Lorraine Dennis, Leo Robert Dennis-IRA Smith Barney, Dennis Family Trust-Ron
Dennis, Dennis Family Turst-Richard and Jessica Dennis, JPS Associates, Marcia
Deifik, Connie King, Herm Warme, Jon Warme, Judith Glaser, Steve Brown, Irving
Steinfield, Steve Schwartz, Zorinee Schwartz Mervyn Kalman, Jerry Lertzman, and
RER. Of these shares, Mr. Weintraub received, directly and indirectly, a total
of 588,426 shares of our common stock. Mr. Weintraub also received, directly and
indirectly, a total of $583,132 in cash and a promissory note in the amount of
$11,079,514, of which $656,531 was paid on August 7, 1999 and $4,172,475 was
paid on January 5, 2000.
In addition, we issued Mr. Weintraub a promissory note in the amount of
$2,000,000 on March 31, 1999, of which $55,555.55 was paid monthly from and
including August to October 1999. We will continue to pay Mr. Weintraub $40,000
per month, and on March 31, 2002, we will make a balloon payment of $497,777.60
plus interest at the rate of 9% per annum calculated as simple interest,
accruing monthly from and after August 31, 1999.
Ms. Jill Schulman, Mr. Weintraub's daughter and Vice President of Neptune
Management received, in connection with our acquisition of Neptune Management
and Heritage Alternatives, a total of $19,652; 19,103 of our common shares and
$373,391 by way of promissory note of which $176,865 was paid on August 7, 1999.
On August 1, 1999, we renegotiated the payment terms of the promissory
notes we issued to the former owners of Neptune Management and Heritage
Alternatives. In consideration or extending the time for repayment, we issued
share purchase warrants exercisable to acquire up to 250,000 shares of our
common stock at $6.00 per share to holders of the notes. The share purchase
warrants were issued to Mr. Weintraub's daughters, including Ms. Jill Schulman,
the Vice President of Neptune Management, who received 62,500 share purchase
warrants.
Also in connection with our acquisition of the Neptune Management and
Heritage Alternatives, we 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
Our operations are subject to numerous environmental laws, regulations and
guidelines adopted by various governmental authorities in the jurisdictions in
which we operate. Liabilities
33
<PAGE>
are recorded when environmental liabilities are either known or considered
probable and can be reasonably estimated. Our policies are designed to control
environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to acquisition. We believe environmental
liabilities to be immaterial individually and in the aggregate.
We are party to other legal proceedings in the ordinary course of its
business, but do not expect the outcome of any of other proceedings,
individually or in the aggregate, to have a material adverse effect on our
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 our common stock on the NASDAQ OTC
Bulletin Board as reported by the NASD 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
Fourth Quarter $6.562 $5.062
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
As of January 5, 2000, the high and low bid quotation for our common shares
was $6.062 and $5.875, respectively.
As at December 31, 1999, we had 86 registered shareholders.
The declaration of dividends on our shares is within the discretion of our
board of directors and will depend upon the assessment of, among other factors,
earnings, capital
34
<PAGE>
requirements and the operating and financial condition of the company. At the
present time, we anticipate 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, we issued 2,000,000 shares of our 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 our 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, we issued 8,000,000 shares of our 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 us on January 19, 1999. Each share purchase warrant
was exercisable to acquire one share of our 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 account
without a view towards distribution. We filed a Form D notice of sale with the
Securities and Exchange Commission within 15 days after the first sale.
On May 7, 1999, we issued 1,000,000 shares of our common stock in
consideration of all the issued and outstanding shares and limited partnership
units of certain of our operating subsidiaries. We issued these shares to
Emanuel Weintraub Inter Vivos Trust, Jill Schulman, Stanley Zicklin, Marvin
Falikoff, Helen Kramer, Milton Kramer, Paul Shields, Nancy Leferman, Norman
Leferman, Sam Perlow, Joan Perlow, Stuart Solomon, Marilyn Tenzer, Arlene
Zicklin, Linda Stark, Ted Boock, Marlene Burdman, James Freedman, Freedman
Family Trust, Dennis Family Trust-Leo Robert and Lorraine Dennis, Leo Robert
Dennis-IRA Smith Barney, Dennis Family Trust-Ron Dennis, Dennis Family
Turst-Richard and Jessica Dennis, JPS Associates, Marcia Deifik, Connie King,
Herm Warme, Jon Warme, Judith Glaser, Steve Brown, Irving
35
<PAGE>
Steinfield, Steve Schwartz, Zorinee Schwartz Mervyn Kalman, Jerry Lertzman, and
RER. 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. We filed a Form D notice of sale with
the Securities and Exchange Commission within 15 days after the first sale.
On May 7, 1999, we 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 Neptune Management and
Heritage Alternatives. 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. We filed a
Form D notice of sale with the Securities and Exchange Commission within 15 days
after the sale.
On May 7, 1999, we 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 certain of our operating
subsidiaries. See "Item 1. Description of Business - History of the Neptune
Society." The note 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. We filed a Form D notice of
sale with the Securities and Exchange Commission within 15 days after the sale.
Pursuant to an Agency Agreement with Standard Securities Capital
Corporation dated July 22, 1999, we agreed to issue 1,666,666 shares of our
common stock at $6.00 per share for total proceeds of $7,000,000 pursuant to a
private placement. Under this agreement, we issued 666,666 shares of our common
stock at $6.00 per share to raise $4,000,000 on August 9, 1999; 223,333 shares
at $6.00 per share for gross proceeds of $1,340,000 on October 12, 1999; and
260,000 shares at $6.00 per share for gross proceeds of $1,560,000 on December
30, 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. We paid Standard Securities Capital
Corporation an agency fee of $140,000 on October 12, 1999, and $270,000 on
December 30, 1999. We will pay a further fee of $10,000 upon the final issuance
of 16,667 shares at $6.00 per share on or before January 31, 2000.
On August 18, 1999, we issued warrants exercisable to acquire 275,000
shares of our common stock at $6.00 per share. We issued the warrants to certain
debt holders in consideration for amending the terms of repayment of debt and
interest. We 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 offering was made in compliance with
the definitions set forth in Rule 501 and certain applicable general conditions
set forth in
36
<PAGE>
Rule 502. We filed a Form D notice of sale with the Securities and Exchange
Commission within 15 days after the first sale.
On December 31, 1999, we issued a total of $5,000,000 of convertible
debentures to CapEx, L.P. and to D.H. Investment Banking Corp. The debentures
are convertible into 1,000,000 shares of our common stock upon the election of
the holders. In addition, we issued the a warrants exercisable for five years to
purchase 200,000 shares of our common stock at an exercise price of $5.21 per
share and 200,000 shares of our common stock at an exercise price of $6.25 per
share. The debentures and warrants were issued in reliance upon an exemption
from registration under Rule 506 of Regulation D promulgated under the
Securities Act. The offering was made in compliance with definitions set forth
in Rule 501 and certain applicable general conditions set forth in Rule 502. We
filed a Form D notice of sale with the Securities and Exchange Commission within
15 days after the first sale.
On December 31, 1999, we issued 22,727 shares of our common stock in
consideration of all the assets of Crematory Society of Washin7gton. See "Item
1. Description of Business - History of the Neptune Society." The shares were
issued to Crematory Society of Washington, Inc., a Washington corporation whose
sole shareholder is John C. Ayres, 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. We filed a Form D
notice of sale with the Securities and Exchange Commission within 15 days after
the first sale.
On December 31, 1999, we issued 22,727 shares of our common stock to
Charles S. Wetmore as consideration for entering into a non-compete agreement
with us. 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. We 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
Our authorized capital consists of 50,000,000 common shares with par value
of $0.001 per share of which 13,195,453 common shares were issued as of January
5, 2000.
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 our 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 our business, if any, after payment or provision
for payment of all of our debts, obligations or liabilities shall be distributed
to the holders of shares of common stock. There are no pre-emptive rights,
37
<PAGE>
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 our shares is within the discretion of our
board of directors and will depend upon the assessment of, among other factors,
earnings, capital requirements and our operating and financial condition. At the
present time, we anticipate that all available funds will be invested to finance
the growth of its business.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to our bylaws, we shall indemnify all of our officers and
directors 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 our board of directors, we shall not indemnify any of our employees
who are not otherwise entitled to indemnification pursuant to our 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 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.
Our Articles of Incorporation and Bylaws also contain provisions stating
that no director shall be liable to us or any of our 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
38
<PAGE>
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
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,
we have had no changes in or disagreements with its accountants on accounting
and financial disclosure.
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 9 month period ended September 30, 1999
Consolidated Statement of Income for 9 month period ended September 30,
1999 and 1998
Consolidated Statement of Cash Flows for 9 month period ended September 30,
1999 and 1998
Consolidated Statement of Stockholders' Equity for 9 month period ended
September 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
39
<PAGE>
The Neptune Society, Inc.
Consolidated Financial Statements
For the 9 Month Period Ended September 30, 1999 and 1998
Contents
Page
----
Notice to Reader 1
Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Income (Operations) 3
Consolidated Statements of Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
<PAGE>
- --------------------------------------------------------------------------------
NOTICE TO READER
The Consolidated Balance Sheets of The Neptune Society as at September 30, 1999
and Consolidated Statements of Income (Operations), the Consolidated Statements
of Shareholders' Equity and Consolidated Statements of Cash Flows for the nine
month period then ended have been compiled by Management. They have not been
audited, reviewed or otherwise verified as to the accuracy or completeness of
information. Readers are cautioned that these statements may not be appropriate
for their purposes.
- --------------------------------------------------------------------------------
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS September 30 December 31
1999 1998
----------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 513,915 $ 612,370
Accounts receivable 224,851 217,265
Other current assets 35,475 4,924
----------------- ------------------
Total current assets 774,241 834,559
Property and equipment (net) 302,822 218,450
Other assets:
Prearranged cremation contracts 33,401,367 32,055,280
Deferred contract procurement costs 8,339,681 7,754,729
Goodwill (net) 22,781,601 -
Other intangibles 77,149 40,554
================= ==================
$ 65,676,861 $ 40,903,572
================= ==================
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,327,648 $ 866,670
Due to former principal shareholder 139,185 -
Income taxes payable 142,802 -
Loans payable 377,954 -
Current portion of long-term debt 15,354,278 -
----------------- ------------------
Total current liabilities 17,341,867 866,670
Long-term debt 1,217,254 -
Deferred income taxes 156,000 -
Deferred prearranged cremation contract revenues 33,401,367 32,055,280
----------------- ------------------
52,116,488 32,921,950
----------------- ------------------
Shareholders' equity:
Common stock, $.001 par value, 50,000,000 shares authorized, 24,867 13,200
12,666,666 shares issued and outstanding
Capital in excess of par value 4,652,991
Equity of combining entities 8,882,515 7,968,422
----------------- ------------------
Total Shareholders' equity 13,560,373 7,981,622
----------------- ------------------
$ 65,676,861 $ 40,903,572
================= ==================
</TABLE>
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)
<TABLE>
Nine Months Ended September 30,
1999 1998
----------------- ------------------
<S> <C> <C>
Revenue:
Services $ 6,191,599 $ 5,405,980
Liquidation of trust fund 525,224 -
Management and finance fees 971,910 760,787
----------------- ------------------
Total revenues 7,688,733 6,166,767
Direct costs and expenses: 3,728,806 3,571,371
----------------- ------------------
Gross profit 3,959,927 2,595,396
----------------- ------------------
Expense:
General & administrative expenses 1,404,959 936,597
Interest on promissory notes 114,960 0
Depreciation & amortization 308,839 38,046
Professional fees 380,183 603,204
Compensation of former principal shareholder 513,091 1,842,721
----------------- ------------------
Total expenses 2,722,032 3,420,568
Earnings before income taxes 1,237,895 (825,172)
Provision for income taxes 298,802 0
================= ==================
Net earnings (loss) $ 939,093 $ (825,172)
================= ==================
Net income (loss) per share, basic and diluted: $ 0.08 $ (0.07)
Weighted average number of shares outstanding,
basic and diluted 12,126,521 12,000,000
================= ==================
</TABLE>
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
Capital in
Common excess of Par Retained
Stock Value Earnings Total
------------ ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 13,200 $ $ 7,968,422 $ 7,981,622
Net earnings for the period ended:
September 30, 1999 939,093
939,093
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
667 3,563,991 3,564,658
Issued for cash:
=============== ================ =============== ==============
Balance at September 30, 1999 $ 24,867 $ 4,652,991 $ 8,882,515 $ 13,560,373
=============== ================ =============== ==============
</TABLE>
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
September 30
1999 1998
------------------ -------------------
<S> <C> <C>
Cash flows provided by (used for) operating activities: $ 939,093 $ (825,172)
Net income (loss)
Adjustment to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 308,839 38,046
Changes in assets and liabilities (Increase) decrease in assets:
Accounts receivable (7,586) 1,496,487
Other current assets (30,551) 2,590
Increase in deferred procurement costs (584,952) (267,867)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 460,978 74,886
Provision for income tax 298,802 -
------------------ -------------------
Net cash provided by operating activities: 1,384,623 518,970
------------------ -------------------
Cash flows provided by (used for) investing activities:
Purchase of property and equipment (104,836) (343)
Goodwill (23,069,976) -
Intangibles and other assets (36,595) 93,192
------------------ -------------------
Net cash used for investing activities: (23,211,407) 92,849
------------------ -------------------
Cash flows provided by (used for) financing activities:
Due to former principal shareholder 139,185 -
Loans payable 377,954 -
Promissory notes 16,571,532 -
Issuance of capital stock 4,664,658 -
Distribution to owners (25,000) (135,500)
------------------ -------------------
Net cash provided by financing activities: 21,728,329 (135,500)
------------------ -------------------
Net increase (decrease) in cash and cash equivalents (98,455) 476,319
Cash and cash equivalents, beginning of period 612,370 601,767
================== ===================
Cash and cash equivalents, end of period $ 513,915 $ 1,078,086
================== ===================
</TABLE>
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
1. Organization and Basis of Presentation:
The accompanying financial statements present the consolidated financial
position and results of operations of the following companies:
* The Neptune Society, Inc. (formerly Lari Corporation)
* The Neptune Society of America, Inc. (formerly Lari Acquisition
Company, Inc.)
* Neptune Management Corp.
* Neptune Pre-need Plan, Inc.
* Heritage Alternatives, Inc.
* Heritage Alternatives, L.P.
* Neptune Funeral Services, Inc.
* Neptune Funeral Services of Westchester, Inc.
* Neptune - Los Angeles, Ltd.
* Neptune - Santa Barbara, Ltd.
* Neptune - Ft. Lauderdale, Ltd.
* Neptune - St. Petersburg, Ltd.
* Neptune - Miami, Ltd.
* Neptune - Westchester, Ltd.
* 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 valued at $100,000, 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 September 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.
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
2. Interim Financial Statements (Unaudited)
The accompanying unaudited condensed financial statements for the interim
periods ended September 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 nine months ended September
30, 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999.
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 $308,839 for the period (1998 -
nil). Accumulated amortization of Goodwill as of September 30, 1999 is
$288,374.
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 September 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.
[unaudited - prepared by management]
<PAGE>
THE NEPTUNE SOCIETY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIODS ENDED September 30, 1999 AND 1998
6. Long term debt
Promissory Note in the amount of $19,000,000 on the following terms:
1. $4,125,722 due August 11, 1999 with no interest. This amount was
repaid.
2. $701,802 due January 3, 2000 together with interest accrued at the
rate of 9% from August 1, 1999.
3. $4,172,476 due January 3, 2000 with no interest,
4. $5,065,836 due July 31, 2000 with no interest,
5. $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. As at September 30, 1999 the balance owing on this note was
$1,697,254 with $480,000 due within the next 12 months.
7. Private Placement
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 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 shares are subject to a hold period of 12 months from the
date of issuance.
[unaudited - prepared by management]
<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: DKF, 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 94104-9572
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 949 851-4660
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 685,663 505,632
---------------- ---------------
Total current liabilities 866,670 690,531
---------------- ---------------
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 7,968,422 9,077,875
---------------- ---------------
Total stockholders' equity 7,981,622 9,090,575
---------------- ---------------
$ 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 4,871,789 4,686,244 4,989,340
--------------- -------------- --------------
Gross profit 3,566,364 5,070,610 4,053,821
--------------- -------------- --------------
General and administrative expenses 1,645,450 1,584,750 1,524,484
Professional fees 668,894 245,033 172,619
Compensation and expenses of principal
shareholder and partner 2,200,473 1,840,984 737,556
--------------- -------------- --------------
Net income (loss) $ (948,453) $ 1,399,843 $ 1,619,162
=============== ============== ==============
Net income (loss) per share, basic and
diluted $ (0.08) $ 0.12 $ 0.13
============== ============== ==============
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 $ 6,817,437 $ 6,830,137
Net income for the year ended
December 31, 1996 1,619,162 1,619,162
Distribution to owners (338,000) (338,000)
------------ -------------- --------------
Balance at December 31, 1996 12,700 8,098,599 8,111,299
Net income for the year ended
December 31, 1997 1,399,843 1,399,843
Distribution to owners (420,567) (420,567)
------------ -------------- --------------
Balance at December 31, 1997 12,700 9,077,875 9,090,575
Net loss for the year ended
December 31, 1998 (948,453) (948,453)
Distribution to owners (160,500) (160,500)
Common stock issued 500 (500)
------------ -------------- --------------
Balance at December 31, 1998 $ 13,200 $ 7,968,422 $ 7,981,622
============ ============== ==============
</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) $ (948,453) $ 1,399,843 $ 1,619,162
--------------- --------------- -------------
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 180,031 226,627 119,042
--------------- --------------- -------------
Total adjustments 1,117,816 (892,130) (1,094,587)
--------------- --------------- -------------
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:
<TABLE>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Lari Corporation ($1,878) $ 0
Neptune Management Corp. (68,898) (78,883)
Neptune Pre-Need Plan, Inc. 6,342 8,435
Heritage Alternatives, Inc. (1,679) (1,669)
Heritage Alternatives, L.P. 133,740 369,746
Neptune Funeral Services, Inc. (14,119) (12,945)
Neptune Funeral Services of Westchester, Inc. (14,269) (13,096)
Neptune - Los Angeles, Ltd. 5,187,951 6,003,100
Neptune - Santa Barbara, Ltd. 849,399 1,052,407
Neptune - Ft. Lauderdale, Ltd. 1,810,185 1,626,172
Neptune - St. Petersburg, Ltd. 16,904 35,510
Neptune - Miami, Ltd. 16,832 31,012
Neptune - Westchester, Ltd. 35,104 38,334
Neptune - Nassua, Ltd. 26,008 32,452
------------------- -------------------
$7,981,622 $9,090,575
=================== ===================
</TABLE>
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.
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:
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.
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.
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:
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 $(948,453) $1,399,843 $1,619,162
Credit/provision for income taxes,
principally current (371,448) 568,448 660,600
---------- ----------- ------------
Pro forma net (loss)/income $(577,005) $ 831,395 $ 958,562
========== =========== ============
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.
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.
See accompanying independent auditors' report.
8
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies, Continued:
Other Comprehensive Income (Loss)
Comprehensive income (loss) is the same as net income (loss).
(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
=============== ==============
(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
See accompanying independent auditors' report.
9
<PAGE>
THE NEPTUNE SOCIETY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
(4) Commitments and Contingencies, Continued:
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.
10
<PAGE>
(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
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.
<PAGE>
Exhibit
Number Description
- ------ -----------
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
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
<PAGE>
Exhibit
Number Description
- ------ -----------
10.20 Form of Subscription Agreement
10.21 Form of Registration Rights Agreement
10.22 Debenture and Warrant Purchase Agreement dated November 24,
1999,
10.23 Form of Convertible Debenture
10.24 Asset Purchase Agreement dated December 31, 1999, by and
among The Neptune Society, Inc., Crematory Society of
Washington, Inc., and John C. Ayres. -----------------
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
<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.
Date: January 12, 2000 /s/ Marco Markin
---------------------------------------
Marco Markin, President and 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.
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.
<PAGE>
Exhibit
Number Description
- ------ -----------
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
10.22 Debenture and Warrant Purchase Agreement dated November 24,
1999,
10.23 Form of Convertible Debenture
10.24 Asset Purchase Agreement dated December 31, 1999, by and
among The Neptune Society, Inc., Crematory Society of
Washington, Inc., and John C. Ayres.
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
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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
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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
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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
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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
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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.
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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
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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.
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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.
<PAGE>
(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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<PAGE>
(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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<PAGE>
(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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<PAGE>
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
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<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.
-6-
<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
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<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>
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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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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>
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(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;
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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;
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(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.
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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>
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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;
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(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;
<PAGE>
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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;
<PAGE>
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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;
<PAGE>
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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
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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:
<PAGE>
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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.
<PAGE>
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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
<PAGE>
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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:
<PAGE>
- 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
<PAGE>
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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>
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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>
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(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>
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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>
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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>
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(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.
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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";
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(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
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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]
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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]
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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:
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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]
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/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.
[Initials]
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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;
[Initials]
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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
[Initials]
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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
[Initials]
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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
[Initials]
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-6-
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.
[Initials]
<PAGE>
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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)
[Initials]
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
[Initials]
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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
[Initials]
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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.
[Initials]
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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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-5-
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.
[Initials]
<PAGE>
-6-
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.
[Initials]
<PAGE>
-7-
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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<PAGE>
-8-
(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.
[Initials]
<PAGE>
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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"),
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<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
<PAGE>
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
7
<PAGE>
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.
8
<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
-4-
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;
1
<PAGE>
(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;
2
<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.
3
<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
5
<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.
6
<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.
7
<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;
8
<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;
9
<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;
11
<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 10.22
THE NEPTUNE SOCIETY, INC.
DEBENTURE AND WARRANT PURCHASE AGREEMENT
This Debenture and Warrant Purchase Agreement (this "Agreement") is entered
into as of November 24, 1999, by and between The Neptune Society, Inc., a
Florida corporation (the "Company"), CapEx, L.P., a Delaware limited partnership
("CapEx"), and D.H. Blair Investment Banking Corp., a New York corporation
("DHB") (together with CapEx, the "Purchasers").
