Exhibit 10.4

 

Execution Copy

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OMNIBUS AGREEMENT

 

among

 

McCOWN DE LEEUW & CO. IV, L.P.,

 

McCOWN DE LEEUW & CO. IV ASSOCIATES, L.P.,

 

MDC MANAGEMENT COMPANY IV, LLC,

 

DELTA FUND LLC,

 

CORNERSTONE FAMILY SERVICES LLC

 

CFSI LLC,

 

STONEMOR PARTNERS L.P.,

 

STONEMOR GP LLC

 

and

 

STONEMOR OPERATING LLC

 

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

Section 1.1

   Definitions    1

ARTICLE II

NONCOMPETITION

Section 2.1

   Restricted Businesses    5

Section 2.2

   Scope of Restricted Business Prohibition    5

Section 2.3

   Enforcement    5

ARTICLE III

INDEMNIFICATION

Section 3.1

   Indemnification by CFSI LLC for Successor Liability    5

Section 3.2

   Indemnification by CFSI LLC for an NOL Limitation Event    6

Section 3.3

   Indemnification by the Partnership Entities    7

Section 3.4

   Indemnification Procedures    7

Section 3.5

   Existence of CFSI LLC    9

Section 3.6

   Limitations on Transfers and Incurrence of Indebtedness of CFSI LLC    9

ARTICLE IV

MISCELLANEOUS

Section 4.1

   Choice of Law; Submission to Jurisdiction    12

Section 4.2

   Notice    12

Section 4.3

   Entire Agreement; Supersedure    13

Section 4.4

   Effect of Waiver or Consent    13

Section 4.5

   Amendment or Modification    13

Section 4.6

   Assignment    13

Section 4.7

   Counterparts    14

Section 4.8

   Severability    14

Section 4.9

   Construction    14

Section 4.10

   Further Assurances    14

Section 4.11

   No Rights of Limited Partners, Assignees, and Third Parties    14

 

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OMNIBUS AGREEMENT

 

THIS OMNIBUS AGREEMENT (this “Agreement”) is entered into on, and effective as
of, the Closing Date (as defined herein) by and among McCown De Leeuw & Co. IV,
L.P., a California limited partnership (“MDC Fund IV”), McCown De Leeuw IV
Associates, L.P., a California limited partnership (“MDC Fund IV Associates”),
MDC Management Company IV, LLC, a California limited liability company, for
itself and in its capacity as general partner of MDC Fund IV and MDC Fund IV
Associates, Delta Fund LLC, a California limited liability company,
(collectively, the “MDC Group”), Cornerstone Family Services LLC, a Delaware
limited liability company (“CFS LLC”), CFSI LLC, a Delaware limited liability
company (“CFSI LLC”), StoneMor Partners L.P., a Delaware limited partnership
(the “Partnership”), StoneMor GP LLC, a Delaware limited liability company (the
“General Partner”), for itself and on behalf of the Partnership in its capacity
as general partner of the Partnership, and StoneMor Operating LLC, a Delaware
limited liability company (the “Operating Company”).

 

PRELIMINARY STATEMENTS

 

1. The parties desire by their execution of this Agreement to evidence their
understanding, as more fully set forth in Article II, with respect to certain
noncompetition obligations on the part of the MDC Entities (as defined herein).

 

2. The parties desire by their execution of this Agreement to evidence their
understanding, as more fully set forth in Article III, with respect to certain
indemnification obligations of the parties to each other.

 

AGREEMENT

 

In consideration of the mutual promises contained herein, the benefits to be
derived by each party hereunder and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions. Capitalized terms used in this Agreement shall have the
respective meanings set forth below or elsewhere in this Agreement, as the case
may be:

 

“5% Shareholders” shall have the meaning ascribed to such term in Section
382(k)(7) of the Code, including the constructive ownership rules applicable
thereto and the Treasury Regulation thereunder.

 

“Actual Aggregate Income Tax Due” means the aggregate amount of federal, state
and local income Tax the Partnership Entities must pay in any taxable year.

 

“Affiliate” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“Agreement” means this Omnibus Agreement, as amended, modified or supplemented
from time to time in accordance with the terms hereof.

 

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“Assignee” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“CFSI LLC Agreement” shall mean the limited liability company agreement of CFSI
LLC, dated as of September 17, 2004, as such agreement is amended, modified or
supplemented from time to time.

 

“Closing Date” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Units” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“Conflicts Committee” shall have the meaning ascribed to such term in the
Partnership Agreement.