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 Sale and Purchase. Subject to the terms and conditions hereof, at the
Closing (as defined in Section 2 below), the Company hereby agrees to issue and
sell to the Purchasers, and the Purchasers agree to purchase from the Company,
the following convertible secured debentures (the "Debentures") due February 24,
2004, in the respective principal amounts set out opposite the name of each of
the Purchasers below, each Debenture to be in the form of the Debenture attached
hereto as Exhibit A and to be convertible (subject to adjustment and therein
provided) into the number of shares of the Company's Common Stock set out
opposite the name of each of the Purchasers below in accordance with the terms
thereof:
Purchaser Principal Amount Shares Convertible Into
--------- ---------------- -----------------------
CapEx $3,000,000 600,000
DHB $2,000,000 400,000
1.2 Sale of Warrant. In connection with and in consideration for the
offering of the Debentures (the "Offering"), the Company will issue to the
Purchasers four warrants (the "Warrants") exercisable for five years from the
date of issue to purchase from the Company the number of shares (subject to
adjustment as therein provided) of the Company's Common Stock set out opposite
the name of each of the Purchasers below, at the respective exercise prices set
out below opposite the name of such Purchaser, each such Warrant to be in the
form of the Warrant attached hereto as Exhibit B:
Purchaser Shares Purchasable Exercise Price per Share
--------- ------------------ ------------------------
CapEx 120,000 $5.21
DHB 80,000 $5.21
CapEx 120,000 $6.25
DHB 80,000 $6.25
<PAGE>
2. CLOSING, DELIVERY AND PAYMENT
2.1 The closing of the sale and purchase of the Debentures and the Warrants
under this Agreement (the "Closing") shall take place at 10:00 a.m. on December
24, 1999, at the offices of Moye, Giles, O'Keefe, Vermeire & Gorrell, LLP, 1225
Seventeenth Street, Suite 2900, Denver, Colorado 80202, or at such other time or
place as the Company and the Purchasers may mutually agree (such date being
hereinafter referred to as the "Closing Date"). At the Closing, the Purchasers
shall pay to the Company, by certified check or wire transfer of immediately
available funds, the Purchase Price, and the Company shall, at the Closing,
deliver to the Purchasers the Debentures and the Warrants, each dated the
Closing Date.
2.2 At the Closing, upon and in consideration of the completion of the
Offering, the Company shall pay to CapEx, on behalf of the Purchasers, a
non-refundable fee of $100,000.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Purchasers as
follows:
3.1 Organization, Subsidiaries, Good Standing, Qualification and Power and
Authority. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. The Company is the sole
registered and beneficial owner of all classes of capital stock of each of
Neptune Society of America, Inc., a California corporation ("Neptune USA").
Neptune USA is the sole registered and beneficial owner of all classes of
capital stock of each of Neptune Management Corp., a California corporation
("Neptune Management"), Neptune Pre-Need Plan, Inc. ("Neptune Pre-Need"), a
California corporation and Heritage Alternatives, Inc. ("Heritage", and together
with Neptune USA and Neptune Management, the "Subsidiaries"). Neptune USA is
also the sole registered and beneficial owner of all classes of capital stock of
Neptune Pre-Need Plan, Inc. ("Neptune Pre-Need"), a California corporation.
Neptune Pre-Need is an inactive company, with no significant assets, liabilities
or business operations. The Company and each Subsidiary has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted and as presently proposed to be
conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its business, properties, prospects or
financial condition. The Company and each Subsidiary has all requisite corporate
power and authority (a) to execute and deliver this Agreement, the Debentures,
the Warrants, the Right of First Refusal Agreement the form of which is attached
hereto as Exhibit C (the "Right of First Refusal Agreement") and the other
agreements, instruments and documents contemplated to be executed and delivered
by it pursuant to this Agreement (this Agreement, the Debentures, the Warrants,
the Right of First Refusal Agreement and such other agreements instruments and
documents being herein sometime collectively referred to as, the "Transaction
Documents"), (b) to issue and sell the Debentures and to issue the shares of the
Company's Common Stock issuable upon conversion of the Debentures (the
"Conversion Shares"), (c) to issue and sell the Warrants and to issue the shares
of the Company's Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares"), and (d) to carry out the other provisions of the Transaction
Documents. The Company has no subsidiaries or affiliates other than the
Subsidiaries and Neptune Pre-Need and does not, directly or indirectly, own any
interest in or control any corporation, partnership, joint venture, or other
business entity.
2
<PAGE>
3.2 Capitalization. All issued and outstanding shares of the common stock
of the Company ("Common Stock") and all issued and outstanding shares of the
common stock of the each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. The issued and outstanding
capital stock of the Company and the Subsidiaries immediately prior to the
Closing will be as set forth on Schedule 3.2 attached hereto and incorporated by
reference herein. Except as set forth on Schedule 3.2, there are no outstanding
(or deemed outstanding) options, warrants or other rights to purchase from the
Company or any of the Subsidiaries any of its securities. To the best of the
Company's knowledge, the only persons who beneficially own more than 4% of the
Company's issued and outstanding stock is, through various entities, Emanuel
Weintraub and members of his family.
3.3 Authorization; Binding Obligations. All corporate action on the part of
the Company and each Subsidiary, its officers, directors and shareholders
necessary for the authorization of the Transaction Documents and the performance
of all of its obl igations thereunder and for the authorization, sale, issuance
and delivery of the Debentures, the Warrants, the Conversion Shares and the
Warrant Shares has been taken or will be taken prior to the Closing. The
Conversion Shares and the Warrant Shares have been or will prior to the Closing
be duly and validly reserved for issuance and, when issued upon conversion of
the Debentures or upon the exercise of the Warrants, as the case may be, will be
validly issued, fully paid and nonassessable. The Company shall take all such
action as may be necessary to assure that an adequate number of shares of Common
Stock is authorized and reserved for issuance of the Conversion Shares and the
Warrant Shares. This Agreement has been duly authorized and executed by the
Company. This Agreement constitutes, and the Debentures, the Warrants, the Right
of First Refusal Agreement and the other Transaction Documents will once
executed constitute, valid, legal and binding obligations of the Company or the
Subsidiary party thereto, as the case may be, enforceable in accordance with
their terms, except to such limitations as may result from any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights generally.
3.4 No Real Property. Neither the Company nor any Subsidiary or Neptune
Pre-Need owns or has any interest in any real estate.
3.5 Consents and Approvals. Except as required by the Securities Act of
1933, as amended, or any state securities laws, no filings with, notices to, or
approvals of any governmental or regulatory body are required to be obtained or
made by the Company or any Subsidiary in connection with the consummation of the
transactions contemplated hereby.
3.6 No Violations. The execution and delivery of this Agreement, the
Debentures, the Warrants or the other Transaction Documents and the performance
by the Company and the Subsidiaries party thereto of their obligations hereunder
and thereunder (a) do not and will not conflict with or violate any provision of
the Company's or such Subsidiary's Certificate of Incorporation or bylaws, and
(b) do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any encumbrance upon the capital stock or assets of the Company
or such Subsidiary pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any autho rization, consent, approval, exemption or other action by
or
3
<PAGE>
notice to any court or administrative or governmental body or other third party
pursuant to, any law, statute, rule or regulation or any agreement or instrument
or any order, judgment or decree to which the Company or such Subsidiary is
subject or by which any of its assets are bound except for such consents which
have been obtained by the Company or such Subsidiary.
3.7 Compliance with Laws. The business of the Company and each Subsidiary
has been conducted in compliance with all applicable laws and regulations of
governmental authorities, except for such violations that have been cured or
that, individually or in the aggregate, may not reasonably be expected to have a
material adverse effect on the business, operations, financial condition or
prospects of the Company or such Subsidiary. Neither the real or personal
properties owned, leased, operated or occupied by the Company or such
Subsidiary, nor the use, operation or maintenance thereof (i) violates any
applicable laws, or regulations of any government or governmental authorities,
or (ii) violates any restrictive or similar covenant, agreement, commitment,
understanding or arrangement.
3.8 Licenses; Permits; Related Approvals. Except for Neptune Management's
funeral establishment licenses and Heritage's crematory license which are
pending transfer from their previous owners by the State of California, the
Company and each of the Subsidiaries possesses all licenses, permits, consents,
approvals, authorizations, qualifications, and orders (hereinafter collectively
referred to as "Permits") of all governments and governmental authorities
legally required to enable the Company or such Subsidiary to conduct its
business in all jurisdictions in which such business is conducted (including
without limitation all federal, state and local Permits relating to the
operation of funeral homes, crematoriums and related operations included in the
Company's and the Subsidiaries' business). All of the Permits are in full force
and effect, and no suspension, modification or cancellation of any of the
Permits is pending or threatened.
3.9 Title to Assets. Except as set forth on Schedule 3.9 attached hereto
and incorporated by reference herein, each of the Company and the Subsidiaries
has good and marketable title to its property and assets free and clear of all
mortgages, security interests, liens, claims, and other encumbrances. With
respect to the property and assets it leases, the Company and each Subsidiary is
in material compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any security interests, liens, claims, or other
encumbrances. As at the Closing Date, the Company and the Subsidiaries will not
have tangible assets having an aggregate book value in excess of $250,000, nor
the chief executive office of any of them, located in any jurisdiction other
than the States of Florida and California.
3.10 Vendor Note. As of the date hereof, Neptune USA is indebted to the
holders of a promissory note dated March 31, 1999 in the initial principal
amount of $19,000,000 (the "Vendor Note"), in the principal amount of
$14,874,215.82. Neither the Company nor any of the Subsidiaries is in default of
any of its obligations owed to the holders of the Vendor Note, as amended by an
amendment agreement between Neptune USA and certain of the holders dated for
reference the 1st of August, 1999, the Security Agreement in favor of the
holders of the Vendor Note entered into by Neptune USA, the Subsidiaries and
Neptune Pre-Need, Management and Heritage dated as of March 31, 1999, the
Guarantee of the Company of Neptune USA's obligations under the Vendor Note, or
any other agreements, instruments or documents relating to the Vendor Note, such
Security Agreement, such Guarantee or such other agreements, instruments and
documents. Without limiting
4
<PAGE>
the generality of the foregoing, Neptune USA has fully performed all of its
obligations under each of the Acquisition Documents (as such term is defined in
the Vendor Note).
3.11 Defaults. The Company and each of the Subsidiaries is not in default
in the performance, observance or fulfillment of any obligation, agreement,
covenant, or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which it
or any of its properties may be bound, other than such violations or defaults
that would not individually or in the aggregate have a material adverse effect
on the Company's or such Subsidiary's business, prospects, properties, condition
(financial or other), results of operations or net worth.
3.12 Intellectual Property. Except as set forth on Schedule 3.12 attached
hereto and incorporated by reference herein, the following statements are
correct, other than such exceptions that would not have a material adverse
effect on the Company or Subsidiaries. The Company and each of the Subsidiaries
owns or has a license to use all intellectual property used in its business.
Neither the Company nor any Subsidiary has infringed, and is now infringing, on
any proprietary right belonging to any other person, firm, or entity. The
Company and each of the Subsidiaries has the exclusive right and authority to
use all of its creations and inventions, trade secrets, processes, models,
designs, software and formulas as are necessary to enable the Company or such
Subsidiary to conduct and to continue to conduct all phases of its business in
the manner presently conducted by it and in accordance with the its business
plan. The Company and each Subsidiary is the sole owner of the its trade
secrets, free and clear of any liens, encumbrances, restrictions, or legal or
equitable claims of others and the Company or such Subsidiary has taken all
reasonable security measures to protect the secrecy, confidentiality, and value
of these trade secrets. Any of the Company's and the Subsidiaries' employees and
any other persons who, either alone or in concert with others, developed,
invented, discovered, derived, programmed, or designed these secrets, or who
have knowledge of or access to information relating to them, have assigned and
transferred their rights to such trade secrets to the Company or such Subsidiary
and each such person has been put on notice and, if necessary, has entered into
agreements that these secrets are proprietary to the Company or each Subsidiary
and are not to be divulged or misused. All of the Company's and the
Subsidiaries' intellectual property of a proprietary nature is presently valid
and protectible, and is not part of the public knowledge or literature.
3.13 Proprietary Rights. Neither the Company nor any Subsidiary has
received any communications alleging that it has violated or, by conducting its
business as proposed would violate, any proprietary rights of any other person,
nor is the Company or any Subsidiary aware of any basis for the foregoing.
3.14 No Litigation. Except as set forth on Schedule 3.14 attached hereto
and incorporated by reference herein, there is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any of the Subsidiaries or any of their properties or rights before any
court or by or before any governmental body or arbitration board or tribunal,
and the Company and the Subsidiaries are not in default with respect to any
final judgment, writ, injunction, decree, rule or regulation of any court or
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
5
<PAGE>
3.15 Financial Statements; Undisclosed Liabilities. Attached hereto as
Schedule 3.15 and incorporated by reference herein are copies of the Company's
audited combined balance sheet as of December 31, 1998, and its unaudited
consolidated balance sheet as of September 30, 1999, the Company's audited
combined statement of operations and retained earnings for the period ended
December 31, 1998 and its unaudited consolidated statement of operations and
retained earnings for the period ended September 30, 1999, and the Company's
audited combined statement of changes in financial position for the period ended
December 31, 1998 and its unaudited combined statement of changes in financial
position for the period ended September 30, 1999 (hereinafter collectively
referred to as the "Financial Statements"). The Financial Statements are in
accordance with the books and records of the Company, are true, correct and
complete and accurately present the Company's financial position as of the dates
set forth therein and the results of the Company's operations and changes in the
Company's financial position for the periods then ended, all in conformity with
generally accepted accounting principles applied on a consistent basis during
each period and on a basis consistent with that of prior periods. Except (i) as
disclosed in the Financial Statements, (ii) as disclosed in this Agreement, and
(iii) as are incurred in the ordinary course of the routine daily affairs of the
Company's and the Subsidiaries' business, nei ther the Company nor any of the
Subsidiaries has any liabilities or obligations of any nature or kind, known or
unknown, whether accrued, absolute, contingent, or otherwise. There is no basis
for assertion against the Company or any of the Subsidiaries of any material
claim, liability or obligation not fully disclosed in the Financial Statements
or in this Agreement.
3.16 Tax Matters. The Company and each of the Subsidiaries has duly and
timely filed, or obtained extensions of time for filing, all material tax
returns required by federal, state and local authorities (the "Returns"). All
information reported on the Returns is true, accurate, and complete. The Company
is not a party to, and is not aware of, any pending or threatened action, suit,
proceeding, or assessment against it for the collection of taxes by any
government. The Company and each of the Subsidiaries has paid in full all taxes,
interest, penalties, assessments and deficiencies owed by it to all taxing
authorities.
3.17 Rule 144. The Company has maintained all reports and documents and has
taken all actions as may be necessary or useful in order to allow a holder of
Registrable Securities (as defined in Article 5 below) to sell any such
securities without registration in accordance with Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act").
3.18 Full Disclosures. All factual information heretofore or herewith
furnished by or on behalf of the Company to the Purchasers for purposes of or in
connection with this Agreement or any transaction contemplated hereby (including
the Company's business plan) is and all statements made by representatives of
the Company in connection with the negotiation of this Agreement do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained herein not misleading. There is no
fact known to the Company which materially adversely affects the accuracy of the
representations and warranties contained in this Agreement or the financial
condition, operations, business, earnings, assets, or liabilities of the Company
or any of the Subsidiaries.
3.19 No Brokers or Finders. The Company has not engaged any broker or
finder and no claims for brokerage commissions or finder's fees arranged by the
Company will arise in connection with the Company's execution of this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers each severally and not jointly hereby represent and warrant
to the Company as follows:
4.1 Requisite Power and Authority. Such Purchaser has all necessary power
and authority to execute and deliver this Agreement and to carry out its
provisions. All actions on such Purchaser's part required for the lawful
execution and delivery of this Agreement have been or will be effectively taken
prior to the Closing.
4.2 Investment Representations. Such Purchaser understands that none of the
Debenture, the Warrants, the Conversion Shares and the Warrant Shares to be
acquired by such Purchaser has yet been registered under the Securities Act.
Such Purchaser also understands that such Debenture and such Warrants are being
offered and sold pursuant to an exemption from registration contained in
regulations under the Securities Act based in part upon such Purchaser's
representations contained in this Agreement.
(a) Acquisition for Own Account. Such Purchaser is acquiring the Debenture
and/or the Conversion Shares and the Warrants and/or the Warrant Shares to be
acquired by it for its own account for investment only, and not with a view
towards their distribution in violation of applicable securities laws.
(b) Accredited Investor. Such Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(c) Non-Foreign Status. Such Purchaser certifies that it is not a
nonresident alien for purposes of income taxation (as such term is defined in
the Internal Revenue Code of 1986, as amended, and Income Tax Regulations).
(d) Such Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Debenture, the Warrants, the Debenture Shares and the Warrant
Shares (collectively, the "Securities") and it is able to bear the economic risk
of loss of its entire investment.
(e) The Company has provided to such Purchaser the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Offering and it has had access to such information concerning the Company as it
has considered necessary or appropriate in connection with its investment
decision to acquire the Securities.
(f) Such Purchaser agrees that if it decides to offer, sell or otherwise
transfer any of the Securities, it will not offer, sell or otherwise transfer
any of such Securities directly or indirectly, unless:
(i) the sale is made pursuant to registration under the
Securities Act;
(ii) the sale is made pursuant to the exemption from the
registration requirements under the Securities Act provided
by Rule 144 thereunder and in accordance with any applicable
state securities or "Blue Sky" laws; or
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(iii) the Securities are sold in a transaction that does not
require registration under the Securities Act or any
applicable state laws and regulations governing the offer
and sale of securities, and it has prior to such sale
furnished to the Company an opinion of counsel reasonably
satisfactory to the Company.
(g) Such Purchaser understands and agrees that the certificates
representing the Securities will bear a legend stating that such shares have not
been registered under the Securities Act or the securities laws of any state of
the United States and may not be offered for sale or sold unless registered
under the Securities Act and the securities laws of all applicable states of the
United States or an exemption from such registration requirements is available.
(h) Such Purchaser understands and agrees that the Warrants may not be sold
or transferred unless the Warrant Shares are registered under the Securities Act
and any applicable state securities laws or unless an exemption from such
registration requirements is available and that certificates representing the
Warrants will bear a legend to such effect.
(i) Such Purchaser consents to the Company making a notation on its records
or giving instructions to any transfer agent of the Company in order to
implement the restrictions on transfer set forth and described herein.
5. REGISTRATION RIGHTS RELATING TO CONVERSION SHARES AND WARRANT SHARES
5.1 Definitions. As used in this Article 5, the following terms shall have
the following respective meanings:
(a) "Equity Securities" means (i) any securities of the Company entitled to
participate with the Common Stock in a distribution of the Company's remaining
assets (after distribution to all holders of securities entitled to such
distribution in priority to the holders of Common Stock) and (ii) any securities
convertible into or exercisable or exchangeable for securities of the type
referred to in Section 5.1(a)(i).
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934 (or any
similar successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(c) "Founders" shall mean one or both, as the context requires, of Marco
Markin and Emanuel Weintraub.
(d) "Public Offering" shall mean an underwritten public offering (with a
nationally recognized underwriter) of Common Stock pursuant to an effective
registration statement under the Securities Act.
(e) "Public Sale" means any sale of Registrable Securities to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144.
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(f) "registers," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the SEC.
(g) "Registrable Securities" shall mean (i) the Conversion Shares, (ii) the
Warrant Shares, and (iii) any shares of Common Stock or Equity Securities issued
as a dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in Sections 5.1(g)(i) and 5.1(g)(ii),
provided, however, that Registrable Securities shall not include any such shares
or Equity Securities that have previously been registered under the Securities
Act or that have otherwise been sold to the public in an open-market transaction
under Rule 144.
(h) "Registration Expenses" shall mean all expenses incurred in connection
with effecting any registration pursuant to this Agreement, including without
limitation all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, expenses of any regular or special audits incident to or required
by any such registration, and the fees and expenses of one counsel for the
selling holders of Registrable Securities, but excluding Selling Expenses.
(i) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(j) "SEC" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(k) "Securities Act" shall mean the Securities Act of 1933 (or any similar
successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(l) "Selling Expenses" shall mean all stock transfer taxes, underwriting
discounts, expenses for special counsel of a selling stockholder and selling
commissions applicable to the sale of Registrable Securities.
5.2 Demand Registration.
(a) Request for Registration. Subject to Sections 5.2(b) and 5.2(e), at any
time after 8 months from the issue of the Debentures, when any of the Debentures
or any Registrable Securities are outstanding, Agent (as such term is defined in
Section 8) may, by notice (the "Demand Notice") given by Agent, demand that the
Company effect one (1) registration under the Securities Act utilizing either
(i) a registration on Form S-1 or any similar or successor form (provided that
such registered offering represents not fewer than 250,000 shares of Common
Stock), or (ii) a registration on Form S-3 or any similar or successor form, if
available (provided that such registered offerings represent not fewer than
250,000 shares of Common Stock) (either, a "Demand Registration"). Nothing in
this Article 5 shall permit Agent to demand or require the Company to effect any
registration under the Securities Act in respect of the Debentures or the
Warrants, but Agent shall be permitted to give the Demand Notice in respect of
any Registrable Securities issuable upon a future conversion of the Debentures
or exercise of the Warrants, prior to the issue of such Registrable Securities.
The number of shares required for effecting a registration under this Section
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5.2(a) shall be adjusted for stock splits, combinations, stock dividends and
distributions and similar events occurring after the date hereof.
(b) Deferral of Demand Registration. The Company shall use its best efforts
to file a registration statement with respect to a Demand Registration demanded
pursuant to Section 5.2(a) as soon as practicable and in any event within 30
days after receipt of the Demand Notice; provided, however, that if the Company
selects an underwriter to distribute the Registrable Securities covered by the
Demand Regstration and such underwriter determines in good faith that, and
provides Agent with a certificate (an "Underwriter Notice") of an officer of
such underwriter certifying that in its view such Demand Registration would be
materially detrimental to the Company or would negatively impact any other
material corporate transaction and concludes, as a result, that it is advisable
to defer the filing of such registration statement at such time, then the
Company shall have the right to defer such filing for the period during which
such registration would be detrimental; provided, however, that the Company may
not defer the filing for a period of more than 90 days following receipt of the
Demand Notice. In addition, and notwithstanding the Demand Notice, the Company
shall not be required to effect a registration statement if, within 10 days
after receiving any Demand Notice, the Company delivers a notice (a "Company
Registration Notice") to Agent of its intent to file a registration statement
within the following 60 days and does so file such registration within such time
period. In addition, the Company may, not more than once in each calendar year
and provided that in such calendar year neither an Underwriter Notice nor a
Company Registration Notice shall have been previously given, and no Demand
Notice shall have been given at any time prior thereto, be entitled to provide
to Agent a written notice (a "Company Deferral Notice") stating that the Company
has determined that it would be materially detrimental to the Company or would
negatively impact on other material corporate transactions for Agent to give a
Demand Notice within the period of 60 days following the date of receipt of such
Company Deferral Notice, in which case, Agent shall not be permitted, during
such 60 day period, to give a Demand Notice.
(c) Underwriting. If the Purchasers intend to distribute the Registrable
Securities covered by a Demand Registration by means of an underwriting, Agent
shall so advise the Company as a part of its Demand Notice made pursuant to
Section 5.2(a). Agent shall have the right to select the managing underwriter(s)
of recognized national reputation for an underwritten Demand Registration,
subject to the approval of the Company's Board of Directors (which will not be
unreasonably withheld or delayed). The right of any holder of Registrable
Securities to participate in an underwritten Demand Registration shall be
conditioned upon such holder's participation in such underwriting in accordance
with the terms and conditions thereof, and Agent shall be responsible for
ensuring that all holders enter into an underwriting agreement in customary form
with the underwriter and the Company.
(d) Priorities. The holders of Registrable Securities will have absolute
priority over any other securities proposed to be included in a registered
offering pursuant to Section 5.2(a) hereof. If other securities are included in
any Demand Registration that is not an underwritten offering, all Registrable
Securities included in such offering shall be sold prior to the sale of any of
such other securities. If other securities are included in any Demand
Registration that is an underwritten offering, and the managing underwriter for
such offering advises the Company that in its opinion the amount of securities
to be included exceeds the amount of securities which can be sold in such
offering without adversely affecting the marketability thereof (including the
price at which such securities are to be sold), the Company will include in such
registration all Registrable Securities
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requested to be included therein prior to the inclusion of any other securities.
If the number of Registrable Securities requested to be included in such
registration exceeds the amount of securities which in the opinion of the
underwriter can be sold without adversely affecting the marketability of such
offering, such Registrable Securities shall be included pro rata among the
holders thereof based on the percentage of the outstanding Common Stock held by
each such holder (assuming the complete conversion of the Debent ures, and the
exercise in full of the Warrants and any other options, warrants and similar
rights held by such holders).
(e) One Registration. Where the Company has effected the Registration, it
shall have no obligation to effect any further Demand Registrations; provided,
however, that where at any time within two (2) years after such Demand
Registration was made pursuant to Section 5.2(a)(ii) the time period within
which any issue or trade of Registrable Securities is required to be made under
such registration has passed or will in 30 days pass, the Purchasers shall have
the right to demand (by notice given by Agent on their behalf) that the Company
effect a further registration (including a new Demand Registration) as may be
required for registration of the Registrable Securities.
5.3 Piggyback Registrations.
(a) Request for Inclusion. At any time after the completion of a Public
Offering after the date hereof, if the Company shall determine to register any
of its securities for its own account or for the account of other security
holders of the Company on any registration form (other than a registration
relating to either Form S-4 or S-8) which permits the inclusion of Registrable
Securities (a "Piggyback Registration"), the Company will promptly give Agent
written notice thereof and, subject to Section 5.3(c), shall include in such
registration all of the Registrable Securities requested to be included therein
pursuant to the written request of Agent received within twenty (20) days after
delivery of the Company's notice.
(b) Underwriting. If the Piggyback Registration relates to an underwritten
public offering, the Company shall so advise Agent as a part of the written
notice given pursuant to Section 5.3(a). In such event, the right of any holder
of Registrable Securities to participate in such registration shall be
conditioned upon such holder's participation in such underwriting in accordance
with the terms and conditions thereof. Agent shall be responsible for answering
that all holders of Registrable Securities proposing to distribute their
securities through such underwriting enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company and
the Company.
(c) Priorities. If such proposed Piggyback Registration is an underwritten
offering and the managing underwriter for such offering advises the Company that
the amount of securities requested to be included therein exceeds the amount of
securities that can be sold in such offering, or if the Company and the managing
underwriter shall in good faith determine to reduce the number of shares to be
offered by the Company pursuant to a reasonable assessment of market conditions,
(i) the number of Registrable Securities requested to be included in such
Piggyback Registration, (ii) the number of securities determined by the
directors of the Company in good faith to be sold by the Company, and (iii) the
number of securities, if any, to be sold by any other security holders of the
Company exercising Demand Registration rights in such offering, shall each be
reduced pro rata among the holders on the basis of the percentage of the
outstanding Common Stock held by such
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holders (assuming the complete conversion of the Debenture and the exercise in
full of the Warrant and any other options, warrants and similar rights held by
such holders).
5.4 Expenses of Registration. Except as provided in this Section 5.4, the
Company shall bear all Registration Expenses incurred in connection with the
Demand Registration and any Piggyback Registrations. All Selling Expenses
incurred by the Company relating to Registrable Securities included in any
Demand Registration or Piggyback Registration, shall be reimbursed by Agent.
5.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Article 5, the Company will keep Agent advised in
writing as to the initiation of such registration and as to the completion
thereof. The Company will use its reasonable efforts to:
(a) cause such registration to be declared effective by the SEC and, in the
case of a Demand Registration, keep such registration effective for a period of
two years or until the holders of Registrable Securities included therein have
completed the distribution described in the registratio n statement relating
thereto, whichever first occurs;
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement (including post-effective amendments) as may be necessary
to comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such registration
statement;
(c) obtain appropriate qualifications of the securities covered by such
registration under state securities or "blue sky" laws in such jurisdictions as
may be requested by Agent;
(d) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as Agent
from time to time may reasonably request;
(e) notify Agent at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing, and at the request of Agent, prepare and furnish to Agent a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; cause all Registrable Securities covered by such
registration to be listed on each securities exchange or inter-dealer quotation
system on which similar securities issued by the Company are then listed;
(f) provide a transfer agent and registrar for all Registrable Securities
covered by such registration and, if necessary, a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
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(g) otherwise comply with all applicable rules and regulations of the SEC,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least 12 months, but not more
than 18 months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(h) in connection with any underwritten Demand Registration, the Company
will enter into an underwriting agreement reasonably satisfactory to Agent
containing customary underwriting provisions, including indemnification and
contribution provisions.
5.6 Indemnification.
(a) The Company will indemnify each Purchaser, each of such Purchaser's
officers and directors, and each person controlling such Purchaser within the
meaning of Section 15 of the Securities Act, with respect to each registration,
qualification or compliance effected pursuant to this Article 5 or otherwise,
against all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act applicable to the Company and relating to action
or inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified person for
any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such claims, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Purchaser and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 5.6(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).
(b) Each of the Purchasers, to the extent it is a holder of Registrable
Securities included in any registration effected pursuant to this Article 5,
shall indemnify the Company, each of its directors, officers, agents, employees
and representatives, and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse such indemnified persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by Agent on behalf
of such Purchaser; provided, however, that (x) such Purchaser shall
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not be liable hereunder for any amounts in excess of the net proceeds received
by such Purchaser pursuant to such registration, and (y) the obligations of such
Purchaser hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Purchaser (which consent has
not been unreasonably withheld).
(c) Each party entitled to indemnification under this Section 5.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel selected by the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
5.6 to the extent such failure is not prejudicial. No Indemnifying Party in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include an unconditional release of such Indemnified Party from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 5.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in an underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
5.7 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the SEC which may effectuate the registration
of Registrable Securities or permit the sale of Registrable Securities to the
public without registration, the Company agrees to:
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(a) after its initial registration under the Securities Act, exercise best
efforts to cause the Company to be eligible to utilize Form S-3 (or any similar
form) for the registration of Registrable Securities;
(b) at such time as any Registrable Securities are eligible for transfer
under Rule 144(k), upon the request of Agent on behalf of the holder of such
Registrable Securities, promptly remove any restrictive legend from the
certificates evidencing such securities, at no cost to Agent or such holder
where such holder is a Purchaser hereunder, and at the cost of Agent in any
other case;
(c) make and keep available public information as defined in Rule 144 under
the Securities Act at all times from and after its initial registration under
the Securities Act;
(d) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at any
time after it has become subject to such reporting requirements; and
(e) furnish Agent upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time following
the effective date of the first registration statement filed by the Company
under the Securities Act for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
as a holder of Registrable Securities may reasonably request in availing itself
of any rule or regulation of the Commission (including Rule 144A) allowing a
holder of Registrable Securities to sell any such securities without
registration.
5.8 Termination of Registration Rights. The right of Agent to request
inclusion of Registrable Securities in any registration pursuant to this Article
5 shall terminate at the date that is the earlier of: (a) that date that all
Registrable Securities have been registered under the Securities Act has or
otherwise been sold to the public in an open-market transaction under Rule 144;
and (b) the later of (i) the fifth anniversary of the Closing Date, and (ii) the
second anniversary of the date on which the last Conversion Shares obtainable by
either Purchaser have been obtained by conversion of such Purchaser's Debenture;
provided, however, that where a Company Deferral Notice has been given within 70
days prior to the date on which termination would otherwise occur, it shall not
occur for 60 days beyond the end of the 60 day period during which a Demand
Notice cannot be given pursuant to Section 5.2(b).
5.9 Go-Along Rights. In the event that, in connection with any Public
Offering by the Company, any of the Founders or any other any Equity Securities
becomes entitled to sell some or all of such Equity Securities (or any
securities of the Company into which such Equity Securities are convertible or
for which such Equity Securities are exercisable or exchangeable) as part of
such Public Offering (collectively, the "Selling Shareholders"), the Company
will promptly give Agent written notice thereof and shall include in such
registration all the Registerable Securities requested to be included therein
pursuant to the written request of Agent on behalf of the holders of such
Registerable Securities received within twenty (20) days after delivery of the
Company's notice; provided always, however, that such holders collectively shall
be entitled to sell no more than twenty-five percent (25%) of the aggregate of
all outstanding securities (including such Registerable Securities) sold by the
Selling Shareholders and such holders of Registrable Securities electing to
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sell Registerable Securities, and to the extent that the aggregate number of
Registerable Securities requested to be included in the Public Offering pursuant
to the written request of Agent received within the aforesaid period exceeds
such entitlement, the number of shares to be included by the holders of such
Registerable Securities in such registration shall be reduced pro rata among
such holders on the basis of the number of shares specified to be included in
such written request of Agent for such holders respectively.
6. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The obligation of the Purchasers to purchase and pay for the Debentures and
the Warrants to be delivered to it at the Closing shall be subject to the
satisfaction of the following conditions as of the Closing Date:
6.1 the representations and warranties of the Company contained in this
Agreement, the Debenture and the Warrant shall be true and correct on and as of
the Closing Date;
6.2 prior to or concurrent with the Closing, the other parties (besides the
Purchasers) thereto shall have entered into the Right of First Refusal
Agreement;
6.3 prior to or concurrent with the Closing, Mr. Emanuel Weintraub, the
Emanuel Weintraub Intervivos Trust and Leo Robert Dennis (the "Notification
Holders"), shall have entered into an agreement in form and substance
satisfactory to Agent in their absolute discretion pursuant to which the
Notification Holders agree to give certain notices to Agent on behalf of
Purchasers and confirm certain matters to the Purchasers;
6.4 prior to or concurrent with the Closing, the holders of that certain
promissory note (the "Weintraub Note") dated March 31, 1999, executed by Neptune
USA (then called "Lari Acquisition Company, Inc.") to and in favor of Emanuel
Weintraub Inter Vivos Trust, in the principal amount of $2,000,000, the
Purchasers and the Company shall have entered into a subordination agreement
relating to the Weintraub Note whereby such holders subordinate payment of the
Weintraub Note and all security held by them therefor to and in favor of the
prior payment of the Debentures and all security held by Agent for the
Purchasers, in form and substance satisfactory to Agent in its absolute
discretion;
6.5 concurrent with the Closing, Agent shall have received evidence
satisfactory to it that:
(a) the Guarantees of the Subsidiaries and the Security Agreements (as
defined in the Debentures) and any additional security instruments or documents
required by the Purchasers have been executed and delivered, and all necessary
consents, subordinations, releases, discharges and other instruments have been
obtained as may be necessary, for the security constituted thereby to enjoy the
priority thereby contemplated, subject only to the encumbrances permitted by the
Debentures;
(b) the Company has a free cash balance available to it, as of the Closing
Date, of no less than $2,500,000 (less any amounts used by the Company and
disclosed in writing to the Purchasers during the period from September 1, 1999
to the Closing Date for acquisitions or capital expenditures);
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(c) except as may be required by the Securities Act of 1933, as amended,
and any applicable state securities laws, the Company and the Subsidiaries have
obtained any and all consents, approvals and acknowledgments of all persons
whose consents, approvals and acknowledgments may be required, including without
limitation all requisite corporate, shareholder and governmental consents, as
are necessary for the consummation of the transactions hereby contemplated;
6.6 concurrent with the Closing, the Purchasers shall have received the
opinions of counsel acceptable to Agent in the States of Florida and California,
in form and substance satisfactory to Agent; and
6.7 prior to or concurrent with the Closing, the Company shall have
delivered to Agent its Year 2000 business plan.
7. COMPANY COVENANTS
The Company covenants and agrees with the Purchasers that:
7.1 Use of Proceeds. The Company shall use the proceeds from the sale of
the Debenture solely for the purpose of paying down principal and accrued but
unpaid interest owing under the Vendor Note. Such proceeds shall be paid, and
escrow arrangements mutually acceptable to Agent and the Company, pursuant to
the Company's written direction directly on or after Closing to City National
Bank, N.A., the escrow agent appointed by the holders of the Vendor Note by
Joint Written Instructions to Escrow Agent dated April 22, 1999, as amended.
7.2 Reservation of Common Stock. The Company will reserve and keep
available that maximum number of its authorized but unissued Common Stock as may
be required for the issuance of Conversion Shares and the Warrant Shares.
7.3 Board Meeting Attendance. Until such time as either (a) 75% of the
principal amount of the Debenture has been converted into the Company's Common
Stock, or (b) the Debenture shall have been repaid in full, Agent shall be
entitled to receive notice of and to have a representative attend all meetings
(including telephonic meetings) and all adjournments of meetings of the Board of
Directors and any committee thereof (including committees comprised of both
directors and non-directors). Failure to provide notice (on the same basis as is
required for all board members and in any event on not less than three business
days) of or to permit such representative to attend such meeting shall
constitute a material breach of the provisions of this Agreement. Such
representative shall have no voting rights at any such meeting, but shall be
entitled to participate fully in all discussions that take place thereat.
8. CAPEX AS AGENT FOR THE PURCHASER
8.1 Provisions for the Benefit of Purchasers Only. The provisions of this
Section 8 relate to the rights and obligations of the Purchasers and Agent,
inter se, and shall be operative as between the Purchasers and Agent only, and
the Company shall not have any rights or be entitled to rely for any purposes
upon such provisions, save as provided in section 8.2(b).
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8.2 Authorization and Action.
(a) Each Purchaser appoints CapEx, L.P. as its agent (in such capacity,
"Agent"), for the purposes of collecting payments, electing to exercise the
rights of the Purchasers under this Agreement and the other Transaction
Documents as herein and therein provided, and holding and enforcing those
security documents referred to in the Debentures (and hereinafter referred to)
as the "Security" in accordance with the terms of this Agreement, and
distributing any funds received either as payments from the Company or on
realization of the Security in accordance with this Agreement. For such
purposes, each Purchaser authorizes Agent on behalf of such Purchaser to take
such action and to exercise such rights, powers and discretions as are expressly
delegated to it under this Agreement and the other Transaction Documents and on
the terms hereof or thereof together with such other rights, powers and
discretions as are reasonably incidental thereto; provided always, however,
that, without the consent of both Purchasers, Agent shall not: (i) effect or
agree to any change in the interest rate, payment dates, maturity date or
conversion rights under the Debentures; or (ii) fail to elect under Section 7.1
of the Debentures to accelerate repayment of all indebtedness owing thereunder
upon the occurrence of a Default Event and proceed to enforce all security held
by Agent for such indebtedness. Agent may perform any of its duties hereunder or
thereunder by or through its agents, officers or employees. Agent shall not be
required to exercise any right, power or discretion or take any action as to any
matters not expressly provided for by this Agreement or the other Transaction
Documents (including, without limitation, enforcement of the collection of any
amounts owing to the Purchasers hereunder). Agent shall not be required to
exercise any right, power or discretion or to take any action which exposes
Agent to personal liability or risk thereof or which is contrary to this
Agreement, the other Transaction Documents or applicable law. The duties of
Agent, as agent, shall be mechanical and administrative in nature. Agent shall
not have, by reason of this Agreement or the other Transaction Documents, a
fiduciary relationship in respect of either Purchaser.
(b) Agent shall only act on behalf of the Purchasers in dealings and
communications with the Company as set out in this Agreement, and shall be the
only person to so act, except as may be otherwise agreed in writing between the
parties hereto. The Company and the Subsidiaries may rely upon the grant and
delegation of authority provided in this section 8 from each of the Purchasers
to Agent without further inquiry.
8.3 Exoneration.
(a) Agent and its limited and general partners, and their respective
directors, officers, managers, members, shareholders, agents or employees shall
not be liable to any person, company or firm (including the Purchasers and the
Company) for any action taken or omitted to be taken by any of them (other than
actions taken or omitted to be taken by Agent in its capacity as a Purchaser,
including, without limitation, actions giving rise to indemnification
obligations pursuant to Section 5.6(b)) under or in connection with this
Agreement or the other Transaction Documents unless directly due to their own
gross negligence or wilful misconduct.
(b) Without limiting the generality of the foregoing Section 8.3(a):
(i) subject to sections 8.8 and 9, Agent may retain, consult with and
pay legal counsel, independent accountants and other experts selected
by it (provided that all
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reasonable costs and fees in respect thereof shall be paid by the
Company as provided for in Section 9) and Agent shall not be liable
for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts;
(ii) Agent shall not incur any liability by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telegram, telecopy, cable or telex) believed by it at the time to be
genuine or by acting upon any representation or warranty of the
Company made hereunder;
(iii) Agent may assume without inquiry or investigation that no event
of default, default, or other event which is, or which with the
passing of time or giving of notice or both would become an event of
default under the Debentures or any other Transaction Document, has
occurred unless it has received from the Company or any Purchaser a
notice thereof specifying the nature of the relevant event whereupon
Agent may assume that such event has occurred as therein described and
that an default hereunder or default or event of default thereunder,
as the case may be, has occurred; and
(iv) Agent shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or
conditions of this Agreement or any other Transaction Document, to
inspect the property (including the books and records) of the Company,
the Subsidiaries or any of the other parties, or to conduct any other
inquiry usual for a lender; Agent shall not be responsible to any
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any other
Transaction Document or any security provided by the Company and the
Subsidiaries.
8.4 Agent as Purchaser. Agent, which is also a Purchaser as to its
Debenture, shall have the same rights and powers under this Agreement and the
other Transaction Documents as any other Purchaser and may exercise the same as
though it were not Agent; and the terms "Purchaser" or "Purchasers" shall,
unless otherwise expressly indicated, include Agent in its capacity as
Purchaser. Subject to any restrictions on the Company herein, Agent may accept
deposits from, lend money to, and generally engage in any kind of business with
the Company and any other party, all as if Agent were not agent hereunder and
without any duty to account therefor to either Purchaser.
8.5 Credit Decision. Each Purchaser has entered into this Agreement after
its own negotiations with the Company and is and will continue to be solely
responsible for its own independent appraisal of and investigations into the
financial condition, creditworthiness, affairs and nature of the Company and all
other credit and banking matters relative to this Agreement and the other
Transaction Documents. Each Purchaser confirms to Agent that it has not relied,
and will not hereafter rely, on Agent:
(a) to check or inquire on its behalf into the adequacy, accuracy or
completeness of any information provided by the Company under or in connection
with this Agreement or the transactions herein contemplated and that each
Purchaser shall be responsible for obtaining directly
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from the Company, through requests made by Agent to the Company on its behalf,
such information, documents or other information as each Purchaser deems
necessary from time to time; or
(b) to assess or keep under review on its behalf the financial condition,
creditworthiness, affairs or nature of the Company, the Subsidiaries or their
respective properties or any other credit or banking matters relative to this
Agreement.
A copy of this Agreement including all Schedules hereto has been, or prior to
such Purchaser entering into this Agreement will be, made available to each
Purchaser for review by it and each Purchaser is, or will be, satisfied with the
form and substance of this Agreement including all Schedules hereto; and Agent
is not liable in any way to such Purchaser in respect thereof or in respect of
the accuracy or completeness of any information or data, financial or otherwise,
made available to such Purchaser in connection with the negotiation of this
Agreement or for any statements, warranties or representations whether made in
writing or orally made in connection with the negotiation of this Agreement.
8.6 Security.
(a) Each of the Purchasers hereby acknowledges that the guarantees of the
Subsidiaries and the Security Agreements, and any and all security now or
hereafter held to secure the aggregate of all indebtedness owing by the Company
under the Debentures (the "Security") and the remedies provided hereunder or
thereunder are for the benefit of the Purchasers such that the Security and such
remedies shall enure to benefit of all the Purchasers until such indebtedness
shall have been repaid in full.
(b) Except as contemplated by section 8.6(c), no part of the Security shall
be discharged or otherwise surrendered to the Company, in whole or in part, by
Agent or any of the Purchasers without the consent of all of the Purchasers, but
none of the Purchasers or Agent shall be liable or responsible to the others for
any loss or damages suffered as a result of any action taken or omitted to be
taken with respect to any of the Security, except as provided in this Agreement,
or any invalidity or unenforceability of any of the Security for any reason
whatsoever, including without limiting the generality of the foregoing, any
negligent omission to comply with any filing or registration requirement or any
renewal filing or registration requirement or other requirement necessary to
perfect or maintain any security interest.