 

“Contribution Agreement” shall have the meaning ascribed to such term in the
Partnership Agreement.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.

 

“Conveyed Assets” means the Aggregate Cemetery LLC Interests, the Association
Notes, the NJ NQ Sub Stock, the CFSI LLC Partial OLP Interest and the CFSI LLC
Remaining OLP Interest, each of which shall have the meaning ascribed to such
term in the Contribution Agreement.

 

“CPA Mediator” means an internationally recognized firm of independent public
accountants selected jointly by the Conflicts Committee and the Indemnifying
Party and which is not then performing and has not in the past three years
performed services for or on behalf of either the Indemnified Party or the
Indemnifying Party.

 

“Discharge Date” shall have the meaning ascribed to such term in Section 3.6(a).

 

“Estimated Formation Taxes” means the estimated amount of income Taxes due and
owing, as shown on Exhibit A, by the Predecessor Entities as a result of the
Formation Transactions.

 

“Fair Market Value” shall have the meaning ascribed to such term in Section
3.6(c).

 

“Formation Taxes” means those income Taxes due and owing by the Predecessor
Entities as a result of the Formation Transactions.

 

“Formation Transactions” means those transactions contemplated by and described
in the Contribution Agreement, including those transactions described in the
recitals to the Contribution Agreement.

 

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“Governmental Authority” means (i) the United States of America, (ii) any state,
commonwealth, county, municipality or other governmental subdivision within the
United States of America, (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America, or of any state, commonwealth, county, municipality or other
governmental subdivision within the United States of America, and (iv) any
arbitration tribunal having jurisdiction over any member of the MDC Entities or
any of the Partnership Entities.

 

“IRS” means the Internal Revenue Service.

 

“Knowledge” means the actual knowledge after due inquiry of the members of the
board of managers of CFSI LLC and the executive officers of CFSI LLC.

 

“Known Threshold Amount “ shall have the meaning ascribed to such term in
Section 3.6(d).

 

“Limited Partner” shall have the meaning ascribed to such term in the
Partnership Agreement.

 

“Losses” means any losses, damages, liabilities, assessments, claims, demands,
causes of action, judgments, settlements, fines, penalties, costs, and expenses
(including, without limitation, court costs and reasonable attorney’s fees and
expert’s fees) of any and every kind or character.

 

“MDC Entities” means each member of the MDC Group, CFS LLC, CFSI LLC and their
respective direct and indirect Subsidiaries, other than the Partnership
Entities.

 

“MDC Entity” means any of the MDC Entities.

 

“NOL Carryover Period” means the NOL carryover period allowed under Section 172
of the Code.

 

“NOL Carryovers” means the amount of federal and state NOL carryovers shown on
Exhibit B, as adjusted pursuant to this definition. Such amounts are to be
available as of the Closing Date for use by the Partnership Entities as a
reduction of taxable income in future taxable periods of the Partnership
Entities. The amounts shown on Exhibit B reflect (i) the amounts of federal and
state NOL carryovers of the Predecessor Entities as of December 31, 2003, plus
(ii) the amount of federal and state NOL carryovers that are to result from the
Formation Transactions. The amounts referred to in clause (i) and shown on
Exhibit B shall be adjusted for any increase or decrease in federal and state
NOL carryovers resulting from the operations (not including the Formation
Transactions) of the Predecessor Entities for the period beginning January 1,
2004 and ending on the Closing Date, as finally determined and reported on the
federal and state income tax returns of the Predecessor Entities.

 

“NOL Limitation Event” means an entry of a final, nonappealable judgment or
decree by a court or the execution of a final and binding settlement agreement
with any Governmental Authority that has the effect of reducing or eliminating
any of the NOL Carryovers.

 

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“NOL” means net operating loss as defined in Section 172 of the Code.

 

“Notional Aggregate Income Tax Due” means the Actual Aggregate Income Tax Due if
no NOL Limitation Event were to have occurred.

 

“Other Known Interests” shall have the meaning ascribed to such term in Section
3.6(d).

 

“Over-Allotment Option” shall have the meaning ascribed to such term in the
Partnership Agreement.

 

“Partnership Agreement” means the First Amended and Restated Agreement of
Partnership of the Partnership, dated as of the Closing Date, as such agreement
is amended, modified or supplemented from time to time.

 

“Partnership Entities” means the General Partner and each member of the
Partnership Group.

 

“Partnership Entity” means any of the Partnership Entities.

 

“Partnership Group” means the Partnership and any of its Subsidiaries.

 

“Person” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“Predecessor Entities” means CFSI LLC and its predecessors and any controlled
Affiliate of the foregoing.

 

“Restricted Business” shall have the meaning ascribed to such term in Section
2.1.

 

“Restricted Period” shall have the meaning ascribed to such term in Section
3.6(d).

 

“Section 382 Ownership Change” shall have the meaning ascribed to such term in
Section 3.6(d).

 

“Subordinated Units” shall have the meaning ascribed to such term in the
Partnership Agreement.

 

“Subsidiary” shall have the meaning ascribed to such term in the Partnership
Agreement.

 

“Tax” or “Taxes” means any taxes, assessments, fees and other governmental
charges imposed by any Governmental Authority, including without limitation
income, profits, gross receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), environmental, stamp, leasing, lease, user, excise,
duty, franchise, capital stock, transfer, registration, license, withholding,
social security (or similar), unemployment, disability, payroll, employment,
fuel, excess profits, occupational, premium, windfall profit, severance,
estimated, or other charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

 

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“Tax Returns” means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Testing Period” shall have the meaning ascribed to such term in Section 382(i)
of the Code.

 

“Transfer” shall have the meaning ascribed to such term in Section 3.6(a).

 

“Treasury Regulations” means the regulations of the U.S. Department of Treasury
promulgated pursuant to the Code.

 

“Units” shall mean the Common Units and Subordinated Units.

 

ARTICLE II

NONCOMPETITION

 

Section 2.1 Restricted Businesses. For as long as the general partner of the
Partnership is an Affiliate of the MDC Entities (it being acknowledged and
agreed that the General Partner is an Affiliate of the MDC Entities as of the
date hereof), each of the MDC Entities shall be prohibited from engaging
(whether directly or through the acquisition of or investment in equity or debt
interests in any Person) in any business having assets engaged in the following
businesses (each a “Restricted Business”): owning or operating cemeteries or
funeral homes, or selling cemetery or funeral home products or services, in any
state or territory of the United States (other than the ownership or operation
of assets solely on behalf of a member of the Partnership Group).

 

Section 2.2 Scope of Restricted Business Prohibition. Except as provided in
Section 2.1, each MDC Entity shall be free to engage (whether directly or
through the acquisition of or investment in equity or debt interests in any
Person) in any business activity whatsoever, including those that may be in
direct competition with any of the Partnership Entities.

 

Section 2.3 Enforcement. Each MDC Entity acknowledges and agrees that the
Partnership Entities do not have an adequate remedy at law for the breach by any
MDC Entity of the covenants or agreements set forth in this Article II, and that
any breach by any MDC Entity of the covenants or agreements set forth in this
Article II would result in irreparable injury to the Partnership Entities. Each
MDC Entity further acknowledges and agrees that any Partnership Entity may, in
addition to the other remedies that may be available to the Partnership
Entities, file a suit in equity to enjoin any MDC Entity from such breach, and
each MDC Entity consents to the issuance of injunctive relief under this
Agreement.

 

ARTICLE III

INDEMNIFICATION

 

Section 3.1 Indemnification by CFSI LLC for Successor and Other Liability.
Subject to the other provisions of this Article III, CFSI LLC shall indemnify,
defend and hold harmless the Partnership Entities from and against any Losses
suffered or incurred by reason of or arising out of or otherwise relating to
liability for (a) all federal, state and local income Tax liabilities

 

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attributable to the operation of the Conveyed Assets prior to the Closing Date
and (b) Formation Taxes, including, without limitation, liability for Taxes
under U.S. Treasury Regulation Section 1.1502-6 (or any similar provision of
state or local law) as a transferee or successor, by contract or otherwise, in
excess of the Estimated Formation Taxes. The indemnification obligation under
this Section 3.1 shall continue until the later of (i) the expiration of all
applicable statutes of limitation (including any extensions thereof) relating to
the filing by the Predecessor Entities of all Tax Returns relating to the
Formation Transactions and (ii) the ultimate resolution of all indemnification
claims pursuant to this Section 3.1 that were timely made pursuant to Section
3.4(g), including the full discharge by CFSI LLC of all indemnification
obligations arising from such claims.

 

Section 3.2 Indemnification by CFSI LLC for an NOL Limitation Event.