(c) Each of the Purchasers agrees that its rights under the Security are to
be exercised not severally, but collectively, by Agent in accordance with the
terms hereof or thereof. The Company hereby confirms that Agent may exercise the
rights of the Purchasers under the Security collectively if the Purchasers so
require, or severally for the benefit of the Purchasers, if the Purchasers so
require. Notwithstanding the foregoing, where, in the sole opinion of Agent, the
exigencies of the situation warrant such action, Agent may (but shall not be
required to do so) without notice to or the consent of the Purchasers take such
action on behalf of the Purchasers as it deems appropriate or desirable in the
interests of the Purchasers. Each of the Purchasers covenants that upon any such
consent of the Purchasers being given, it shall co-operate fully with Agent to
the extent requested by Agent in the collective realization of the Security.
Each Purchaser agrees to do all acts and things and to make, execute and deliver
all agreements and other instruments so as to fully carry out and effect the
intent and purpose of this section 8.
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(d) No representation or warranty with respect to the authorization,
execution, delivery, registration, validity, enforceability or value of the
Security or of any other kind or character in relation thereto shall be binding
on any of the Purchasers or Agent unless expressly made in writing. The
Purchasers acknowledge that Agent has not made any representation or warranty
whatsoever to the Purchasers with respect to any of the Security held or to be
held by it.
8.7 Sharing of Payments. All Purchasers shall share in payments received
from or other recoveries from the Company or any of the Subsidiaries in respect
of their indebtedness (including amounts paid by the Company in accordance with
the Debentures and this Agreement, amounts received on any exercise of any right
of counterclaim, set-off, banker's lien or similar right and amounts recovered
on the realization of the Security) pari passu, equally and ratably on a pro
rata basis between the Purchasers, based upon the respective amounts of
indebtedness owing under their Debentures.
8.8 Indemnification. The Purchasers agree to indemnify Agent (to the extent
not reimbursed by the Company) ratably according to the respective amounts of
indebtedness owing under their Debentures from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any nature or kind whatsoever which may be
imposed on, incurred by, or asserted against Agent in its capacity as Agent
hereunder in any way relating to or arising out of this Agreement, any other
Transaction Document or any action taken or omitted by Agent under this
Agreement or any other Transaction Document; provided that no Purchaser shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent's gross negligence or wilful misconduct. Without limitation each
Purchaser agrees to reimburse Agent promptly upon demand for its rateable share
as above described of out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by Agent in connection with the determination
or preservation of any rights of Agent or the Purchasers under, or the
enforcement of, or legal advice in respect of rights or responsibilities under,
this Agreement or other Transaction Documents, to the extent that Agent is not
reimbursed for such expenses by the Company on demand.
8.9 Selling Expenses. Agent shall be entitled to be reimbursed for all
Selling Expenses incurred by it pursuant to Section 5.4 by the holders of
Registrable Securities included in the Registration to which such Selling
Expenses relate, and may require payment of any holder's estimated share thereof
to it as a precondition to including such Registrable Securities in such
Registration.
8.10 Exchange of Information. The Company agrees that each Purchaser and
Agent may provide to the other Purchasers or Agent such information concerning
the financial position and property and operations of the Company and the
Subsidiaries as, in the opinion of such Purchaser or Agent, is relevant to the
ability of the Company and the Subsidiaries to fulfil their obligations under or
in connection with this Agreement and the other Transaction Documents.
8.11 Replacement of Agent. Upon any dissolution of Agent, Agent shall be
entitled to transfer to its limited partners or to one or more corporations or
limited partnerships, the majority of the shareholders or partners of which are
limited and or general partners of Agent, all of its rights as Agent under the
Transaction Documents. In connection with such distribution, Agent shall be
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entitled to assign to its limited partners or such corporations or partnerships
Agent's rights hereunder. In addition, after the occurrence of a Default Event,
as defined in the Debentures, should Agent fail to take any of the steps
referred to in Section 8.2(a)(ii) forthwith after the occurrence of such Default
Event (or any subsequent Default Event), either Purchaser may immediately remove
Agent from its position and appoint a successor Agent in the stead of CapEx,
L.P. Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be then discharged from its further duties and obligations
as Agent under this Agreement provided that the Agent shall execute such
documents as may be necessary or desirable to assign and transfer the retiring
Agent's interest in this Agreement, the Security and the other Transaction
Documents to the successor Agent. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 8 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement.
9. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse Agent on behalf of the Purchasers
for all of its out-of-pocket expenses incurred in connection with the
transactions contemplated hereby, including all out-of-pocket expenses
(including filing fees and other third party charges) incurred in connection
with its third party due diligence costs, the preparation and negotiation of
this Agreement, the Debenture, the Security Agreement (as defined in the
Debenture), the Warrant, and the Right of First Refusal Agreement, and all other
documents evidencing the transactions contemplated herein (including reasonable
attorneys' fees). Agent acknowledges receiving a $7,500.00 advance on or before
mutual execution of the term sheet dated November 17, 1999 on account of such
expenses.
10. MISCELLANEOUS
10.1 Currency. Except as may be otherwise expressly provided, all dollar
amounts herein are references to United States dollars.
10.2 Governing Law. This Agreement shall be governed by the internal law,
and not the law of conflicts, of the State of Colorado.
10.3 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by or on behalf of the
Purchasers and the closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
10.4 Successors and Assigns. Except as provided in Section 8.11, neither
Purchaser shall be entitled to assign its rights under this Agreement or any of
the other Transaction Documents, without the consent of the Company, which
consent shall not be unreasonably withheld or delayed; provided always, however,
that no such consent shall be required for either Purchaser to assign such
rights to any person or group of persons controlling or owning the majority of
all beneficial interests in such Purchaser, any other entity controlled by such
person or persons, or an entity controlled by such Purchaser, provided that such
entity shall continue to be so controlled by such persons or such
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Purchaser as applicable. The provisions hereof shall inure to the benefit of,
and be binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto.
10.5 Entire Agreement; Amendment and Waiver. This Agreement, the Schedules
and Exhibits hereto and the other documents expressly delivered pursuant hereto
or thereto supersede any other agreement, whether written or oral, that may have
been made or entered into by the parties hereto relating to the matters
contemplated hereby, and constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth or incorporated by reference herein and therein. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Company and the Purchasers.
10.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, special next day delivery, with
verification of receipt. All communications shall be sent:
to the Company at:
The Neptune Society Inc.
100 North First Street
Suite 205
Burbank, California
91502
Attention: Marco Markin, President
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to the Purchasers, prior to January 15, 2000, at:
c/o CapEx, L.P.
1670 Broadway Suite 3350
Denver, CO 80202
Telecopier No. (303) 869-4644
Telephone No. (303) 869-4700
Attention: Evan Zucker, Managing Partner
and, thereafter, at:
c/o CapEx, L.P.
518 17th St., Suite 1700
Denver, CO 80202
Telecopier No. (303) 869-4644
Telephone No. (303) 869-4700
Attention: Evan Zucker, Managing Partner
with a copy to:
Moye, Giles, O'Keefe, Vermeire & Gorrell LLP
1225 Seventeenth Street, 29th floor
Denver, Colorado 80202-5528
Telecopier No. (303) 292-4510
Telephone No. (303) 292-2900
Attention: Edward D. White III, Esq.
or at such other address as the Company or Agent on behalf of Purchasers may
designate by ten (10) days advance written notice to the other parties hereto.
10.8 Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed and delivered by
facsimile.
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10.9 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
THE NEPTUNE SOCIETY, INC.
By: -----------------------------
Name: --------------------------
Title: -------------------------
PURCHASERS:
CAPEX, L.P. D.H. BLAIR INVESTMENT BANKING CORP.
By Its General Partner, RBP, LLC
By: ---------------------------------- By: --------------------------------
Name: Evan Zucker Name: J. Morton Davis
Title: Managing Member Title: Chairman
25
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Exhibit A
FORM OF THE DEBENTURE
26
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Exhibit B
FORM OF THE WARRANT
27
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Exhibit C
FORM OF RIGHT OF FIRST REFUSAL AGREEMENT
28
EXHIBIT 10.23
THE NEPTUNE SOCIETY, INC. Debenture No. --
A Florida Corporation
CONVERTIBLE DEBENTURE
THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE
"STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
UPON THE ISSUANCE TO THE CORPORATION OF A FAVORABLE OPINION OF ITS COUNSEL OR
SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE CORPORATION, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE ACT AND THE STATE ACTS.
December 24, 1999
THE NEPTUNE SOCIETY, INC., a Florida corporation (the "Corporation"), is
indebted and, for value received, promises to pay to or to the order of [HOLDER]
(together with any successor thereto and any other person who becomes a holder
of this Debenture, "Holder"), on February 24, 2004 (the "Due Date") (unless this
Debenture shall have been sooner called for redemption or the amount owing
hereunder accelerated upon the occurrence of a Default Event as hereinafter
provided), upon presentation of this Debenture, [DOLLARS] ($-----------) (the
"Principal Amount") and to pay interest on the Principal Amount at the rate of
thirteen per cent (13%) per annum as provided herein.
This Debenture is issued by the Corporation pursuant to and subject to the
terms and conditions of a Debenture and Warrant Purchase Agreement (the
"Debenture Purchase Agreement") dated as of November 24, 1999, among the
Corporation, CapEx L.P., a Delaware limited partnership, and D. H. Blair
Investment Banking Corp., a New York corporation. Pursuant to the provisions of
Section 8 of the Debenture Purchase Agreement, CapEx L.P. has been appointed by
each Purchaser thereunder of a Debenture (including this Debenture) as its
agent, (in such capacity, "Agent") for the purposes, inter alia of electing to
exercise the rights of Holder under this Debenture, and in connection therewith,
the Corporation shall, in respect of all of its obligations under this
Debenture, be entitled to rely upon the grant and delegation of authority to
Agent provided for in Section 8 of the Debenture Purchase Agreement, and to deal
with Agent without further inquiry, with respect to all such obligations owed by
it under this Debenture to Holder (including without limitation all obligations
of the Corporation to make payments on account of principal or interest
hereunder).
The Corporation covenants, promises and agrees as follows:
1. Interest
1.1 Current and Deferred Interest. Subject to Section 1.2, interest which
shall accrue on the Principal Amount shall be payable as to one-half of the
amount thereof or six and one-half percent (6 1/2%) per annum (such portion of
interest being hereinafter sometimes referred to as "Current Interest") in
arrears in monthly installments on the first day of each month in each and
<PAGE>
every calendar year until the Principal Amount and all accrued and unpaid
Current Interest shall have been paid in full. The remaining one-half, or six
and one-half percent (6 1/2 %) per annum, of interest accruing on the Principal
Amount (such portion of interest being hereinafter sometimes referred to as
"Deferred Interest") shall accrue and be payable on the Due Date or such earlier
date on which the Principal Amount shall become due and payable as herein
provided. If this Debenture shall be issued on a date other than the first day
of a calendar month, the Current Interest and the Deferred Interest payable
shall be prorated for the number of days of such calendar month period during
which this Debenture shall have been issued and outstanding. Any overdue
installment of Current Interest shall bear interest (which shall be included in
and be deemed to be Current Interest) at the aforesaid rate of thirteen percent
(13%), compounded monthly, on each interest payment date, until paid. For
greater certainty, no Deferred Interest shall bear interest unless it is not
paid on the date when the same shall become due, in which case all such overdue
Deferred Interest shall from such date be included in and be deemed to be
Current Interest on which additional Current Interest at the aforesaid rate of
of thirteen percent (13%), compounded monthly, on each interest payment date,
shall accrue and be payable until all such overdue Deferred Interest is paid.
All accrued and unpaid Current Interest and Deferred Interest shall be payable
on the Due Date or such earlier date on which the Principal Amount shall become
due and payable as herein provided. The first payment of Current Interest shall
be made to Agent on January 1, 2000 at 1670 Broadway Suite 3350, Denver,
Colorado 80202. All subsequent payments of principal or interest shall be made
to Agent at 518 Seventeenth St., Suite 1700, Denver, Colorado 80202, or at such
other place as may be designated by Agent.
1.2 Default Interest. In the event that a Default Event (as defined in
Section 7.1) shall occur, and for so long as such Default Event shall remain
unremedied and Agent shall not have waived the same, all amounts owing under
this Debenture, whether in respect of the Principal Amount, Current Interest,
Deferred Interest or otherwise, shall bear additional interest ("Default
Interest") in addition to the interest hereinbefore provided for at the rate of
two percent (2%) per annum, compounded monthly, which Default Interest shall be
payable on each interest payment date on which Current Interest shall be
payable, with Default Interest accruing on any accrued and unpaid Default
Interest.
2. Conversion.
2.1 Conversion Right. Holder shall have the right, at Holder's option, at
any time and from time to time during the period (the "Conversion Period") from
nine (9) months following the date hereof to the Due Date, to convert this
Debenture, in whole or in part, into such number of fully paid and
non-assessable shares of voting Common Stock of the Corporation (the "Common
Stock") as shall be provided herein.
2.2 Notice. Holder may exercise the conversion right provided in this
Section 2 by Agent giving written notice on its behalf (the "Conversion Notice")
to the Corporation of the exercise of such right and stating the address to
which the stock certificate or stock certificates for the shares of Common Stock
to be issued (to be in the name of Holder) shall be delivered. The Conversion
Notice shall be accompanied by this Debenture. The number of shares of Common
Stock that shall be issuable upon conversion of this Debenture shall equal Six
Hundred Thousand (600,000) multiplied by the Conversion Ratio as defined and
determined in accordance with Section 3 in effect on the date the Conversion
Notice is given; provided, however, that in the event that this Debenture shall
have
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been partially redeemed or converted prior to the date of such Conversion
Notice, shares of Common Stock shall be issued pro rata, rounded to the nearest
whole share.
2.3 Certificates. Conversion shall be deemed to have been effected on the
date the Conversion Notice is given (the "Conversion Date"). Within 10 business
days after receipt of the Conversion Notice, the Corporation shall issue and
deliver by hand against a signed receipt therefor or by United States registered
mail, return receipt requested, to the address designated by Agent in the
Conversion Notice, a stock certificate or stock certificates of the Corporation
representing the number of shares of Common Stock to which Holder is entitled
and a check or cash in payment of all Current Interest accrued and unpaid on the
Debenture up to and including the Conversion Date.
2.4 Forgiveness of Deferred Interest. Upon the conversion of all or any
portion of the Principal Amount hereof, any and all Deferred Interest which has
accrued prior to the Conversion Date (but, for greater certainty, not any
Default Interest accruing upon any overdue installment of Deferred Interest) on
the portion of the Principal Amount so converted shall be absolutely forgiven
and shall not after conversion be required to be paid .
2.5 Accrued Interest. For greater certainty, no conversion in part or in
whole of the Principal Amount shall extinguish or satisfy, or relieve the
Corporation of its obligation to pay, any interest other than Deferred Interest
on such Principal Amount, or interest on such interest, accruing prior to the
effective date of such conversion.
2.6 New Debenture. In the event that any amounts remain outstanding
hereunder after giving effect to such conversion, the Corporation shall issue a
new debenture, in form identical to this debenture, except that it shall be
equal in principal amount to the amount of the Principal Amount outstanding
hereunder immediately following such conversion, and the number of shares of
Common Stock into which such debenture shall be convertible specified in Section
2.2 above shall be the number of such shares remaining at the Conversion Date,
after giving effect to such conversion.
2.7 No Fractional Shares. No fractional share or scrip representing a
fractional share shall be required to be issued upon the conversion of this
Debenture. If the conversion of this Debenture would otherwise result in a
fractional share, the Corporation shall, in lieu of issuing such fractional
share, pay to Agent (on behalf of Holder) an amount equal to the fair market
value of the fractional share based upon the then prevailing market price for a
whole share.
3. Conversion Ratio
3.1 Initial Conversion Ratio. On the date hereof, the Conversion Ratio
shall equal one (1.0), provided, however, that the Conversion Ratio shall be
subject to adjustment in accordance with and at the times provided in this
Section 3.
3.2 Additional Common Stock.
(a) If and whenever any shares of Additional Common Stock (as hereinafter
defined) shall be issued by the Corporation (i) for a cash consideration less
than the amount per share
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determined by dividing (a) $5.00 by (b) the Conversion Ratio in effect at the
close of business on the business day immediately preceding the day of such
issue (the "Initial Conversion Ratio"), or (ii) without consideration, then in
each such case, the Initial Conversion Ratio shall be increased effective as of
the opening of business on the date of such issue (the "Issue Date") to the
Conversion Ratio determined: (1) by multiplying (A) $5.00 times (B) the
aggregate number of shares of Common Stock issued and outstanding at the close
of business on the Issue Date (the "Issue Date Shares") and (2) by dividing the
product thus determined by the sum of the following clauses (3) and (4): (3)
$5.00 divided by (x) the Initial Conversion Ratio and the quotient thus
determined multiplied by (y) the number of shares of Common Stock issued and
outstanding at the close of business on the business day immediately preceding
the Issue Date; plus (4) the amount of the consideration (if any) received by
the Corporation for the shares of Additional Common Stock issued on the Issue
Date.
(b) In case of the issuance of shares of Additional Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of the cash received by
the Corporation for such shares, or, if such shares of Additional Common Stock
are offered by the Corporation for subscription, the subscription price, or, if
such shares of Additional Common Stock shall be sold to underwriters or dealers
pursuant to a public offering other than by subscription, the initial public
offering price, less any compensation or discount in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services or for any expenses incurred in connection therewith.
(c) In case of the issuance of any shares of Additional Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the Fair Market
Value for such consideration as determined in accordance with Section 8.1
hereof. In case of the reclassification of securities into shares of Common
Stock, the shares of Common Stock issued in such reclassification shall be
deemed to have been issued for a consideration other than cash immediately prior
to the close of business on the date fixed for the determination of the
stockholders entitled to receive such shares of Common Stock.
(d) Shares of Additional Common Stock issued by way of dividend or other
distribution on any class of stock of the Corporation shall be deemed to have
been issued without consideration and shall be deemed to have been issued as of
the opening of business on the business day immediately following the date fixed
for the determination of the stockholders entitled to receive such dividend or
other distribution.
(e) The term "Additional Common Stock" as used herein shall mean all shares
of Common Stock (or shares of any other class of securities of the Corporation
entitling the holder thereof to participate in any distribution of the
Corporation's remaining assets after payment to the holders of securities
entitled to a preferential distribution upon any dissolution, liquidation or
winding-up of the Corporation) issued by the Corporation on or after November
24, 1999, whether or not subsequently reacquired or retired by the Corporation
other than:
(i) shares of Common Stock issued upon the conversion of any of this
Debenture;
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(ii) shares issued by way of dividend or other distribution on shares
of Common Stock referred to in paragraph (i) of this Section 3.2(e) or on
shares of Common Stock resulting from any subdivision or combination of
Common Stock referred to in paragraph (i) of this Section 3.2(e); or
(iii) shares ("Acquisition Shares") issued by the Corporation in
connection with and as consideration for the acquisition by the Corporation
or any Subsidiary of the assets or stock of another corporation pursuant to
a bona fide purchase and sale transaction with one or more persons acting
at arm's length from the Corporation, the Subsidiaries and their respective
directors, officers and significant shareholders, provided such transaction
is in good faith approved by the Board of Directors of the Corporation.
(f) In case of the issuance of
(i) options to purchase or rights to subscribe for shares of Common
Stock,
(ii) securities by their terms convertible into, or exchangeable for,
shares of Common Stock, or
(iii) options to purchase or rights to subscribe for such convertible
or exchangeable securities,
then in each such case, for all purposes of this Section 3.2 (including without
limitation for the purpose of determining the Issue Date Shares referred to in
Section 3.2(a)(1)(B) and the number of Common Stock issued and outstanding
immediately preceding the Issue Date referred to in Section 3.2(a)(2)(y)):
(iv) The aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to be Additional Common Stock at
the time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in Sections 3.2(b)
and 3.2(c)) if any, received by the Corporation upon the issuance of such
options or rights plus the minimum purchase price provided in such options
or rights for the shares of Common Stock covered thereby.
(v) The aggregate number of shares of Common Stock deliverable upon
conversion of, or in exchange for, any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to be Additional Common
Stock at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration received by
the Corporation for any such securities or related options or rights
(excluding any cash received on account of accrued interest or accrued
distributions), plus the additional consideration, if any, to be received
by the Corporation upon the conversion or exchange of such securities
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or the exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in Sections 3.2(b) and
3.2(c)).
(vi) In the event of any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or securities
other than a change resulting from the antidilution provisions thereof, the
Conversion Ratio shall be readjusted effective as of the date of such
change to the Conversion Ratio which would have been obtained had the
adjustment made upon the issuance of such options or rights or securities
not converted prior to such change or options or rights or securities
related to such securities not converted prior to such change been made on
the basis of such change.
(vii) On the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of any options
or rights related to such convertible or exchangeable securities, the
Conversion Ratio shall forthwith be readjusted to such Conversion Ratio as
would have obtained had the adjustment made upon the issuance of such
options, rights, securities or options or rights related to such securities
been made upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities, or upon the exercise of
the options or rights related to such securities and subsequent conversion
or exchange thereof.
(g) The provisions of this Section 3.2 shall not apply to any Equity
Offering with respect to which the provisions of Section 5.16(b) shall require
an adjustment to the Conversion Ratio.
3.3 Subdivisions and Combinations. In case issued and outstanding shares of
Common Stock shall be subdivided or split up into a greater number of shares of
the Common Stock, the Conversion Ratio in effect at the opening of business on
the business day immediately preceding the date fixed for the determination of
the stockholders whose shares of Common Stock shall be subdivided or split up
(the "Split Record Date") shall be proportionately increased, and in case issued
and outstanding shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Conversion Ratio in effect at the opening of
business on the business day immediately preceding the date fixed for the
determination of the stockholders whose shares of Common Stock shall be combined
(the "Combination Record Date") shall be proportionately decreased, such
increase or decrease, as the case may be, becoming effective immediately after
the opening of business on the business day immediately after the Split Record
Date or the Combination Record Date, as the case may be. In the event of any
subdivision or split up, the number of shares of Common Stock issued and
outstanding immediately after such subdivision or split up, to the extent of the
excess thereof over the number of shares of Common Stock issued and outstanding
immediately before such subdivision or split up, exclusive of that portion of
such excess attributable to the subdivision of shares excluded from the
definition of Additional Common Stock, shall be deemed to be Additional Common
Stock and to have been issued without consideration immediately after the
opening of business on the business day immediately after the Split Record Date.