 

(a) Upon the occurrence of an NOL Limitation Event, CFSI LLC or its successor
shall indemnify, defend and hold harmless the Partnership Entities for any
increases in federal, state and local income Tax liabilities of the Partnership
Entities attributable to the reduction or elimination of NOL Carryovers
otherwise available to the Partnership Entities on the Closing Date. The
indemnification obligations under this Section 3.2 shall continue until the
later of (i) the expiration of all applicable statutes of limitations (including
any extensions thereof) relating to the filing by the Predecessor Entities of
all Tax Returns relating to the Formation Transactions, (ii) the ultimate
resolution of all inquiries from or instigations of proceedings by Governmental
Authorities for which notice was required to be given by the Indemnifying Party
pursuant to Section 3.4(c), including the full discharge by CFSI LLC of all
indemnification obligations arising from inquiries or proceedings and (iii) the
ultimate resolution of all indemnification claims pursuant to this Section 3.2
that were timely made pursuant to Section 3.4(c), including the full discharge
by CFSI LLC of all indemnification obligations arising from such claims.

 

(b) The indemnification obligations under this Section 3.2 shall be an amount
equal to:

 

(i) The excess, if any, of (A) the Actual Aggregate Income Tax Due of the
Partnership Entities over (B) the Notional Aggregate Income Tax Due of the
Partnership Entities. The indemnification obligations under this Section
3.2(b)(i) shall be calculated, measured and applied for each taxable year of the
Partnership Entities, including taxable years prior to, during and after the
taxable year in which the NOL Limitation Event occurs, until the expiration of
the NOL Carryover Period (measured from the earliest period affected by the NOL
Limitation Event); or

 

(ii) At the option of CFSI LLC, CFSI LLC may make payments in satisfaction of
its indemnification obligations under this Section 3.2 with respect to increases
in federal income Tax liabilities, as well as state and local income Tax
liabilities, which payments with respect to state and local income Tax
liabilities may be made in satisfaction of indemnification obligations under
this Section 3.2 at different times as those made in satisfaction of any federal
income Tax liabilities, equal to amounts determined by, and in the sole
discretion of, the Conflicts Committee of the Partnership. Such payments may be
satisfied in multiple

 

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installments to the extent, and on a schedule, permitted by the Conflicts
Committee of the Partnership.

 

Section 3.3 Indemnification by the Partnership Entities. The Partnership
Entities shall, jointly and severally, indemnify, defend and hold harmless the
MDC Entities from and against all Losses suffered or incurred by the MDC
Entities arising out of or relating to the Conveyed Assets, whether before, on
or after the Closing Date, except with respect to matters for which the
Partnership Entities are entitled to indemnification under Section 3.1 and
Section 3.2 (without regard to any limitations as to time).

 

Section 3.4 Indemnification Procedures.

 

(a) As used in this Section 3.4, the term “Indemnifying Party” refers to CFSI
LLC, in the case of any indemnification obligation arising under Section 3.1 or
Section 3.2, and to the Partnership Entities, in the case of any indemnification
obligation arising under Section 3.3, and the term “Indemnified Party” refers to
the Partnership Entities, in the case of any indemnification obligation arising
under Section 3.1 or Section 3.2, and to the MDC Entities, in the case of any
indemnification obligation arising under Section 3.3.

 

(b) The Indemnified Party agrees that promptly after it becomes aware of facts
giving rise to a claim for indemnification under Section 3.1 or Section 3.3, it
will provide notice thereof in writing to the Indemnifying Party, specifying the
nature of and specific basis for such claim.

 

(c) Under Section 3.2, the Indemnifying Party shall promptly notify the
Indemnified Party upon the occurrence of any inquiry from or instigation of
proceedings by a Governmental Authority that could reasonably be expected to
lead to or result in an NOL Limitation Event, and that occurs prior to the
expiration of the applicable statutes of limitations (including any extension
thereof) relating to the filing by the Predecessor Entities of all Tax Returns
relating to the Formation Transactions. Thereafter, the Indemnifying Party
agrees to keep the Indemnified Party informed as to the status of such inquiry
or proceeding. Upon the occurrence of an NOL Limitation Event, the Indemnifying
Party shall promptly provide notice thereof in writing to the Indemnified Party.
The Indemnifying Party shall have (30) thirty days from the date of the
occurrence of an NOL Limitation Event to deliver to the Indemnified Party and
the Conflicts Committee of the Partnership its preliminary written notice to
elect to make payment pursuant to Section 3.2(b)(ii) in satisfaction of its
indemnification obligation under Section 3.2. The Conflicts Committee of the
Partnership shall then have (90) ninety days to deliver to the Indemnifying
Party its written notice of the amount to be indemnified against under Section
3.2(b)(ii) with respect to such taxable periods. The Indemnifying Party shall
then have (20) twenty days to deliver to the Indemnified Party its final written
notice to elect to make payment pursuant to Section 3.2(b)(ii) in the amount
determined by the Conflicts Committee of the Partnership and the Indemnifying
Party shall promptly pay the Indemnified Party the amount to be indemnified
against under Section 3.2(b)(ii) in accordance with the schedule permitted by
the Conflicts Committee. If the Indemnifying Party does not elect to make
payment pursuant to Section 3.2(b)(ii) and to the extent the indemnification
obligation under Section 3.2 relates to taxable periods prior to the taxable
period in which the NOL Limitation Event occurs, the Indemnified Party shall
then have (90) ninety days to deliver to the Indemnifying Party its good

 

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faith written notice of the amount to be indemnified against under Section
3.2(b)(i) with respect to such prior taxable period. To the extent the
indemnification obligation under Section 3.2 relates to taxable periods during
or after the taxable period in which the NOL Limitation Event occurs, the
Indemnified Party shall then have (120) one hundred twenty days after the end of
each such taxable year to deliver to the Indemnifying Party its good faith
written notice of the amount to be indemnified against under Section 3.2(b)(i)
with respect to such taxable periods. Receipt of any such notices setting out
the amounts to be indemnified against by the Indemnifying Party under Section
3.2(b)(i) shall be conclusive against the Indemnifying Party in all respects
(20) twenty days after receipt by the Indemnifying Party of such notices and the
Indemnifying Party shall promptly pay the Indemnified Party the amount to be
indemnified against under Section 3.2(b)(i), unless within such period the
Indemnifying Party sends the Indemnified Party a notice disputing the amount of
such claim. Such notice of dispute shall describe the basis for such objection
and the amount of the claim as to which the Indemnifying Party does not believe
should be subject to indemnification. Upon receipt of any such notice of
objection, both the Indemnified Party and the Indemnifying Party shall use all
reasonable efforts to cooperate and arrive at a mutually acceptable resolution
of such dispute with the next (30) thirty days. If a mutually acceptable
resolution cannot be reached between the Indemnified Party and the Indemnifying
Party within such 30-day period, the matter shall be referred to the CPA
Mediator. Within (30) thirty days after the date of such referral, the CPA
Mediator shall render its decision with respect to the differences, and such
decision shall be final and binding on the Indemnified Party and the
Indemnifying Party.

 

(d) The Indemnifying Party shall have the right to control, at its sole cost and
expense, all aspects of the defense of (and any counterclaims with respect to)
any claims brought against the Indemnified Party that are covered by the
indemnification provisions under this Article III, including, without
limitation, the selection of counsel, determination of whether to appeal any
decision of any Governmental Authority and the settling of any such matter or
any issues relating thereto; provided, however, that no such settlement shall be
entered into without the consent of the Indemnified Party (which consent shall
not be unreasonably withheld) unless it includes a full release of the
Indemnified Party from such matter or issues, as the case may be.

 

(e) The Indemnified Party agrees to cooperate fully with the Indemnifying Party
with respect to all aspects of the defense of any claims covered by the
indemnification provisions under this Article III, including, without
limitation, the prompt furnishing to the Indemnifying Party of any
correspondence or other notice relating thereto that the Indemnified Party may
receive, permitting the name of the Indemnified Party to be utilized in
connection with such defense, the making available to the Indemnifying Party of
any files, records or other information of the Indemnified Party that the
Indemnifying Party considers relevant to such defense and the making available
to the Indemnifying Party of any employees of the Indemnified Party; provided,
however, that in connection therewith the Indemnifying Party agrees to use
reasonable efforts to minimize the impact thereof on the operations of the
Indemnified Party and further agrees to maintain the confidentiality of all
files, records and other information furnished by the Indemnified Party pursuant
to this Section 3.4. In no event shall the obligation of the Indemnified Party
to cooperate with the Indemnifying Party as set forth in the immediately
preceding sentence be construed as imposing upon the Indemnified Party an
obligation to hire and pay for counsel in connection with the defense of any
claims covered by the indemnification set forth in this Article III; provided,
however, that the Indemnified Party may, at its own option,

 

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cost and expense, hire and pay for counsel in connection with any such defense.
The Indemnifying Party agrees to keep any such counsel hired by the Indemnified
Party informed as to the status of any such defense, but the Indemnifying Party
shall have the right to retain sole control over such defense.