3.4 Reorganizations, Reclassifications, Mergers, Etc. In case of any
capital reorganization, any reclassification of the stock of the Corporation
(other than as a result of a stock dividend or subdivision, split up or
combination of shares), or the merger of the Corporation with
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or into another person or entity (other than a merger in which the Corporation
is the continuing corporation and which does not result in any change in the
Common Stock) or of the sale, exchange, lease, transfer or other disposition of
all or substantially all of the properties and assets of the Corporation as an
entirety or the participation by the Corporation in share exchange as the
corporation the stock of which is to be acquired, this Debenture shall
(effective on the opening of business on the date after the effective date of
such reorganization, reclassification, merger, sale or exchange, lease, transfer
or other disposition or share exchange) be convertible into the kind and number
of shares of stock or other securities or property of the Corporation or of the
corporation resulting from surviving such merger or to which such properties and
assets shall have been sold, exchanged, leased, transferred or otherwise
disposed or which was the corporation whose securities were exchanged for those
of the Corporation to which the holder of the number of shares of Common Stock
deliverable (at the close of business on the date immediately preceding the
effective date of such reorganization, reclassification, merger, sale, exchange,
lease, transfer or other disposition or share exchange) upon conversion of this
Debenture would have been entitled upon such reorganization, reclassification,
merger, sale, exchange, lease, transfer or other disposition or share exchange.
The provisions of this Section 3.4 shall similarly apply to successive
reorganizations, reclassifications, mergers, sales, exchanges, leases, transfers
or other dispositions or other share exchanges.
3.5 Notice of Adjustment. Whenever the Conversion Ratio shall be adjusted
as provided in this Article 3, the Corporation shall promptly prepare and send
to Agent a statement, signed by the chief financial officer of the Corporation,
showing in detail the facts requiring such adjustment and the Conversion Ratio
that shall be in effect after such adjustment.
3.6 Notice of Adjustment Events. In the event the Corporation shall propose
to take any action of the types described in this Article 3 hereof, the
Corporation shall give notice to Agent, which notice shall specify the record
date, if any, with respect to any such action and the date on which such action
is to take place. Such notice shall be given on or prior to the earlier of 10
days prior to the record date or the date which such action shall be taken. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Ratio and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of this Debenture. Failure to give notice in accordance with
this Section 3.4 shall not render such action ultra vires, illegal or invalid
but shall constitute default hereunder.
3.7 Taxes. The Corporation shall pay all documentary, stamp or other
transactional taxes and charges attributable to the issuance or delivery of
shares of stock of the Corporation upon conversion; provided, however, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the record holder of this
Debenture.
3.8 Reservation of Shares. The Corporation shall at all times reserve and
keep available, free from preemptive rights, unissued or treasury shares of
Common Stock sufficient to effect the conversion of this Debenture.
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4. Preemptive Rights
4.1 Preemptive Rights. Except for the issuance of shares of Common Stock
described in either of Sections 3.2(e)(i) or (ii) and except for any public sale
of Equity Securities (as hereinafter defined) within 120 days of the date
hereof, whenever the Board of Directors of the Corporation shall authorize the
issuance of (a) shares of Common Stock, (b) any other securities of the
corporation entitled to participate with the Common Stock in a distribution of
the Corporation's remaining assets (after distribution to all holders of
securities entitled to such distribution in priority to the holders of Common
Stock), or (c) any rights, options or warrants to purchase, or securities of any
type whatsoever that are, or may become, convertible into, or exchangeable for,
securities of the type referred to in Section 4.1(a) or (b) (hereinafter
collectively referred to as "Equity Securities"), the Equity Securities shall
first be offered ratably to the existing holders of Equity Securities and this
Debenture on the date of the authorization by the Board of Directors of such
issuance. Holder and the holder of the other convertible debenture issued under
the Debenture Purchase Agreement (each, a "Preemptive Rightholder") shall be
entitled to exercise preemptive rights for that number of such Equity Securities
equal to the percentage of the total number of shares of Common Stock into which
this Debenture may be converted pursuant to Section 2 hereof (the "Equity
Percentage"). For the purposes of calculating the Equity Percentage, each
Preemptive Rightholder shall be deemed to be the owner of the number of shares
of Common Stock into which its debenture may be converted and such shares of
Common Stock shall be deemed to be issued and outstanding. Each Preemptive
Rightholder shall be entitled to exercise the preemptive rights provided herein
with respect to the whole of such proportionate share or with respect to only a
part thereof.
4.2 Consideration for Equity Securities. The preemptive rights provided for
in this Section 4 shall entitle Holder to subscribe for, purchase, or otherwise
acquire any Equity Securities to be offered for sale, at a price or prices not
less favorable than the price or prices at which such Equity Securities are
proposed to be offered for sale to others (net of any expenses of, or
compensation for, underwriting or purchase of such Equity Securities by
underwriters or dealers). In the event that the Corporation proposes to offer
for sale to others any Equity Securities for a consideration other than cash,
such preemptive rights shall be exercisable by a Preemptive Rightholder for
cash, in an amount which shall equal the Fair Market Value of any consideration
other than cash determined in accordance with Section 8.1.
4.3 Issuance Notice. The Corporation shall, on the 10th business day after
the date of authorization of the issuance of any Equity Securities, give notice
to Agent (the "Issuance Notice") of such authorization, which Issuance Notice
shall specify the number of shares of Equity Securities to be issued, a full
description of such class of Equity Securities and the offering price thereof.
4.4 Acceptance or Decline of Offer. The preemptive rights granted pursuant
to this Section 4 with respect to any Equity Securities to be issued by the
Corporation shall be exercised by the Preemptive Rightholder by the giving of
notice by Agent of such exercise within 10 business days after receipt by such
Holder of the Issuance Notice (the "Preemptive Rights Period"). In the event any
Preemptive Rightholder fails or declines to purchase his/her proportionate share
of the Equity Securities so offered (a "Declining Rightholder"), the Equity
Securities not purchased by the Declining Rightholders shall be offered to those
Preemptive Rightholders who shall have duly exercised their preemptive rights
with respect to that issue (the "Accepting Rightholders"). Each
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Accepting Rightholder shall be entitled to purchase the Equity Securities not
purchased by the Declining Rightholders (the "Reoffered Securities") in the
proportion which the Equity Percentage of the Accepting Rightholders bears to
the aggregate of the Equity Percentages of all Accepting Rightholders; provided,
however, that each Accepting Rightholder shall be entitled to exercise his/her
preemptive rights to purchase Reoffered Securities only with respect to the
whole of such proportionate share thereof and not with respect to only a part
thereof. On the 10th business day after the expiration of the Preemptive Rights
Period, the Corporation shall give notice (the "Reoffer Notice") to Agent of the
amount of Reoffered Securities available for purchase.
4.5 Acceptance or Decline of Reoffered Securities. The preemptive rights
granted with respect to the Reoffered Securities shall be exercised by the
giving of notice by Agent on behalf of an Accepting Rightholder of such exercise
within 5 business days after receipt by the Agent of the Reoffer Notice. In the
event that any Accepting Rightholder fails or declines to purchase his/ her
proportionate share of such Reoffered Securities, then such unpurchased
Reoffered Securities shall continue to be offered in the same manner
proportionately to those Accepting Rightholders on whose behalf Agent properly
exercised their rights to purchase the Reoffered Securities most recently
offered to them, until such time as all of the Securities to be issued have been
purchased or all Accepting Rightholders shall have failed or declined to
purchase any of the Reoffered Securities most recently offered to them, at which
time the preemptive rights granted by this Section 5 shall have been exhausted
with respect to that particular issue of Securities.
5. Covenants of the Corporation
The Corporation hereby covenants and agrees with Holder that so long as any
of the Principal Amount or any Current Interest, Deferred Interest or Default
Interest remains unpaid:
5.1 To pay indebtedness. The Corporation will well, duly and punctually pay
or cause to be paid to Holder all indebtedness due hereunder at the dates and
places, in the currencies and in the manner mentioned herein.
5.2 To maintain existence. The Corporation will, and will cause each of
Neptune Society of America, Inc., a California corporation ("Neptune USA"),
Neptune Management Corp., a California corporation ("Neptune Management"),
Neptune Pre-Need Plan, Inc. ("Neptune Pre-Need"), a California corporation and
Heritage Alternatives, Inc. ("Heritage", and together with Neptune USA and
Neptune Management, the "Subsidiaries") to, at all times maintain its corporate
existence.
5.3 To carry on its business. The Corporation will, and will cause each of
the Subsidiaries to, carry on its business in a proper and efficient manner, and
will keep or cause to be kept proper books of account and make or cause to be
made therein true and faithful entries of all material dealings and transactions
in relation to its business and will make available or cause to be made
available such books of account for inspection by Holder and its representatives
during normal business hours.
5.4 To pay taxes. The Corporation will, and will cause each of the
Subsidiaries to, pay or cause to be paid all taxes, rates, government fees and
dues levied, assessed or imposed upon it and
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upon its property or any part thereof, as and when the same become due and
payable, save and except when and so long as the validity of any such taxes,
rates, fees, dues, levies, assessments or imposts is in good faith by proper
legal proceedings contested by it in which event it shall satisfy Agent and if
requested by Agent furnish security satisfactory to Agent that such contestation
will involve no forfeiture of any of its property and to duly observe and
conform to all valid and material requirements of any governmental authority
relative to any of its property and all covenants, terms and conditions upon or
under which such property is held provided, however, that nothing herein
contained shall require it to observe any such requirements so long as it shall,
in good faith, be contesting its obligation to observe such requirements.
5.5 Not to Amend Articles or By-Laws. The Corporation shall not, and will
cause each of the Subsidiaries not to, without Agent's prior written consent,
amend or restate its articles of incorporation nor amend, repeal, replace or
restate any of its by-laws or any unanimous shareholders agreement relating to
it.
5.6 To perform obligations and to renew. The Corporation will, and will
cause each of the Subsidiaries to, from time to time punctually observe and
perform all material obligations and pay and discharge all amounts payable under
or by virtue of, and defend, and ensure the enforceability of any exclusive
rights to, any patent, trademark, lease, license, concession, franchise or right
held by it so long as the same is of commercial value to it and during such time
will not suffer or permit any default for which any of the same may be
terminated so that its interest therein may at all times be preserved as
unimpaired; provided however that nothing herein contained shall require the
Corporation or any Subsidiary to make any such payments so long as it shall in
good faith contest its liability therefor.
5.7 Not to Sell Assets, Issue Options, Mergers, Etc. The Corporation shall
not, and will cause each of the Subsidiaries not to:
(a) sell, lease or otherwise transfer the undertaking, property and assets
of any of its operating divisions or subsidiaries as an entirety or
substantially as an entirety in one or more transactions, or, sell, lease or
otherwise dispose of its undertaking, property and assets as an entirety or
substantially as an entirety or of its controlling interest in any subsidiary of
the Corporation or any Subsidiary in one or more transactions;
(b) issue any Equity Securities of the type described in Section 4.1(c),
other than, in the case of the Corporation only, (i) stock options to employees,
officers or directors of the Corporation or a Subsidiary pursuant to employee
stock option plans approved of by Agent and in any event not where the total
number of shares of Common Stock obtainable under all such Equity Securities
outstanding (including options and warrants existing as of the date hereof) is
greater than 10% of the issued and outstanding shares of Common Stock at that
time, and (ii) Acquisition Shares; provided that, for greater certainty, nothing
herein shall prohibit the Corporation from issuing shares issuable upon any
exercise of the 275,000 common share warrants of the Corporation existing as of
the date hereof or issue 276,667 shares of Common Stock pursuant to an agency
agreement between the Corporation and Standard Securities Capital Corporation;
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(c) in the case of each Subsidiary, issue shares of any class of stock to
any person other than the sole shareholder of all issued and outstanding stock
prior thereto; or
(d) amalgamate or merge with any other corporation or effect any corporate
reorganization;
without the prior written consent of Agent.
5.8 To repair. The Corporation will, and will cause each of the
Subsidiaries to, at all times, repair and keep in repair and good order and
condition, or cause to be so repaired and kept in repair and good order and
condition, all buildings, erections, machinery, plant and equipment used in or
in connection with its business which are necessary for efficient operation up
to a modern standard of usage, and renew and replace or cause to be renewed and
replaced all and any of the same which may become worn, dilapidated,
unserviceable, inconvenient, obsolete or destroyed, even by a fortuitous event,
fire or other cause, and which are necessary for efficient operation, and, at
all reasonable times during normal business hours allow Agent or its duly
authorized agent access to its premises in order to view the state and condition
of the same.
5.9 To insure.
(a) Property Cover - The Corporation will, and will cause each of the
Subsidiaries to, insure at its own expense the assets of the Corporation or such
Subsidiary at all times during the term hereof to an amount equal to the
replacement value thereof with a company or companies that are nationally known
or are approved by Agent, against loss or damage by fire, lightning, explosion,
windstorm, aircraft or vehicles or other insurable hazards which are now or may
hereafter from time to time be insured against by the terms of a standard fire
extended coverage insurance or additional perils supplemental contract of
insurance including, if applicable, boiler and pressure vessel insurance against
loss or damage to property of a class or kind similar to the property and assets
of the Corporation. The Corporation shall, and will cause each of the
Subsidiaries to, also maintain such other insurance policies as Agent shall
reasonably require in connection with the Corporation and the Subsidiaries and
their business including, without restriction, business interruption insurance
and liability insurance.
(b) Renewal Receipt - The Corporation shall, 15 days prior to the expiry of
any insurance policy required hereby, deliver or cause to be delivered to Agent
a renewal receipt, binder or new policy, or otherwise satisfy Agent that such
insurance has been renewed.
5.10 Compliance With Laws. The Corporation shall, and will cause each of
the Subsidiaries to, carry on its business in compliance with all applicable
laws, regulations, by-laws and orders including, without limitation, all laws
relating to environment protection, the maintenance and disposal of hazardous
materials and wastes, land use and occupational safety and health. The
Corporation shall give notice to Agent of any notice received by it or any
Subsidiary of any violation of such laws, regulations, by-laws or orders of any
impending or threatened investigations or proceedings in connection therewith or
of any proceedings commenced or threatened by any other person in connection
with environmental, health or safety matters.
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5.11 To Grant Security. To secure payment of its indebtedness, liabilities
and obligations under this Debenture (a) the Subsidiaries have each delivered
their guarantee agreements ("Guarantees") to Agent; and (b) the Corporation and
the Subsidiaries have each executed and delivered to Agent concurrently with
this Debenture security agreements (the "Security Agreements") granting to Agent
a security interest in all of the Corporation's and each such Subsidiary's
property now owned or hereafter acquired. At any and all times the Corporation
will, and will cause each of the Subsidiaries to, at its expense, do, execute,
acknowledge and deliver or will cause to be done, executed, acknowledged and
delivered all and every such further mortgages, security agreements or other
instruments, transfers and assurances as Agent shall reasonably require, for the
purpose of giving to Agent, and preserving in favor of Agent, a valid mortgage
or security interest of the nature specified in the Security Agreements, upon
all of the Corporation's and the Subsidiaries' real and personal property. In
particular, without restriction, the Corporation will, and will cause each of
the Subsidiaries to, upon request by Agent, deliver a mortgage on any and all
real property hereafter acquired by the Corporation or any Subsidiary and, upon
the acquisition by the Corporation or such Subsidiary of any real property,
subject only to encumbrances approved of in writing by Agent and other
encumbrances permitted by Section 5.12. The Corporation shall not, and will
cause each of the Subsidiaries not to, at any time have its chief executive
office or assets (other than inventory and mobile equipment used to transport
inventory) having an aggregate recorded book value to it in excess of $250,000
located in jurisdictions in which the Agent has not been given prior written
notice and the opportunity to first record or register the Security Agreement or
other security in favor of Agent in all appropriate public offices at the
Corporation's expense.
5.12 Not to Permit Encumbrances. The Corporation shall not, and will cause
each of the Subsidiaries not to, create or permit to exist any security
interest, mortgage, charge, pledge, lien or other encumbrance upon its assets
provided that the foregoing shall not apply to prevent, and there shall be
permitted:
(a) security on the assets of the Corporation or any Subsidiary to secure
Neptune USA's obligations under that certain promissory note (the "Vendor Note")
dated March 31, 1999, executed by Neptune USA (then called "Lari Acquisition
Company, Inc.") to and in favor of certain holders, in the principal amount of
$19,000,000.
(b) security on the assets of the Corporation or any Subsidiary to secure
Neptune USA's obligations under that certain Promissory Note dated March 31,
1999, executed by Neptune USA (then called "Lari Acquisition Company, Inc.") to
and in favor of Emanuel Weintraub Intervivos Trust, in the principal amount of
$2,000,000; provided always that such security is consistent with the terms and
conditions of the Inter-Creditor Agreement of even date herewith between Agent
and the Emanuel Weintraub Intervivos Trust; and
(c) Purchase Money Mortgages (as hereinafter defined) existing as of the
date hereof or entered into after the date hereof under which the Corporation or
a Subsidiary is the primary obligor, provided such Purchase Money Mortgages do
not in the aggregate secure an amount in excess of $350,000. For the purposes
hereof, "Purchase Money Mortgage" means any mortgage, security interest, title
retention, lien or other encumbrance on property given, assumed or arising by
operation of law to secure payment of, or to provide the obligor with funds to
pay the whole or any part of, the consideration for the acquisition of such
property (and for such purposes any capital or operating
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<PAGE>
lease shall be deemed to be a Purchase Money Mortgage in the amount of the
aggregate of all remaining lease payments required to be made thereunder, other
than under extensions exercisable only by the Corporation or the Subsidiary
party thereto), or to secure any renewal, extension or refunding of such
encumbrance and of the indebtedness represented thereby upon the same property
provided that the indebtedness secured thereby and the security therefor are not
increased thereby.
5.13 Not to Incur Indebtedness for Borrowed Money; Non-Equity Securities.
The Corporation shall not, and will cause each of the Subsidiaries not to,
incur, guarantee or otherwise become liable in respect of, any indebtedness for
borrowed money (including without limitation Purchase Money Mortgages), or issue
any class of shares or other securities other than Equity Securities, subsequent
to the date hereof without the prior written consent of Agent, except for
Purchase Money Mortgages in accordance with Section 5.12.
5.14 To Pay Expenses. The Corporation shall pay all costs, charges and
expenses (including legal fees and disbursements) of or incurred by Agent and
Holder in connection with this Debenture, the Security Agreements and any other
security documents delivered after the date hereof to Agent, and all ancillary
documents or the enforcement hereof and of such security.
5.15 Marco Markin. Mr. Marco Markin shall be the President and Chief
Executive Officer of the Corporation on the date hereof and, within 30 days
following the date hereof, the Corporation will obtain 10 year minimum, level
premium, term life insurance on the life of Mr. Markin in the amount of at least
$5,000,000, naming Agent as beneficiary, and will use its best efforts to
maintain such insurance during the term thereof and will pay all premiums
thereunder. In the event of Mr. Markin's death while any portion of the
Principal Amount or any interest remains outstanding hereunder or under the
other debenture issued by the Corporation pursuant to the Debenture Purchase
Agreement, the proceeds of such life insurance shall be deposited into a
collateral account with a financial institution acceptable to Agent, which
account (and all rights therein and proceeds thereof) shall be assigned by the
Corporation to Agent as additional collateral security for the Corporation's
obligations hereunder, and shall be released to the Corporation only upon the
conversion of the entire Principal Amount of this Debenture or upon the
repayment in full of the Principal Amount and all other amounts outstanding
hereunder. At any time and from time to time prior to Mr. Markin's death where
the Principal Amount and the principal amount owing under the other debenture
issued by the Corporation pursuant to the Debenture Purchase Agreement (the
"Total Debenture Principal Amount") is less than $5,000,000, the Corporation
shall be entitled, by notice given to Agent, but not required, to reduce the
amount of such insurance (or replace such insurance policy with a like policy in
such less amount), provided that the new amount of insurance is not less than
the Total Debenture Principal Amount at that time. Upon the satisfaction by
repayment, redemption or conversion of the Total Debenture Principal Amount and
all other indebtedness owing under this Debenture and under the other debenture
issued by the Corporation pursuant to the Debenture Purchase Agreement, Agent
shall do all things necessary to assign the benefit of such life insurance
policy to the Corporation. It is hereby expressly acknowledged by Agent and the
Purchasers that the proceeds of such life insurance policy or policies shall be
payable to Agent solely as additional collateral security for the obligations of
the Corporation under the Debentures and the Security, and under no
circumstances shall Agent or either Purchaser be entitled to any portion of such
proceeds in excess of such obligations, but shall be required to remit such
excess to the Corporation after the full satisfaction of such obligations
forthwith upon request.
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5.16 Equity Offerings.
(a) Qualified Secondary Offering. The Corporation shall, on or before
August 31, 2000, complete a Qualified Secondary Offering. For the purposes
hereof, "Qualified Secondary Offering" shall mean a sale to the public of the
Corporation's shares of Common Stock as part of a single underwritten offering
by a first-tier or second-tier investment bank acceptable to Holder acting
reasonably, which provides to the Corporation net proceeds, after all costs and
expenses associated therewith (including without limitation underwriters'
commissions and issuance expenses) of not less than ten million dollars
($10,000,000), all of which net proceeds shall be used to repay and retire all
remaining indebtedness of the Corporation under the Vendor Note (or, where such
proceeds exceed such indebtedness, that portion of such proceeds equal to such
indebtedness shall be so used). In the event that a Qualified Secondary Offering
is not so completed on or before August 31, 2000, then, in addition to any other
rights and remedies Agent or Holder may have hereunder, then the Conversion
Ratio shall automatically be increased to that amount equal to the product of
the Conversion Ratio in effect immediately prior to such increase multiplied by
5.00 and divided by 4.25.