 

(f) In determining the amount of any loss, cost, damage or expense for which the
Indemnified Party is entitled to indemnification under this Agreement, (i) the
gross amount of the indemnification will be reduced by (A) any insurance
proceeds realized by the Indemnified Party, and such correlative insurance
benefit shall be net of any incremental insurance premium that becomes due and
payable by the Indemnified Party as a result of such claim and (B) all amounts
recovered by the Indemnified Party under contractual indemnities from third
Persons and (ii) the extent of the Losses suffered by the Indemnified Party with
respect to claims under Section 3.1 shall be established by the entry of a final
nonappealable judgment or decree by a court or the execution of a final and
binding settlement agreement with any Governmental Authority having jurisdiction
thereof.

 

(g) The date on which written notification of a claim for indemnification is
received by the Indemnifying Party shall determine whether such claim is timely
made within the limitations specified in Section 3.1. No claim for
indemnification pursuant to Section 3.1 shall be brought or made unless, prior
to thirty (30) days after the expiration of all applicable statutes of
limitation (including any extensions thereof) relating to the filing by the
Predecessor Entities of all Tax Returns relating to the Formation Transactions,
the Indemnified Party shall have delivered to the Indemnifying Party a good
faith written notice to the effect that the Indemnified Party has incurred
Losses entitled to be indemnified against under Section 3.1, which notice
specifies in reasonable detail the amount of such Losses and the nature and
specific basis of such claim.

 

(h) Any action, notice, consent, approval or waiver that is required to be taken
or given or may be taken or given by a Partnership Entity pursuant to this
Article III shall be taken or given by the Conflicts Committee of the
Partnership.

 

Section 3.5 Existence of CFSI LLC. CFSI LLC shall remain in existence until the
later of (i) the expiration of all applicable statutes of limitations (including
extension) relating to the filing by the Predecessor Entities of all Tax Returns
relating to the Formation Transactions or (ii) the ultimate resolution of all
indemnification claims pursuant to Section 3.1 and Section 3.2 that were timely
made pursuant to Section 3.4(g) and Section 3.4(c), respectively, including the
full discharge by CFSI LLC of all indemnification obligations arising from such
claims.

 

Section 3.6 Limitations on Transfers and Incurrence of Indebtedness of CFSI LLC.

 

(a) Until all of its obligations under this Agreement have been discharged in
full (the “Discharge Date”), CFSI LLC shall not be permitted to (i) sell,
transfer, assign, gift, exchange, pledge, hypothecate, mortgage, encumber or
dispose of, by law or otherwise (each, a “Transfer”), any interest in the
General Partner or the Partnership (other than a Transfer of Common Units and
Subordinated Units to the Partnership upon the redemption of such Common Units
and Subordinated Units by the Partnership upon the exercise of the
Over-Allotment Option), except as otherwise provided in this Section 3.6, or
(ii) contract, create, incur, assume or

 

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suffer to exist any indebtedness or other liability of CFSI LLC, or (iii)
guarantee any obligation of any other Person. Any Transfer or purported Transfer
by CFSI LLC of any interest in the General Partner or the Partnership not made
in accordance with this Section 3.6 shall be null and void.

 

(b) CFSI LLC shall not Transfer any Subordinated Units held by it until the
expiration of three years and thirty-six days after the date of this Agreement
(the “Restricted Period”), except as provided in Section 3.6(a)(i) or Section
3.6(e).

 

(c) Subject to Section 3.6(b) and Section 3.6(d), at any time and from time to
time prior to the Discharge Date, CFSI LLC shall be permitted to Transfer any or
all of its interest in the General Partner or the Partnership so long as
immediately after giving effect to such Transfer CFSI LLC holds assets
(including equity interests) having an aggregate Fair Market Value (as defined
below) of at least $35.0 million. The determination of such aggregate Fair
Market Value shall be made at the time of the proposed Transfer, giving pro
forma effect to the proposed Transfer (but excluding the Fair Market Value of
any consideration to be received by CFSI LLC for the interests proposed to be
Transferred), and otherwise in accordance with the foregoing provisions:

 

(i) the Fair Market Value of a Common Unit at any date shall mean, in the event
the Common Units are traded in the over-the-counter market or on a national or
regional securities exchange, the closing price per Common Unit on the trading
day immediately preceding the date of the proposed Transfer. The closing price
for such trading day shall be the last reported sale price regular way or, in
case no such reported sale takes place on such day, the average of the last
closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Units are listed or admitted to
trading, or if not listed or admitted to trading on any national securities
exchange, the closing sale price for such trading day reported by NASDAQ, if the
Common Units are traded over-the-counter and quoted in the National Market
System, or if the Common Units are so traded, but not so quoted, the average of
the closing reported bid and asked prices of the Common Units as reported by
NASDAQ or any comparable system, or, if the Common Units are not listed on
NASDAQ or any comparable system, the average of the closing bid and asked prices
as furnished by two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Conflicts Committee of the Partnership
for that purpose in its sole discretion. If the Common Units are not publicly
traded or not traded in such manner that the quotations referred to above are
available for the date specified hereunder, the Fair Market Value of a Common
Unit shall be deemed to be the fair market value per Common Unit as determined
by the Conflicts Committee of the Partnership in its sole discretion;

 

(ii) the Fair Market Value of a Subordinated Unit at any date shall be equal to
75% of the Fair Market Value of a Common Unit at such date (determined in
accordance with clause (i) above);

 

(iii) the Fair Market Value of any Class A membership interest in the General
Partner at any date shall be equal to the product of (A) a fraction, the
numerator of which is the number of Class A units of the General Partner held by
CFSI LLC as of such date and the denominator of which is the total number of
outstanding Class A units in the General

 

10

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Partner held by all Class A members of the General Partner as of such date, (B)
50% of the implied number of Common Units representing the General Partner’s
general partner interest in the Partnership as of such date and (C) the Fair
Market Value of a Common Unit as of such date (determined in accordance with
clause (i) above); provided, however, that CFSI LLC may instead request that the
Fair Market Value of its Class A membership interest in the General Partner be
determined by an independent third party valuation expert, which expert shall be
selected by the Conflicts Committee of the Partnership in its sole discretion,
whose fees and expenses shall be borne solely by CFSI LLC and whose
determination shall be final and conclusive;

 

(iv) the Fair Market Value of any other assets or property shall be determined
by the Conflicts Committee of the Partnership in its sole discretion; and

 

(v) any cash distributions made by the Partnership to CFSI LLC in respect of any
Common Units or Subordinated Units held by CFSI LLC or by the General Partner to
CSFI LLC in respect of any membership interests in the General Partner held by
CSFI LLC (in any such case, whether or not such distributions have been
distributed by CFSI LLC to its members) shall be excluded from the determination
of such aggregate Fair Market Value.

 

(d) Following the Restricted Period and subject to Section 3.6(c), CFSI LLC
shall be permitted to Transfer (in one or a series of transactions) up to 49% of
the total outstanding interests in the Partnership (which 49% shall be based on
value and shall include any interest in the Partnership held directly by CFSI
LLC or indirectly by CFSI LLC through its ownership interest in the General
Partner or otherwise) in any Testing Period. The amount of total outstanding
interests in the Partnership that CFSI LLC is permitted to Transfer pursuant to
this Section 3.6(d) may be increased if CFSI LLC obtains either (i) an opinion
of counsel that the proposed Transfer “will” not result in a Section 382
Ownership Change (as hereinafter defined), which counsel and opinion shall be
acceptable to the Conflicts Committee of the Partnership in its sole discretion,
or (ii) a ruling from the IRS that the proposed Transfer will not result in a
Section 382 Ownership Change, in either of which cases the amount of total
outstanding interests in the Partnership that CFSI LLC is permitted to Transfer
pursuant to this Section 3.6(d) shall be increased to the extent permitted by
the opinion of counsel or IRS ruling, as the case may be. A “Section 382
Ownership Change” shall occur if, immediately after an “owner shift” (as defined
in Section 382(g) of the Code) involving a 5% Shareholder or an “equity
structure shift” (as defined in Section 382(g) of the Code), the percentage of
stock of any Subsidiary of the Partnership deemed under Section 382 of the Code
to be owned by one or more 5% Shareholders has increased by more than 50
percentage points over the lowest percentage of stock deemed owned by such 5%
Shareholders at any time during a Testing Period. The amount of total
outstanding interests in the Partnership that CFSI LLC is permitted to Transfer
pursuant to this Section 3.6(d) shall be decreased if (x) CFSI LLC has Knowledge
that a Transfer of an amount of outstanding interests in the Partnership that is
equal to or less than 49% of the total outstanding interests in the Partnership
(the “Known Threshold Amount”) will result in a Section 382 Ownership Change, in
which case the amount of total outstanding interests in the Partnership that
CFSI LLC is permitted to Transfer pursuant to this Section 3.6(d) shall be any
amount of outstanding interests in the Partnership that is less than the Known
Threshold Amount, or (y) CFSI LLC has Knowledge of the existence of one or more
owners (either directly or through application of the constructive ownership
rules of Section 382 of the Code) of 5% or