(b) Equity Offerings. Where, in any public offering or private placement
(an "Equity Offering") of Equity Securities the price per share of Common Stock
(or, in the case of Equity Securities other than Common Stock, the price for
such number of Equity Securities as are equivalent to, convertible into or
exchangeable for a share of Common Stock) (in each case net of the Fair Market
Value (determined under Section 8.1) of any warrants, options or other rights to
acquire Equity Securities attaching to or offered concurrently with the offered
Equity Securities, and net of all brokerage fees and commissions) (the "Offering
Price") is less than $5.00 divided by the Conversion Ratio in effect immediately
prior to completion of such Equity Offering, the Conversion Ratio shall be
increased to the extent, if any, necessary such that immediately after such
Equity Offering this Debenture shall in accordance with such increased
Conversion Ratio be convertible into that number of shares of Common Stock which
is the greater of:
(i) that number of shares of Common Stock into which this Debenture
would otherwise be convertible in accordance with the provisions of this
Debenture (other than this Section 5.16(b)); and
(ii) that number obtained by dividing $3,000,000 by the Offering
Price, multiplying the quotient thereby obtained by the Conversion Ratio in
effect immediately prior to completion of such Equity Offering, and then
subtracting from the product so obtained the number of Conversion Shares,
if any, previously issued by the Corporation pursuant to any conversion of
a portion of the Principal Amount.
The provisions of this Section 5.16 shall apply to successive Equity Offerings,
including without limitation any Qualified Secondary Offering.
5.17 Reporting Requirements. Corporation shall provide and deliver the
following financial statements and other reports to Agent:
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(a) Balance Sheet and Income Statement. Within 60 days after the last day
of each fiscal quarter of Corporation, a copy of Corporation's consolidated
balance sheet and income statement prepared by Corporation as of the end of and
for such quarter and certified by Corporation to be true and correct and to have
been prepared in accordance with generally accepted accounting principles that
are consistent with those previously applied in Corporation's most recent
financial statement.
(b) Financial Statements. Upon preparation, but in any event within 90 days
after the last day of each fiscal year of the Corporation, the financial
statements of the Corporation as of the end of and for such fiscal year setting
forth in comparative form the correspondence figures of the financial statements
showing the balance sheet, the income statement and the source and application
of funds statement as of the end of the preceding fiscal year, all in reasonable
detail and certified by a firm of independent certified public accountants
acceptable to Holder.
(c) Additional Information. Such further information as may reasonably be
necessary or as Holder may reasonably request to determine whether the
Corporation is complying with its obligations under this Agreement, the Notes
and the security documents, or to determine the financial condition of the
Corporation.
5.18 Financial Covenant. The Corporation shall at all times maintain (on a
consolidated basis) Fixed Charge Coverage Ratio of at least 1.6:1.0. For the
purposes hereof:
(a) "Cash Flow" means, for any period, the sum without duplication, of (i)
net income and (ii) to the extent net income has been reduced thereby, (a) all
income taxes of the Corporation accrued in accordance with generally accepted
accounting principles ("GAAP") for such period (other than income taxes
attributable to extraordinary or non recurring gains or losses), (b) interest
expense, (c) non-cash charges, and (d) the amount of any and all lease
obligations, including but not limited to equipment leases and real property
leases, of the Corporation paid, accrued, or scheduled to be paid or accrued
during such period, all determined in accordance with GAAP;
(b) "Fixed Charges" means, for any period, the sum without duplication, of
(i) the interest expense, calculated in accordance with GAAP, of the Corporation
for such period, (ii) the interest expense, calculated in accordance with GAAP,
of the Corporation that was capitalized during such period, (iii) the amount of
all cash dividend payments paid, accrued or scheduled to be paid or accrued
during such period, (iv) principal payments due on all outstanding notes of the
Corporation during such period (with the exception of the Vendor Note), and (v)
the amount of any and all lease obligations, including but not limited to
equipment leases and real property leases, of the Corporation paid, accrued, or
scheduled to be paid or accrued, during such period, by the Corporation and the
Subsidiaries.
(c) "Fixed Charge Coverage Ratio" means, in accordance with GAAP, for the
full fiscal quarter ending on or prior to the date of determination, the ratio
of Cash Flow of the Corporation for such period to the Fixed Charges of the
Corporation for such period.
5.19 Employment Agreement. The Corporation shall use its best efforts to
enter into a one-year employment agreement, renewable by the Corporation for at
least one further term of one
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year, with Mr. Marco Markin forthwith and in any event within 60 days after the
date hereof, and shall provide Agent with a copy thereof.
5.20 Agent Entitled to Perform Covenants. If the Corporation shall fail to
perform any covenant on its part herein contained, Agent may, in its discretion,
perform any such covenant capable of being performed by it and, if any such
covenant requires the payment or expenditure of money, Agent may make payments
or expenditures with its own funds, or with money borrowed by or advanced to it
for such purposes, but shall be under no obligation so to do; and all sums so
expended or advanced shall be at once payable by the Corporation on demand and
shall bear interest at the annual rate of fifteen percent (15%) until paid, and
shall be payable out of any funds coming into the possession of Agent in
priority to the other indebtedness hereunder, but no such performance or payment
shall be deemed to relieve the Corporation from any default hereunder nor shall
the right of Agent under this subsection impose any obligation upon Agent to
perform any covenant of the Corporation.
6. Redemption and Prepayment
6.1 Generally. Except as provided in this Article 6 and in Section 7.1,
Holder shall have no right to require any portion of the Principal Amount to be
repaid, and the Corporation shall have no right to prepay any portion of the
Principal Amount, prior to the Due Date.
6.2 Redemption By Holder. Holder shall have the right, exercisable by
written notice given by Agent (a "Retraction Notice") given to the Corporation
at any time after the fifth anniversary of the date of this Debenture and before
the Due Date to require the Corporation to redeem this Debenture in full (but
not in part), and to pay on such date (the "Retraction Date") as is specified in
such Retraction Notice and is not less than ten (10) days following the date of
receipt by the Corporation of the Retraction Notice the entire unpaid and
unredeemed balance of the Principal Amount and all accrued and unpaid interest
on the Debenture up to and including the Retraction Date (including Current
Interest, Deferred Interest and Default Interest).
6.3 By Corporation Upon Qualified Secondary Offering. In the event that at
any time:
(a) during the Conversion Period;
(b) at which the Corporation shall not be in default hereunder;
(c) the Corporation shall propose to complete a Qualified Secondary
Offering (as hereinbefore defined) and shall not less that 30 days prior to the
date of closing of such Qualified Secondary Offering give Agent written notice
of such Qualified Secondary Offering and the terms thereof (and attaching a copy
of the executed term sheet or other document from the underwriter or
underwriters underwriting such Qualified Secondary Offering); and
(d) during the period from receipt of such notice to such closing Agent
shall have the opportunity to convert this Debenture on behalf of Holder in
whole or in part;
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then the remaining Principal Amount of this Debenture shall become subject to
redemption at the option of the Corporation in whole (but not in part)
concurrently with the closing of such Qualified Secondary Offering without
penalty or premium.
6.4 By Corporation. In the event that at any time:
(a) during the Conversion Period;
(b) after the second anniversary of the date hereof;
(c) at which the Corporation shall not be in default hereunder;
(d) the closing price per share of Common Stock (if such shares are listed
on a national securities exchange) or the closing bid per share of Common Stock
(if such shares are quoted on the Over-The-Counter Exchange) (in either case,
the "Closing Price/Bid") is at or above $7.50 (adjusted for any and all
subdivisions or combinations of the Common Stock occurring after the date
hereof) for each of 30 consecutive trading days after such second anniversary;
(e) the Corporation shall, within 10 days following the expiry of such 30
trading day period, give Agent written notice of its intention to redeem this
Debenture pursuant to this Section 6.4; and
(f) during the period of 10 days after receipt of such notice, Agent on
behalf of Holder shall have the opportunity to convert this Debenture in whole
or in part;
then the remaining Principal Amount of this Debenture shall become subject to
redemption at the option of the Corporation in whole (but not in part) at any
time during the period of one hundred and eighty (180) days after the last day
of such 30 trading day period without penalty or premium.
6.5 Extension of Time. In the event that Holder shall be precluded for any
reason (including without limitation any applicable securities laws) from
converting this Debenture in whole or in part and provided Agent shall have
given the Corporation notice of such reason within such 10 day period, the time
periods set out above shall be extended by the number of days Holder is so
precluded. No interest hereunder (including, for greater certainty, interest on
overdue interest) shall accrue, however, during such period that conversion is
precluded, except where the reason for such preclusion is the direct result of
actions or omissions by the Corporation or any Subsidiary.
6.6 Notice. Subject to Section 6.7, the Corporation may exercise its right
to redeem this Debenture prior to the Due Date pursuant to either of Sections
6.3 and 6.4 by giving notice (the "Redemption Notice") thereof to Agent, which
notice shall specify the terms of redemption (including the place at which Agent
may obtain payment), the principal amount of this Debenture to be redeemed (the
"Redemption Amount") and shall fix a date for redemption (the "Redemption
Date"), which date shall not be less than 10 days nor more than 30 days after
the date of the Redemption Notice.
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6.7 Priority of Notices. Notwithstanding any other provision of this
Debenture, the Corporation shall not be permitted to redeem any portion of this
Debenture in respect of which the Corporation shall have received prior to the
Redemption Date either a Retraction Notice or a Conversion Notice.
6.8 Convenant By Holder. By its acceptance hereof, Holder agrees not to
sell to a member of the public any of the Conversion Shares or any of the
Warrant Shares (as defined in the Debenture and Warrant Purchase Agreement)
during any period (up to twenty-five (25) consecutive trading days provided that
each previous consecutive trading day meets the $7.50 test described in Section
6.4(d)) following a period of five consecutive trading days during which the
Corporation met such test.
7. Default
7.1 Default Events. The entire unpaid and unredeemed balance of the
Principal Amount and all Current Interest, Deferred Interest and Default
Interest accrued and unpaid on this Debenture shall, at the election of Agent,
be and become immediately due and payable, and the Security Agreement and any
and all other security documents held by Agent shall become immediately
enforceable, upon the occurrence of any of the following events (a "Default
Event"):
(a) the non-payment by the Corporation when due of principal and interest
or of any other payment as provided in this Debenture or with respect to any
other indebtedness owed by the Corporation;
(b) default by the Corporation in the performance of or compliance with any
term in any of Sections 5.16, or any provision of the Debenture Purchase
Agreement;
(c) default by the Corporation in the performance of or compliance with any
other term or provision of this Debenture or the Security Agreement, where such
default is not remedied within thirty (30) days after Agent gives the
Corporation written notice thereof;
(d) the occurrence of a breach by Mr. Marco Markin of his obligations under
Section 7 of the Right of First Refusal Agreement of even date herewith between
him, the Corporation, Holder and the holder of the other debenture issued under
the Debenture Purchase Agreement;
(e) the occurrence of a material breach by Mr. Marco Markin under his
employment agreement to be entered into pursuant to Section 5.19 (as such
agreement is constituted on the date entered into and as the same may be amended
with the written consent of Agent and without consideration of any waiver
thereof by the Corporation);
(f) Mr. Marco Markin ceasing to hold the offices of President and Chief
Executive Officer of the Corporation;
(g) the Corporation (i) applies for or consents to the appointment of, or
if there shall be a taking of possession by, a receiver, custodian, trustee or
liquidator for the Corporation or any of its property; (ii) becomes generally
unable to pay its debts as they become due; (iii) makes a general
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assignment for the benefit of creditors or becomes insolvent; (iv) files or is
served with any petition for relief under the Bankruptcy Code or any similar
federal or state statute; (v) has any judgment entered against it in excess of
$250,000 in any one instance or in the aggregate during any consecutive 12 month
period or has any attachment or levy made to or against any of its property or
assets; (vi) defaults with respect to any evidence of indebtedness or liability
for borrowed money, or any such indebtedness shall not be paid as and when due
and payable; or (vii) has assessed or imposed against it, or if there shall
exist, any general or specific lien for any federal, state or local taxes or
charges against any of its property or assets; or
(h) any failure by the Corporation to issue and deliver shares of Common
Stock as provided herein upon conversion of this Debenture.
7.2 Payment of Prior Ranking Indebtedness. Upon the occurrence of a Default
Event, in addition to (and not in substitution for, exclusive of nor dependent
on) any other remedies contained herein, in the Security Agreements or in any
existing or future security document granted by the Corporation or any of the
Subsidiaries to Agent, and to all other remedies existing at law or in equity or
by statute, Agent, shall be permitted to make payments to parties having prior
charges or encumbrances on properties owned by the Company or on properties on
which the Company may hold charges or encumbrances (including without limitation
payments on amounts owing under the Vendor Note), and the full amount of such
payments shall be due and payable upon demand by Agent, and shall be added to
and shall form part of the Principal Amount of this Debenture, on which interest
shall accrue and be payable as hereinbefore provided, and in respect of which
the Security shall secure the due and prompt repayment thereof; provided always
however that no portion of such payments shall be subject to conversion in
accordance with Section 2.
7.3 Remedies Cumulative. Each right, power or remedy of Agent, on behalf of
Holder, upon the occurrence of any Default Event as provided for in this
Debenture or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Debenture or now or hereafter existing at
law or in equity or by statute, and the exercise or beginning of the exercise by
the holder or transferee hereof of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Agent, on
behalf of Holder, of any or all such other rights, powers or remedies.
8. General
8.1 Fair Market Value. The term Fair Market Value as used in this Debenture
with respect to assets or property received by the Corporation or any other
person shall be the fair market value, regardless of any prior accounting
treatment, of such assets or property, determined in good faith by agreement of
Agent and the Board of Directors of the Corporation. If Agent and the Board of
Directors shall be unable to agree as to such fair market value, the fair market
value shall be determined by the independent certified public accountant at that
time retained by the Corporation to audit its books and records, and a
determination by such independent certified public accountant shall be final,
conclusive and binding or, if there be none, or if such accountant shall refuse
or be unable to make such a determination then the sole issue of fair market
value shall be submitted to and settled by binding arbitration under and
pursuant to the Colorado Uniform Arbitration Act and
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the rules and regulations of the American Arbitration Association, and the
decision or award of the arbitrator or arbitrators in such arbitration shall be
final, conclusive and binding and a final judgment may be entered thereon by any
court of competent jurisdiction.
8.2 Failure to Act and Waiver. No failure or delay by Holder to insist upon
the strict performance of any term of this Debenture or to exercise any right,
power or remedy consequent upon a default hereunder shall constitute a waiver of
any such term or of any such breach, or preclude Agent from exercising any such
right, power or remedy at any later time or times. By accepting payment after
the due date of any amount payable under this Debenture, Agent shall not be
deemed to waive the right either to require payment when due of all other
amounts payable under this Debenture, or to declare a default for failure to
effect such payment of any such other amount.
The failure of Agent to give notice of any failure or breach of the
Corporation under this Debenture shall not constitute a waiver of any right or
remedy in respect of such continuing failure or breach or any subsequent failure
or breach.
8.3 Consent to Jurisdiction. The Corporation hereby agrees and consents
that any action, suit or proceeding arising out of this Debenture may be brought
in any appropriate court in the State of Colorado, including the United States
District Court for the District of Colorado, or in any other court having
jurisdiction over the subject matter, all at the sole election of Agent, and by
the issuance and execution of this Debenture the Corporation irrevocably
consents to the jurisdiction of each such court.
8.4 Transfer. This Debenture may only be transferred in accordance with the
provisions of Section 10.4 of the Debenture Purchase Agreement and the
requirements set out in the legend on the first page hereof.
8.5 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) business day after
deposit with a nationally recognized overnight courier, special next day
delivery, with verification of receipt. All communications shall be sent:
to the Corporation at:
The Neptune Society Inc.
100 North First Street
Suite 205
Burbank, California
91502
Attn: Marco Markin, President
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to Agent, on behalf of Holder, prior to January 15, 2000, at:
[HOLDER]
[ADDRESS]
and, thereafter, at:
[HOLDER]
[ADDRESS]
with a copy to:
[HOLDER CONTACT]
[ADDRESS]
or at such other address as the Company or Agent may designate by ten (10) days
advance written notice to the other parties hereto.
8.6 Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado without regard to
conflicts of law principles, or, where applicable, the laws of the United
States.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be
duly executed under its corporate seal.
WITNESS: THE NEPTUNE SOCIETY, INC.
By:
- -------------------------------- -------------------------------
Marco Markin, President
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EXHIBIT 10.24
EXHIBIT
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated for reference the 31st day of December, 1999 between
Neptune Society of America, Inc., a company incorporated under the laws of the
State of California (the "Purchaser"), Cremation Society of Washington, Inc., a
company incorporated under the laws of the State of Washington (the "Vendor"),
John C. Ayres ("Ayres") and The Neptune Society, Inc., a company incorporated
under the laws of the State of Florida ("Neptune").
WHEREAS:
A. The Vendor operates and carries on, directly and indirectly, a business
known as "Cremation Society of Washington", "First Choice Cremation" and
"Spokane's Cremation Society" providing funeral, burial and cremation
services including the provision and sale of pre-need cremation services
(the "Business").
B. The Vendor's activities are limited to the operation and carrying on of the
Business.
C. Ayres is the legal and beneficial owner of 100% of the issued and
outstanding shares of the Vendor.
D. Charles S. Wetmore ("Wetmore") is general manager of the Business.
E. Neptune is the legal and beneficial owner of 100% of the issued and
outstanding shares of the Purchaser.
F. The Vendor has agreed to sell all of the assets of the Business and the
Purchaser has agreed to purchase all of the assets of the Business.
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 acknowledged, the parties agree as follows:
7 INTERPRETATION
7.1 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 Vendor's and Ayres' 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
<PAGE>
-2-
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, the Excluded Liabilities and any personal
assets of Ayres not used in connection with the Business;
(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
Vendor in connection with the Business;
(d) "Business Day" means any day except Saturday, Sunday or any statutory
holiday in the State of Washington;
(e) "Claim" means any claim by the Purchaser against the Vendor, or the
Vendor against the Purchaser, for any breach of representation,
warranty, covenant or other agreement or obligation of the Vendor or
Purchaser pursuant to this Agreement;
(f) "Closing" means the completion of the sale and purchase of the Assets
as provided in this Agreement;
(g) "Closing Date" means the close of business (i.e. 6:00 p.m.) on
December 31, 1999 or such later date as the parties may agree to in
writing;
(h) "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 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); (iv) (i) "Effective Date" means December 31,
1999;
<PAGE>
-3-
(j) "Excluded Assets" means the accounts receivable balance for performed
at-need services of the Business at the Effective Date, and, the cash
and cash equivalents of the Business at the Effective Date;
(k) "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 Business up to the Effective Date;
(l) "Funeral Insurance Policies" means those insurance polices set forth
in Schedule F, the proceeds of which are to be used to fund funeral
cremation services provided by the Business;
(m) "General Manager " means the duties of Wetmore as of September 30,
1999 overseeing the operations of the Business;
(n) "Gross Spokane Revenues" means gross revenue from the Business
generated by the Spokane Locations, determined in accordance with
generally accepted accounting principles of the United States of
America, consistently applied;
(o) "Insurance Policies" means those insurance policies as set forth in
Schedule A;
(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 set forth in Schedule B;
(q) "Land and Buildings" means those interests in real property set forth
in Schedule C;
(r) "Leased Assets" means those assets included in the Assets which are
leased by the Vendor and set forth in Schedule D;
(s) "Leases" means the leases under which the Leased Assets are leased by
the Vendor;
(t) "Material Contracts" means those contracts described in Subsection
4.10;
(u) "Neptune Entities" means the Purchaser, Neptune, their subsidiaries,
affiliates, successors or assigns
(v) "Other Operating and Fixed Assets" means those operating and fixed
assets set forth in Schedule E;
<PAGE>
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(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 Lukins & Annis, P.S.,
Washington Trust Financial Center, Suite 1600, 717 W. Sprague Avenue,
Spokane, Washington, 99201-0466;
(y) "Pre-Need Contracts" means those pre-need contracts set forth in
Schedule F for cremation services sold prior to the death of the
beneficiary by or for the Business, its predecessors and assignors for
the provision of funeral cremation services;
(z) "Purchase Price" has the meaning ascribed thereto in Subsection 2.1 of
this Agreement;
(aa) "Securities" means the Neptune Shares as described in Subsection 2.2
of this Agreement;
(bb) "Specified Assets" means those specified assets set forth in Schedule
G;
(cc) "Spokane EBITDA" means earnings before income tax, depreciation, and
amortization from the Business generated from the Spokane Locations,
determined in accordance with generally accepted accounting principles
of the United States of America, consistently applied. Schedule K sets
forth more particularly how the Spokane EBITDA will be calculated for
the purposes of this Agreement;
(dd) "Spokane Locations" means the locations of the Business at East 1821
Sprague Avenue and Suite 619, North 4407 Division Street in Spokane,
Washington, including any replacements locations, which the Neptune
Entities operate as they may determine;
(ee) "Time of Closing" means the time at which the Closing takes place,
which shall be 10:00 a.m. at the Place of Closing on the Closing Date
or such other time as the parties may agree upon;
(ff) "Trade Names" means "Cremation Society of Washington", "First Choice
Cremation" and "Spokane's Cremation Society";
(gg) "Trust Accounts" means all cash, funds and accounts and investments
set forth in Schedule H which arise from the sale of the Pre-Need
Contracts which are administered in trust by the Business;
(hh) "Unaudited Financial Statements" means the unaudited financial
statements of the Business for the 12 month periods ending December
31, 1995, December 31, 1996, December 31, 1997, December 31, 1998 and
the interim periods ending March 31, 1999, June 30, 1999 and September
30, 1999, copies of which is incorporated as Schedule I; and
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(ii) "Washington EBITDA" means earnings before income tax, depreciation,
and amortization from the Business generated from any location of the
Business operated by the Neptune Entities in the State of Washington,
including but not limited to the Spokane Locations, or any other
locations of the Business operated by the Neptune Entities in which
Wetmore is General Manager, determined in accordance with generally
accepted accounting principles of the United States of America,
consistently applied. Schedule K sets forth more particularly how the
Washington EBITDA will be calculated for the purposes of this
Agreement.
7.2 Schedules : The following are the schedules delivered concurrently with,
and incorporated in, this Agreement:
<TABLE>
Schedule Description Reference
-------- ----------- ---------
<S> <C> <C>
A List of Insurance Policies 4.6(a)(b)(c)
B List of Intangible Assets 4.1(i)
C List of Land and Buildings 4.1(h)
D List of Leased Assets 4.1(c)
E List of Other Operating and Fixed Assets 4.1(d)(j)
F List of Pre-Need Contracts and Funeral Insurance 4.10(b)
Policies
G List of Specified Assets 4.1(d)
H List of Trust Accounts 4.2
I Unaudited Financial Statements 4.4
J List of Bank Accounts 4.5(b)
K EBITDA 3
L List of Employees and Employee Benefit Plans 4.8(a)(c)
M List of Material Contracts 4.10
N Required Consents 4.12(a), 8.1(a)
O Certificate of Accredited Investor 8.1(d)
P Ayres Consulting/Non-compete Agreement 8.1(j)
</TABLE>
<PAGE>
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<TABLE>
Schedule Description Reference
-------- ----------- ---------
<S> <C> <C>
Q Wetmore Employment/Non-compete Agreement 8.1(k)
R Lease/Purchase Option Agreement 8.1(l)
</TABLE>
7.3 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.