 

11

--------------------------------------------------------------------------------

more of the total outstanding interests in the Partnership (the “Other Known
Interests”), which Other Known Interests, when aggregated with the total
outstanding interests in the Partnership held by CFSI LLC, exceeds 49% of the
total outstanding interests in the Partnership, in which case the amount of
total outstanding interests in the Partnership that CFSI LLC is permitted to
Transfer pursuant to this Section 3.6(d) shall be reduced by the amount of such
Other Known Interests. For purposes of clause (y), CFSI LLC shall be deemed to
have Knowledge of all information filed with the Securities and Exchange
Commission pursuant to Section 13(d), Section 13(f) and Section 13(g) of the
Securities Exchange Act of 1934, as amended, and the regulations promulgated
thereunder, including without limitation any information filed on Schedule 13D,
Schedule 13F or Schedule 13G.

 

(e) Notwithstanding the provisions of Section 3.6(b) and Section 3.6(d) but
subject to Section 3.6(c), if at any time after the date hereof the remaining
balance of federal NOL Carryovers are less than $1.0 million in the aggregate,
CFSI LLC shall be permitted to Transfer any or all of its interests in the
Partnership without limitation.

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1 Choice of Law; Submission to Jurisdiction. This Agreement shall be
subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state. Each party hereby
submits to the jurisdiction of the state and federal courts in the State of
Pennsylvania and to venue in Philadelphia, Pennsylvania.

 

Section 4.2 Notice. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day after receipt if not received
during the recipient’s normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below, or at such other address as such party may stipulate to the other parties
in the manner provided in this Section 4.2:

 

If to any MDC Entity, to:

 

c/o 525 Middlefield Road

Suite 210

Menlo Park, CA 94025

Facsimile: (650) 854-0853

Attention: Robert B. Hellman, Jr.

 

12

--------------------------------------------------------------------------------

and, if such MDC Entity is CFSI LLC, to:

 

c/o 155 Rittenhouse

Bristol, PA 19007

Facsimile: (215) 826-2851

Attention: Chief Executive Officer

 

If to any Partnership Entity, to:

 

c/o StoneMor Partners L.P.

155 Rittenhouse Circle

Bristol, Pennsylvania 19007

Facsimile: (215) 826-2851

Attention: Chief Executive Officer

 

with a copy (which shall not constitute notice) to:

 

Blank Rome LLP

One Logan Square

Philadelphia, Pennsylvania 19103

Facsimile: (215) 569-5555

Attention: Frederick D. Lipman

 

Section 4.3 Entire Agreement; Supersedure. This Agreement constitutes the entire
agreement of the parties relating to the matters contained herein, superseding
all prior contracts or agreements, whether oral or written, relating to the
matters contained herein.

 

Section 4.4 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a party to complain of any act of any Person
or to declare any Person in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder
until the applicable statute of limitations period has run.

 

Section 4.5 Amendment or Modification. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto;
provided, however, that the Partnership may not, without the prior approval of
the Conflicts Committee, agree to any amendment or modification of this
Agreement that the General Partner determines will adversely affect the holders
of Common Units. Each such instrument shall be reduced to writing and shall be
designated on its face an “Amendment” or an “Addendum” to this Agreement.

 

Section 4.6 Assignment. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto. Any assignment in contravention of this Section shall be null and void
and of no force and effect.

 

13

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Section 4.7 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.

 

Section 4.8 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.

 

Section 4.9 Construction. All references to Article numbers and Section numbers
refer to Articles and Sections of this Agreement, unless the context otherwise
requires.

 

Section 4.10 Further Assurances. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

 

Section 4.11 No Rights of Limited Partners, Assignees, and Third Parties. The
provisions of this Agreement are enforceable solely by the parties to this
Agreement, and no Limited Partner, Assignee or other Person shall have the
right, separate and apart from the parties hereto, to enforce any provision of
this Agreement or to compel any party to this Agreement to comply with the terms
of this Agreement.

 

[Signature Pages Follow]

 

14

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IN WITNESS WHEREOF, the parties have executed this Agreement on, and effective
as of, the Closing Date.

 

McCOWN DE LEEUW & CO. IV, L.P. By: MDC