7.4 Genderand Number : Unless the context otherwise requires, words importing
the singular include the plural and vice versa and words importing gender
include both genders.
7.5 Currency : All dollar amounts referred to in this Agreement are stated in
United States of America currency, unless otherwise expressly stated.
8 PURCHASE AND PURCHASE PRICE
8.1 Purchase : On the Closing Date and subject to the terms and conditions
contained in this Agreement, the Vendor shall sell, assign and transfer the
Assets and the Purchaser, shall purchase the Assets for the aggregate price
of $625,000.00 plus the contingent purchase price as described in Section 3
below (the "Purchase Price").
8.2 Payment of Purchase Price : At the Time of Closing, the Purchase Price will
be payable by the Purchaser to the Vendor as follows:
(a) the sum of $20,000.00 by way of a deposit which both parties
acknowledge has been paid by the Purchaser to the Vendor's attorney
pursuant to that certain letter of intent between the parties dated
November 18, 1999;
(b) the sum of $480,000.00 by way of a certified or attorney's check
payable to the Vendor's attorneys, Lukins & Annis, P.S.;
(c) 22,727 common shares of Neptune (the "Neptune Shares") issued by
Neptune to the Vendor, provided that the average closing price of such
shares on the NASD OTC Bulletin Board, or other stock exchange in the
United States of America, for the 30 day period preceding the first
trading day following the one year anniversary of the Closing (the
"Price Date") is equal to or greater than $5.50 per share (the "Deemed
Price"). In the event that the Deemed Price is less that $5.50 per
share on the Price Date, the Purchaser, will deliver to the Vendor,
within fourteen (14) days following the Price Date, at its option,
either (i) that number of common shares of Neptune which will increase
the aggregate deemed value of the Neptune Shares to $125,000.00; (ii)
cash in an amount equal to $125,000.00 less the aggregate deemed value
of the Neptune Shares on the Price Date; or (iii) a combination of
common
<PAGE>
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shares of Neptune and cash which, when added to the Neptune Shares,
will equal an aggregate deemed value of $125,000.00; and
(d) the contingent purchase price as described in Section 3 below shall be
determined and paid pursuant to the terms of this Agreement by
delivery to the Vendor of a certified or attorney's check payable to
the Vendor or its assigns
which shall be good and sufficient payment to the Vendor to the extent of
such amounts.
8.3 Effective Date : Notwithstanding the Closing Date, all transactions
contemplated in this Agreement will be effective on the Effective Date. All
income from deaths occurring on or before the Effective Date shall be the
income of Vendor and all income from deaths occurring after the Effective
Date shall be the income of Purchaser.
8.4 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, excluding any personal assets of Ayres,
and Excluded Liabilities.
8.5 Reconciliation : On or before March 31, 2000 (the "Reconciliation Date"),
the Purchaser will provide to the Vendor a reconciliation of the Excluded
Assets and Excluded Liabilities, being that amount of cash, collections and
amounts paid, respectively, from the Effective Date.
8.6 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, will be paid by the
Purchaser to the Vendor on or before April 30, 2000. 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 will
be paid by the Vendor to the Purchaser on or before April 30, 2000.
8.7 Right of Set-Off : In the event that the Vendor owes the Purchaser any
amounts in connection with the reconciliation set forth in this Section 2,
the Purchaser and Neptune have the right to set-off any such amount against
any money due and owing to the Vendor from the Purchaser or Neptune under
this or any other Agreement.
8.8 Allocation of Purchase Price: The Purchase Price shall be allocated amongst
the Assets of the Business transferred by Vendor to Purchaser as follows:
Asset Purchase Price
Equipment, Furniture and Fixtures $ 54,000
Leasehold Improvements 52,000
Inventory 4,000
Supplies 1,000
Goodwill 514,000
=======
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TOTAL $625,000*
*The contingent Purchase Price paid to Vendor by Purchaser as described
in Section 3 below shall be treated as additional consideration for the
goodwill of Vendor.
9 CONTINGENT PURCHASE PRICE
3.1 First Contingency Purchase Price: Within sixty (60) days of the one year
anniversary of the Closing Date (such anniversary date to be referred to as
the First Contingency Date) the Purchaser will pay the following to the
Vendor, by way of delivery of a certified check to the Vendor:
(a) 3% of the Gross Spokane Revenues from the twelve (12) month period
immediately preceding the First Contingency Date; and
(b) 12.5% of the Spokane EBITDA from the twelve (12) month period
immediately preceding the First Contingency Date.
3.2 Second Contingency Purchase Price: Within sixty (60) days of the two (2)
year anniversary of the Closing Date (such anniversary date to be referred
to as the Second Contingency Date) the Purchaser will pay the following to
the Vendor, by way of delivery of a certified check to the Vendor:
(a) 2.75% of the Gross Spokane Revenues from the twelve (12) month period
immediately preceding the Second Contingency Date; and
(b) 12.5% of the Spokane EBITDA from the twelve (12) month period
immediately preceding the Second Contingency Date.
3.3 Third Contingency Purchase Price: Within sixty (60) days of the three (3)
year anniversary of the Closing Date (such anniversary date to be referred
to as the Third Contingency Date) the Purchaser will pay the following to
the Vendor, by way of delivery of a certified check to the Vendor:
(a) 1% of the Gross Spokane Revenues from the twelve (12) month period
immediately preceding the Third Contingency Date; and
(b) 7.5% of the Spokane EBITDA from the twelve (12) month period
immediately preceding the Third Contingency Date.
3.4 Fourth Contingency Purchase Price: Within sixty (60) days of the four (4)
year anniversary of the Closing Date (such anniversary date to be referred
to as the Fourth Contingency Date) the Purchaser will pay the following to
the Vendor, by way of delivery of a certified check to the Vendor:
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(a) 1% of the Gross Spokane Revenues from the twelve (12) month period
immediately preceding the Fourth Contingency Date; and
(b) 7.5% of the Spokane EBITDA from the twelve (12) month period
immediately preceding the Fourth Contingency Date.
3.5 Bonus Contingency Purchase Price: Within sixty (60) days of the expiration
of each twelve (12) month period following the five (5) year anniversary of
the Closing Date (such expiration dates to be referred to as the Bonus
Contingency Dates) the Purchaser will pay to the Vendor, or its assignee,
by way of delivery of a certified check, 10.0% of the Washington EBITDA
from the twelve (12) month period immediately preceding each respective
Bonus Contingency Date. The payments set forth in this Subsection 3.5 shall
continue so long as either Ayres or Wetmore continue as a consultant or
employee of the Purchaser. In the event that Ayres ceases to continue as a
consultant or employee of the Purchaser, the payments set forth in this
Subsection 3.5 shall be paid to Wetmore. In the event that both Ayres and
Wetmore cease to be a consultant or employee of the Company, the payments
set forth in this Subsection 3.5 shall be prorated according to the number
of months either Ayres or Wetmore remained as a consultant or employee of
the Purchaser in the twelve (12) month period immediately preceding each
respective Bonus Contingency Date.
3.5 Interest on Contingency Purchase Price: If the contingent purchase prices
set forth in Subsection 3.1 through 3.4 are not paid in full by the
Purchaser when due, such unpaid amounts shall bear interest at the rate per
annum equal to the prime rate as set forth in the Wall Street Journal as of
the due date of the said contingent purchase prices, plus two basis points,
until paid in full.
3.6 Delivery of Financial Statements: As soon as possible following each
anniversary of the Closing Date, the Purchaser shall deliver copies of
Neptunes consolidated financial statements, any other financial statements
used in determining Gross Spokane Revenues, Spokane EBITDA, and Washington
EBITDA, and calculations of contingent purchase price, along with copies of
any supporting working papers for the same, to the Vendor and Ayres.
10 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIESOF THE VENDOR AND AYRES
WITH RESPECT TO THE BUSINESS
The Vendor and Ayres 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 Assets:
10.1 Assets :
(a) Ownership: Except for the Leased Assets, the Vendor has good and
marketable title to all of the Assets free and clear of all
Encumbrances;
<PAGE>
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(b) Authority: The Vendor has the legal capacity, power and authority to
enter into this Agreement and to transfer the legal and beneficial
title and ownership of the Assets to the Purchaser free of
Encumbrances;
(c) Leased Assets: The Leased Assets are held under valid and subsisting
Leases, each of which is listed in Schedule D. Each Lease is in full
force and effect and without amendment thereto, and the Leases and the
Leased Assets are free and clear of all Encumbrances. Except for the
Leases, there are no leases, agreements to lease, tenancy arrangements
or licences to which the Vendor is a party which have a capitalized
value in excess of $1,000. The Vendor has not previously assigned the
Leases nor sublet their interest in any of the Leased Assets under the
Leases. The Vendor has not released any of the other parties to such
leases from the performance of any of their obligations thereunder.
The Vendor is not in breach of any of the terms of any Leases, and the
Vendor is 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 Vendor and Ayres, 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 Vendor is a
sublessor. The Vendor has 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;
(d) Condition of Assets: To the best of the knowledge of the Vendor and
Ayres, all fixed assets and equipment owned or used by the Vendor in
the conduct of the Business, all of which is listed in either
Schedules E or G, 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 Vendor 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 Vendor carries 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 Vendor have been paid in full unless the same are not
due and payable;
<PAGE>
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(h) Land and Buildings: The list of the Land and Buildings set out in
Schedule C accurately reflects all interests of the Vendor in real
property used in the conduct of the Business. The Vendor represents
that all agreements with respect to the Vendor's interest 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 Vendor and Ayres,
neither asbestos nor urea formaldehyde foam is now used, or present,
in any of the buildings listed in Schedule C;
(i) Intangible Assets: The list of the Intangible Assets set out in
Schedule B 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 Vendor on the date hereof free of Encumbrances;
and
(j) Other Operating and Fixed Assets: The list of the Other Operating and
Fixed Assets set out in Schedule E accurately reflects all operating
and fixed assets owned or held by the Vendor having an original
capital cost of $500 or more which are not disclosed elsewhere in this
Subsection 1. Except for sales and purchases in the ordinary course of
business since November 18, 1999, the Vendor owns such assets on the
date hereof free of Encumbrances.
10.2 Trust Accounts :
(a) The Trust Accounts described in Schedule H accurately reflects all
funds received by the Vendor in connection with the sale of pre-need
funeral arrangements for the Business 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 H; and
(b) To the best of the knowledge of the Vendor and Ayres, 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.
10.3 Business Operations :
(a) Operating Authorities: The Vendor has acquired, and currently holds,
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;
<PAGE>
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(b) Compliance with Laws: To the best of the knowledge of the Vendor and
Ayres, the Vendor is operating and using the Assets, and is conducting
the Business, in compliance with all applicable laws and regulations
of each jurisdiction in which the Assets are located or in which it
conducts the Business; and
(c) Jurisdictions in which Business is Carried On: The Vendor does not
carry on the Business or own or lease any assets in any jurisdiction
other than in the State of Washington which would require registration
or licensing in such jurisdiction.
10.4 Financial :
(a) Unaudited Financial Statements: The Unaudited Financial Statements
present fairly in all material respects the financial position of the
Business as at the respective dates of the said statements and the
results of the Vendor's operation of the Business for the 12 month
period then ended in accordance with accounting principles used by the
Vendor consistently applied.
(b) No Material Change: Since September 30, 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
Vendor is 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 September 30, 1999 and up to the date hereof the Vendor
has not:
(i) 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 inconsistent with the Business as carried on;
(ii) 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;
(iii) subjected any of the Assets to any Encumbrances;
(iv) 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;
(v) waived any rights of material value;
(vi) entered into any transaction or into any contracts or
agreements or modifications or cancellations thereof, other
than in the ordinary course of business;
<PAGE>
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(vii) 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;
(viii) used any funds other than in the ordinary course of business
as theretofore carried on; and
(ix) 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
Business and all material financial transactions of the Business have
been accurately recorded in the Books and Records;
(d) Liabilities: The Business does 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 September 30, 1999;
(e) Current Liabilities: Notwithstanding paragraph 4.4 (d) above, the
Business does not have accounts or trade payables or any other current
liabilities, including any sales tax or commissions payable, which
exceed $10,000.00 at the Effective Date.
(f) Receivables: All accounts receivable recorded on the books of the
Business 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;
and
(g) Accountants: The Vendor has not had any material disagreement or
dispute with their auditors or accountants over the accounting or tax
treatment of the financial information of the Business
<PAGE>
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10.5 Banking:
(a) Loans and Credit Facilities: The Vendor has 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 does not have outstanding any bonds, debentures,
mortgages, notes or other similar indebtedness and the Vendor is not
obligated to create or issue any bonds, debentures, mortgages, notes
or other similar indebtedness;
(b) Bank Facilities: Schedule J contains a complete and accurate listing
showing the name of each bank, trust company or similar financial
institution in which the Vendor has 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) Guarantees/Indemnities: The Vendor has 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.
10.6 Insurance:
(a) List of Policies: Schedule A contains a complete and accurate listing
of all insurance policies of the Vendor 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 A is
in good standing, all premiums required to be paid by the Vendor have
been properly paid, there have been no misrepresentations or failures
to disclose material facts, and there has been no refusal to renew any
of the policies and the Vendor and Ayres have no knowledge of any
facts which might render any of the policies invalid, unenforceable or
non-renewable; and
(c) Outstanding Claims: No threatened or actual claims against any of the
policies described in Schedule A have been made in the last 3 years.
The Vendor has given notice of or has otherwise presented in a timely
fashion every claim under each such insurance policy.
10.7 Tax Matters:
(a) Filings: The Vendor has 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,
<PAGE>
-15-
election and designation, including accompanying schedules and
statements is true, correct and complete in all material respects;
(b) Payment: The Vendor has 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 the Vendor
nor with respect to the issuance of any assessment or reassessment;
(d) Adverse Proceedings: To the best of the knowledge of the Vendor and
Ayres, there are no actions, suits, proceedings, investigations or
claims by any governmental authority pending or threatened against the
Vendor relating to taxes, governmental charges or assessments. 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: The Vendor has 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: The Vendor has not acquired property from, or disposed
of property to, any person, firm or corporation with whom the Vendor
does not deal at arm's length since September 30, 1999; and
(g) Other Jurisdictions: The Vendor has not filed or is not currently
required to file any returns, elections or designations with any
taxation authority located in any jurisdiction other than the State of
Washington and the State of California.
10.8 Employee Matters :
(a) List of Employees: The list of employees set out in Schedule L is a
comprehensive list of the employees and commissioned sales people of
the Business as at the Closing Date and includes an accurate
description of, the compensation, and/or commission structure,
position and job classification save and except for the voluntary
termination of Ms. Shelly Perkins from the employ of the Vendor on or
about December 15, 1999;
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(b) Employment Contracts: The Vendor is 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 Business are employed on other than an
indefinite hiring basis terminable on reasonable notice according to
law without further liability to the Business;
(c) Benefit Plans: Schedule L 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 Business as at the Closing Date 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 Vendor 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 Vendor does not have nor has it ever had a pension
plan for any of its employees; and
(e) Employer Associations: The Vendor is not a member of any employer,
management, industry or other trade or business association under
which the Business is obligated to contribute to any employee or
contractor employee benefit fund, including any pension plans, health
benefit plans or other similar employee entitlements.
10.9 Litigation and Claims :
(a) Adverse Proceedings: There are no outstanding actions, claims,
demands, lawsuits, prosecutions or governmental investigations by or
against the Vendor and the Business and there is no other adverse
proceeding which is to the knowledge of the Vendor or Ayres pending or
threatened by, against, or relating to the Vendor, the Assets, or the
Business. The Vendor or Ayres 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 Assets or the Business;
(b) Compliance Directives: There are no outstanding compliance directives
or work orders of which the Vendor or Ayres is 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
the Vendor or Ayres have notice that there are any matters under
formal consideration by any such authorities relating to any of the
Assets or the Business;
<PAGE>
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(c) Notice of Default/Claims: Except as expressly disclosed in this
Agreement, the Vendor has not 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 Vendor 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 the Vendor
or Ayres has been threatened against the Vendor; and
(e) Trademark and Patent Infringement: The conduct of the Business by the
Vendor 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.
10.10 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 the Vendor is a party, by which the Vendor is bound
or under which the Vendor is entitled to any benefits. For the
purposes of this Agreement a contract shall be material if:
(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 F contains a complete and accurate
listing of all active Pre-Need Contracts as of October 31, 1999;
(c) Funeral Insurance Policies: Schedule F contains a complete and
accurate listing of all active Funeral Insurance Policies as of
October 1, 1999; and
(d) Good Standing: Except as disclosed herein, the Vendor is not in breach
or default of any of the terms of the Material Contracts or Pre-Need
Contracts, and neither the Vendor nor Ayres is 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.
<PAGE>
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To the best of the knowledge the Vendor and Ayres 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 4.10(c)
would have a material adverse effect on the Assets or the Business.
10.11 Contingency and Environmental Liabilities:
(a) Compliance: To the best of the knowledge of the Vendor and Ayres, the
Business is in compliance in all material respects with all federal,
state and municipal environmental laws and regulations (the
"Environmental Laws"). The existing activities of the Business and the
crematories and, to the best knowledge of the Vendor and Ayres, its
prior uses and activities and the uses and activities of other
property now or previously owned or operated by the Vendor, comply and
at all times have complied with all Environmental Laws. The Vendor has
filed all environmental reports and notifications required to be filed
under applicable laws and regulations;
(b) Notice of Non-Compliance: The Vendor nor, to the best knowledge of the
Vendor or Ayres, any prior owner or occupant of the property now
leased or operated by the Vendor, 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. The Vendor and the Business 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;
(c) Hazardous Material: The Vendor nor, to the best knowledge of the
Vendor and Ayres, 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 Vendor,
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 Business;
(d) Cremation Residue: The Vendor has not 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; and
(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
Business.
10.12 Effect of this Transaction :
(a) No Adverse Implications: Except as disclosed in Schedule N 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:
<PAGE>
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(i) give any person the right to terminate or cancel any
contractual or other rights with the Vendor 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
Vendor or relating to the disposition of the Assets;
(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 general security
interest in a security agreement granted, issued or assumed
by the Vendor where any of such events could have a material
adverse effect on the Assets or the Business; nor
(iv) violate any provision of any indenture, mortgage, lien,
lease, agreement, instrument, order, arbitration award,
judgment or decree to which the Vendor is a party or by
which the Vendor 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.
(b) Notice Procedure: The Vendor 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 4.12, would constitute a breach of any of the
representations and warranties set out in this Section 4. Such notice
shall state that it is being given pursuant to this Subsection 4.12
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;
(ii) 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;
(iii) or, terminate this agreement without further obligation on
the part of any party to this Agreement;
(c) Joint and Several: The obligations of the Vendor and Ayres shall be
joint and several with respect to all the representations and
warranties set out in this Section 4.
<PAGE>
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11 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO ISSUANCE
OF SECURITIES
The Vendor and Ayres represent and warrant to the Purchaser and to Neptune as
follows and acknowledges that the Purchaser and Neptune are relying upon such
representations and warranties in connection with the issuance of the
Securities:
11.1 Individual Authority: The Vendor has the legal capacity, power and
authority to hold the Securities to be owned by it at the Time of
Closing;11.2Receipt of the Securities : The Vendor 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 Vendor 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."
<PAGE>
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11.3 Solicitation: The Vendor acknowledges that the Securities to be received by
it at Closing were not advertised in printed media of general and regular
paid circulation, radio or television.
11.4 Accredited Investor: 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.).
11.5 No Trades: Other than Ayres purchasing 1000 shares of Neptune in and around
December, 1999, the Vendor has not traded in the common stock of Neptune
and will refrain from trading in or selling short any shares in the common
stock of Neptune or entering into any derivative transactions of same prior
to the Closing Date.
11.6 Residency: The Vendor is a company incorporated in the State of Washington.
11.7 Joint and Several: The obligations of the Vendor and Ayres shall be joint
and several with respect to all the representations and warranties set out
in this Section 5.
12 COVENANTS OF THE VENDOR
The Vendor covenants and agrees with the Purchaser as follows and acknowledge
that the Purchaser is relying upon such covenants and agreements in connection
with the purchase of the Assets:
12.1 Access to the Business: The Vendor 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 Business. The Vendor 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
Business. At the request of the Purchaser, the Vendor 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 Business 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
Business maintained by governmental or other public authorities. At the
Purchaser's request, the Vendor shall co-operate with the Purchaser in
arranging any such meetings as the Purchaser should reasonably request
with:
(a) all employees of the Business;
(b) customers, suppliers, distributors or others who have or have had a
business relationship with the Business; and
<PAGE>
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(c) auditors, attorneys or any other persons engaged or previously engaged
to provide services to the Business who have knowledge of matters
relating to the Business.
In particular, without limitation, the Vendor shall permit the
Purchaser's representatives or consultants to conduct such physical
review of the inventory of the Business 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
Vendor and Ayres 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.
12.2 Delivery of Books and Records: At the Time of Closing there shall be
delivered to the Purchaser by the Vendor 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
Vendor to defend any claim against the Vendor which could result in a Claim
hereunder and at least until December 31, 2005. The Purchaser will permit
the Vendor or its authorized representatives reasonable access thereto in
connection with the affairs of the Vendor. The Purchaser shall not be
responsible or liable to the Vendor 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.
12.3 Conduct Prior to Closing: Without in any way limiting any other obligations
of the Vendor hereunder, during the period from the date hereof to the Time
of Closing:
(a) Conduct Business in the Ordinary Course: The Vendor shall conduct the
Business in its ordinary and normal course and the Vendor 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 September 30, 1999 and before the date
of this Agreement, would constitute a breach of any representation,
warranty, covenant or other obligation of the Vendor contained herein.
In particular the Vendor shall 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 Vendor shall 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 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 Vendor shall use reasonable commercial efforts
to preserve, intact the Assets, the Business and to promote and
preserve for the Purchaser the
<PAGE>
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goodwill of suppliers, customers and others having business relations
with the Business.
12.4 Delivery of Documents: The Vendor shall deliver to the Purchaser all
necessary transfers, assignments and other documentation reasonably
required to transfer to the Purchaser the Assets with a good and marketable
title, free of Encumbrances without any right of set-off;
12.5 Vendors Taxes: Save and expect for Washington State Sales and Use Tax which
will be paid by the Purchaser, or its assigns, as set forth in Section 7.7,
the Vendor is 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
13 JOINT AND SEVERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER AND NEPTUNE
The Purchaser and Neptune represent, warrant and covenant to and with the Vendor
as follows and acknowledge that the Vendor is relying upon such representations,
warranties and covenants in connection with the sale of the Assets:
13.1 Corporate Status and Authority: The Purchaser and Neptune 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.
13.2 Authorization: The Purchaser and Neptune 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.
13.3 Regulatory Approval: The Purchaser and Neptune have complied and will
comply fully with the requirements of all applicable corporate and
securities laws in relation to the issue of the Securities. 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 articles or incorporation or bylaws of the Purchaser or Neptune, any
shareholders' or directors' resolution or of any indenture or other
agreement, written or oral, to which the Purchaser or Neptune may be a
party or by which the Purchaser or Neptune maybe 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 Neptune is bound or to the
knowledge of the Purchaser or Neptune, any statute or regulation applicable
to the Purchaser or Neptune.
13.4 ShareTransfer Restrictions: No order ceasing or suspending trading in
securities of the Purchaser or Neptune nor prohibiting the sale of such
securities has been issued to the
<PAGE>
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Purchaser or Neptune 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.
13.5 Issued Share Capital: As at December 1, 1999, the authorized capital of
Neptune is 100,000,000 shares of which 12,889,999 shares are issued and
outstanding. In addition, Neptune has an obligation to issue 276,667 shares
in respect of private placement transactions and has 675,000 warrants (not
including stock options) outstanding as of December 1, 1999 which may by
the Time of Closing be exchanged or exercised into shares of Neptune.
13.6 FullyPaid Shares: Upon completion of the transactions contemplated in this
Agreement, the shares of the common trading stock of Neptune issued by
Neptune to the Vendor will be fully paid and non-assessable shares of the
common trading stock of Neptune.
13.7 Sales Taxes: Notwithstanding Subsection 6.5, the Purchaser is responsible
for the Washington State of Sales and Use Tax on the sale of personal
property associated with the transaction contemplated herein.
14 CONDITIONS OF CLOSING
14.1 Conditions of Closing in Favour of the Purchaser: The obligation of the
Purchaser to complete the sale and purchase of the Assets is subject to the
following terms and conditions for the exclusive benefit of the Purchaser,
to be fulfilled or performed at or prior to the Time of Closing or waived
in whole or in part by the Purchaser at its sole discretion without
prejudice to any rights the Purchaser may otherwise have:
(a) Contractual Consents: The Vendor shall have delivered to the Purchaser
such waivers, consents and certificates, including but not limited to
those described in Schedule N, from parties having contractual
relations with the Business as may be necessary including, without
limitation, waivers under loan agreements to which the Vendor is a
party;
(b) Representations and Warranties: The representations and warranties of
the Vendor and Ayres 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 Vendor and Ayres 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 Vendor and all
other terms of this Agreement to be complied with or performed by the
Vendor at or before the Time of Closing shall have been complied with
or performed and certificates of the
<PAGE>
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Vendor 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 Vendor has delivered to the
Purchaser and Neptune a certificate of accredited investor in the form
attached as Schedule O 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 authorizations, including
but not limited to those described in Schedule N, as are required to
permit the change of ownership of the Assets and the transactions as
contemplated herein, including, but not limited to, the operation of
the Business by the Purchaser;
(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 or
prohibit the purchase and sale of the Assets 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 Assets;
(j) Ayres Consulting/Non-Compete Agreement: Ayres has entered into a
consulting and non-competition agreement attached as Schedule P to
this Agreement;
(k) Wetmore Employment/Non-Compete Agreement: Wetmore has entered into an
employment and non-competition agreement attached as Schedule Q to
this Agreement;
(l) Lease/Purchase Option: Ayres has entered into a lease and purchase
option agreement attached as Schedule R to this Agreement;
(m) Opinion of Vendor's Attorney: The Purchaser and Neptune have received
legal opinions of the Vendor's attorneys, dated as of the date of
Closing, respecting the
<PAGE>
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transactions 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 Neptune and the Purchaser and Neptune, acting reasonably,
the Purchaser may, by notice to the Vendor, terminate this Agreement and
the obligations of the Vendor, Neptune and the Purchaser under this
Agreement, provided that the Purchaser may also bring an action against the
Vendor 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 4.12(b) by the Vendor. 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
14.2 Conditions of Closing in Favour of the Vendor: The purchase and sale of the
Assets are subject to the following terms and conditions for the exclusive
benefit of the Vendor to be fulfilled or performed at or prior to the Time
of Closing:
(a) Representations and Warranties: The representations and warranties of
Neptune 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 Neptune and the Purchaser dated the Closing
Date to that effect shall have been delivered to the Vendor, such
certificate to be in form and substance satisfactory to the Vendor
acting reasonably;
(b) Covenants: All of the terms, covenants and conditions of this
Agreement to be complied with or performed by Neptune and the
Purchaser at or before the Time of Closing shall have been complied
with or performed and a certificate of Neptune and the Purchaser dated
the Closing Date to that effect shall have been delivered to the
Vendor, such certificate to be in form and substance satisfactory to
the Vendor acting reasonably;
(c) Accounting Opinions: The Vendor will have received legal and/or
accounting opinions that satisfy it that the transaction contemplated
herein does not have any unforseen income or other tax consequences to
the Vendor.
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 Vendor, acting reasonably, the Vendor may, by notice to
the Purchaser and Neptune, terminate this Agreement and the obligations of
the Vendor, Neptune and the Purchaser under this Agreement, provided that
the Vendor may also bring an action against the Purchase and Neptune for
damages suffered by the Vendor 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 4.12(b) by the Purchaser or Neptune. Any such
condition
<PAGE>
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may be waived in whole or in part by the Vendor without prejudice to any
claims they may have for breach of covenant, representation or warranty.
14.3 Parties Efforts : The parties shall use reasonable commercial efforts to
satisfy the conditions contained in Section 8.
15 CLOSING ARRANGEMENTS
15.1 Place of Closing: The closing shall take place at the Time of Closing at
the Place of Closing.
15.2 Transfer: At the Time of Closing, upon fulfilment of all the conditions set
out in Section 8 that have not been waived in writing by Neptune and the
Purchaser or the Vendor as the case may be:
(a) the Purchaser will cause to be delivered to the Vendor's attorney
(Lukins & Annis, P.S., Washington Trust Financial Center, Suite 1600,
717 W. Sprague Avenue, Spokane, Washington, 99201-0466) a certified or
attorney's check in the amount of $480,000.00 payable to the Vendor's
attorney (Lukins & Annis, P.S.) in trust for the Vendor in payment of
the Purchase Price;
(b) the Purchaser will cause to be delivered to the Vendor's attorney
Lukins & Annis, P.S., Washington Trust Financial Center, Suite 1600,
717 W. Sprague Avenue, Spokane, Washington, 99201-0466) a certified or
attorney's check in the amount of $4,455.00 payable to the Vendor's
attorney (Lukins & Annis, P.S.) in payment of the sales tax provided
for in Subsection 7.7; and
(c) Neptune will issue 22,727 shares in the capital of Neptune to the
Vendor and deliver same to the Vendor's attorney (Lukins & Annis,
P.S., Washington Trust Financial Center, Suite 1600, 717 W. Sprague
Avenue, Spokane, Washington, 99201-0466).
15.3 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.
16 INDEMNITY
16.1 KnownActions and Proceedings: The Vendor and Ayres hereby indemnify and
save harmless the Neptune Entities 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
<PAGE>
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including, without limitation, the costs of defending, cross-claiming or
claiming against third parties in respect of any action, claim or matter,
including attorney's fees, costs and disbursements at all court and
administrative levels, which at any time or from time to time may be paid,
incurred or asserted against the Neptune Entities, as to a direct or
indirect result 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 Neptune Entities after the Effective Date. The
obligations of the Vendor and Ayres set forth in this Subsection 10.1 shall
be subject to and limited by the following:
(a) No claim shall be made unless the cumulative amount of all claims
under this Subsection 10.1 equals or exceeds $5,000;
(b) The Purchaser and Neptune shall give written notice to Vendor and
Ayres stating specifically the basis for the claim, the amount
thereof, and shall tender defense thereof to Vendor and Ayres as
provided in Subsection 10.3 below; and
(c) No claim shall be made after the third anniversary of the Closing
Date.
16.2 Indemnification by Purchaser. The Purchaser hereby indemnifies and saves
harmless the Vendor and Ayres against any and all losses, liabilities,
damages, costs, and expenses of any kind whatsoever, including, without
limitation, the cost of defending, cross-claiming, or claiming against
third parties in respect of any action, claim, or matter, including legal
fees, costs, and disbursements of an attorney at all court and
administrative levels, which at the time or from time to time may be paid,
incurred, or asserted against Vendor and Ayres as to the direct or indirect
result of the operation of the Business after the Effective Date. The
obligations of the Purchaser set forth in this Subsection 10.1 shall be
subject and limited by the following:
(a) Noclaims shall be made until the cumulative amount of all claims under
this Subsection 10.1 equals or exceeds $5,000;
(b) Vendor and Ayres shall give written notice to the Purchaser stating
specifically the basis for the claim, the amount thereof, and shall
tender defense thereof to Purchaser as provided in Subsection 10.3
below; and
(c) No claim shall be made after the third anniversary of the Closing
Date.
10.3 Tender of Defenses. Promptly upon receipt by any party of a notice of a
claim by a third-party which may give rise to a claim under Section 10, the
party seeking indemnification (the Indemnified Party) shall give written
notice thereof to the party obligated to provide indemnification (the
Indemnifying Party). If the Indemnifying Party gives to the Indemnified
Party an agreement in writing, in a form reasonably satisfactory to the
Indemnified Party's counsel, to defend such claim, the Indemnifying Party
may, at its sole expense, undertake the defense against such claim and may
contest or settle such claim on such terms, at such time and in such manner
as the Indemnifying Party, in its sole discretion,
<PAGE>
-29-
shall elect and the Indemnified Party shall execute such documents and take
such steps as may be reasonably necessary in the opinion of its counsel to
enable it to conduct the defense of such claim. If the Indemnifying Party
fails or refuses to defend any claim hereunder, the Indemnifying Party may
nevertheless, at its own expense, participate in the defense of such claim
by the Indemnified Party in any and all settlement negotiations relating
thereto. In any and all events, the Indemnifying Party shall have such
access to the records and files of the Business relating to any claim as
may be reasonably necessary to effectively defend or participate in the
defense thereof.
16.3 Right to Set-Off: The Purchaser and Neptune have the right to set-off any
amount owed by the Vendor to the Purchaser or Neptune pursuant to
Subsection 10.1 against any money due and owing to the Vendor from the
Purchaser or Neptune under this or any other agreement between the
Purchaser, Neptune and the Vendor, provided that the Purchaser or Neptune
gives written notification to the Vendor prior to set-off of the amount of
the set-off and any obligation(s) so satisfied.
17 GUARANTEE
Neptune hereby unconditionally guarantees each and every obligation of the
Purchaser arising from or under this Agreement. If the Purchaser should, for any
reason, fail to pay or perform any obligation, indebtedness, or liability
arising out of or pertaining to this Agreement, Neptune promises to pay or
perform the same upon demand. Neptune waives notice of acceptance in this
guaranty and also presentment, demand, protest, notice of protest, and notice of
dishonor of any obligation arising under this Agreement. No extension of time or
other indulgence granted by the Vendor, to the Purchaser will release or affect
the obligation of Neptune. No omission or delay on the part of the Vendor in
exercising any rights hereunder or in taking any action to collect or enforce
payment of any obligation arising under this Agreement will be a waiver of such
right or release or affect the obligation of Neptune hereunder. This guaranty is
given for the benefit of the Vendor and Ayers. Neptune shall be jointly and
severally liable for said obligations, indebtedness, or liabilities.
18 GENERAL MATTERS
18.1 Governing Law and Arbitration: This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington. 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 Seattle, Washington. 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.
<PAGE>
-30-
18.2 Entire Agreement: Except as may be otherwise expressly agreed between the
parties in writing, this Agreement, including any agreements contemplated
herein, constitutes 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.
18.3 Assignment: The Vendor 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 Vendor.
18.4 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 Vendor or the Purchaser
without the prior approval of the other, such approval not to be
unreasonably withheld.
18.5 Confidential Information: The Purchaser and the Vendor 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 Vendor,
shall cease upon Closing. Notwithstanding the Closing, the Vendor 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 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 Vendor its representatives.
18.6 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 Vendor 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.
18.7 Indemnification in Respect of Brokers or Agents: The Vendor and Ayres
indemnify and save harmless the Purchaser and the Business from and against
any claim for commission or other remuneration payable or alleged to be
payable to any broker, agent or other intermediary who
<PAGE>
-31-
claims to be so entitled by virtue of a contract or other arrangement with
the Vendor in connection with the transaction contemplated herein.
18.8 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 Vendor. The Vendor shall not bear any legal,
accounting or other costs incurred by the Purchaser.
18.9 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 . Notices shall be delivered or
addressed as follows:
(a) If to the Purchaser and Neptune:
Neptune Management Corp.
100 North First Street, Suite 205
Burbank, CA 91502
(b) If to the Vendor:
Cremation Society of Washington, Inc.
2458 Manzanita Avenue
Eureka, California 99503
Attn: John C. Ayres
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.
18.10 Time of the Essence: Time shall be of the essence of this Agreement.
18.11Further 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.
18.12Severability: 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,
<PAGE>
-32-
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.
18.13Counterparts: 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.
NEPTUNE SOCIETY OF AMERICA, INC. THE NEPTUNE SOCIETY, INC.
Per: ------------------------------ Per: ------------------------------
Authorized Signatory Authorized Signatory
<PAGE>
-33-
CREMATION SOCIETY OF WASHINGTON, INC.
Per: ------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
JOHN C. AYRES in the presence of: )
)
- -------------------------------------- )
Witness Signature )
)
- -------------------------------------- ) -------------------------------
Address ) JOHN C. AYRES
)
- -------------------------------------- )
Occupation )
)
<PAGE>
-34-
Schedule "A"
to the Asset Purchase Agreement dated December 31, 1999
See Attached List of Insurance Policies
---------------------------------------
<PAGE>
-35-
Schedule "B"
to the Asset Purchase Agreement dated December 31, 1999
List of Intangible Assets
-------------------------
1. Trade Names: Cremation Society of Washington, First Choice Cremation
2. Trademark: Cremation Society of Washington, First Choice Cremation,
Spokane's Cremation Society
<PAGE>
-36-
Schedule "C"
to the Asset Purchase Agreement dated December 31, 1999
List of Land and Buildings
--------------------------
<TABLE>
Description Nature of Interest Base Rent/Month Expiry Date Renewal
- ----------- ------------------ --------------- ----------- -------
<S> <C> <C> <C> <C>
East 1821 Sprague Street, Building owned by Vendor, n/a n/a n/a
Spokane, WA Ayres
Suite 619, North 4407 General office space $602.00 36584 month to month
Division Street, Spokane, WA leased from Hudson and option
Cynthia Staffield
</TABLE>
<PAGE>
-37-
Schedule "D"
to the Asset Purchase Agreement dated December 31, 1999
List of Leased Assets
---------------------
1. See Schedule "C".
2. Other Leased Assets:
<TABLE>
In Agreement with Nature of Lease Total Payments per Month Expiry Date
- ----------------- --------------- ------------------------ -----------
<S> <C> <C> <C>
AT&T Capital Leasing Computer equipment $392.94 June 18, 2001
Ikon Office Solutions Ricoh copier $285.00 June 29, 2003
</TABLE>
<PAGE>
-38-
Schedule "E"
to the Asset Purchase Agreement dated December 31, 1999
See Attached List of Other Operating and Fixed Assets
-----------------------------------------------------
<PAGE>
-39-
Schedule "F"
to the Asset Purchase Agreement dated December 31, 1999
See Folder F(1) for List of Pre-Need Contracts
----------------------------------------------
and Folder F(2) for List of Funeral Insurance Polices
-----------------------------------------------------
<PAGE>
-40-
Schedule "G"
to the Asset Purchase Agreement dated December 31, 1999
List of Specified Assets
------------------------
1. 1 Power-Pak II Cremator
2. 1 Recorder
3. 1 S.S. Stack
4. 1 13'x15'x9' Walk-In Cooler
5. 1 Infitting Cooler Door
6. 4 Cooler Racks
7. 1 92" Body Lift
<PAGE>
-41-
Schedule "H"
to the Asset Purchase Agreement dated December 31, 1999
List of Trust Accounts
----------------------
1. See Schedule "F', Folder F(1).
<PAGE>
-42-
Schedule "I"
to the Asset Purchase Agreement dated December 31, 1999
See Attached Unaudited Financial Statements
-------------------------------------------
<PAGE>
-43-
Schedule "J"
to the Asset Purchase Agreement dated December 31, 1999
List of Bank Accounts
---------------------
1. USbank, Spokane, WA, Checking Account #1-535-0237-0296
2. USbank, Spokane, WA, Savings Account #2-535-0120-3330
<PAGE>
-44-
Schedule "K"
to the Asset Purchase Agreement dated December 31, 1999
EBITDA
------
1. For the purposes of this Agreement, Spokane EBITDA and Washington EBITDA
will be calculated in accordance with generally accepted accounting
principles used in the United States of America, consistently applied, with
the following adjustments:
(i) all consulting fees paid by the Neptune Entities to Ayres will not be
included in the calculation of Spokane EBITDA and Washington EBITDA;
and
(ii) all employment compensation paid by the Neptune Entities to Wetmore in
excess of $45,000.00 will not be included in the calculation of
Spokane EBITDA and Washington EBITDA.
2. For the purposes of this Agreement, Spokane EBITDA and Washington EBITDA
shall not reflect an allocation of general administrative expenses or
overhead assessments of the Neptune Entities without the express written
consent of the Vendor or Ayres. The parties acknowledge, however, that
certain expenses which are both reasonable and necessary and directly
related to and incurred for the exclusive benefit of the Business conducted
from the Spokane Locations, the State of Washington or any other locations
of the Business operated by the Neptune Entities in which Wetmore is
General Manager, may be allocated and included in the calculation of
Spokane EBITDA and Washington EBITDA.
<PAGE>
-45-
Schedule "L"
to the Asset Purchase Agreement dated December 31, 1999
List of Employees and Employee Benefit Plans
--------------------------------------------
<TABLE>
Name Position Estimated 1999 Compensation
- ---- -------- ---------------------------
<S> <C> <C>
John C. Ayres Consultant $5,000 - $7,000
Charles Wetmore General Manager $60,000
Shelley Perkins Location Manager $30,000
Patricia Redding At-Need Secretary $16,320
Joyce Momb Pre-Need Sales Manager $60,000
Doris Moyer Pre-Need Secretary/Officer $19,200
Manager
Elsa Green Telemarketer $5.75 per hour
</TABLE>
Full Time Employees receive HMO health coverage and those with professional
designations receive annual registration fees and continuing education costs
associated with those designations
<PAGE>
-46-
Schedule "M"
to the Asset Purchase Agreement dated December 31, 1999
List of Material Contracts
--------------------------
1. Agreement to Join and Participate in the Washington State Funeral Directors
Association Master Trust dated April 5, 1995 between Cremation Society of
Washington and WSFDA
2. Trust Agreement dated February 12, 1998 between Cremation Society of
Washington and Forethought National TrustBank
<PAGE>
-47-
Schedule "N"
to the Asset Purchase Agreement dated December 31, 1999
List of Required Consents
Contractual Consents
1. Consent to assignment of lease at Suite 619, 4407 Division Street, Spokane,
WA
2. Consent to assignment of the Leases described in Schedule D.
3. Consent to assignment of the Material Contracts described in Schedule M.
Regulatory Consents
4. Consent to Assignment of trademark certificates for:
a. Cremation Society of Washington
b. First Choice Cremation
c. Spokane's Cremation Society
5. Consent to Assignment of registered tradenames for:
a. Cremation Society of Washington
b. First Choice Cremation
6. Transfer of Agent's License authorization to sell Life and Disability
Insurance from the State of Washington's Office of the Insurance
Commissioner
7. Transfer of the licenses from the State of Washington Endorsement for:
a. Crematory Operation
b. Prearrangement Funeral Services
c. Funeral Establishment
<PAGE>
-48-
Schedule "O"
to the Asset Purchase Agreement dated December 31, 1999
See Attached Certificate of Accredited Investor
-----------------------------------------------
<PAGE>
-49-
Schedule "P"
to the Asset Purchase Agreement dated December 31, 1999
See Attached Ayres Consulting/Non-Compete Agreement
---------------------------------------------------
<PAGE>
-50-
Schedule "Q"
to the Asset Purchase Agreement dated December 31, 1999
See Attached Wetmore Employment/Non-Compete Agreement
-----------------------------------------------------
<PAGE>
-51-
Schedule "R"
to the Asset Purchase Agreement dated December 31, 1999
See Attached Lease/Purchase Option Agreement
--------------------------------------------
EXHIBIT 21.1
LIST OF SUBSIDIARIES
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., a company incorporated under the laws
of New York; and
o Neptune Funeral Services of Westchester, Inc., a company incorporated
under the laws of New York.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 513,915
<SECURITIES> 0
<RECEIVABLES> 224,851
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 774,241
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,676,861
<CURRENT-LIABILITIES> 17,341,867
<BONDS> 0
0
0
<COMMON> 24,867
<OTHER-SE> 13,535,500
<TOTAL-LIABILITY-AND-EQUITY> 65,676,861
<SALES> 6,191,599
<TOTAL-REVENUES> 7,688,733
<CGS> 3,728,806
<TOTAL-COSTS> 2,722,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,237,895
<INCOME-TAX> 298,802
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 939,093
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
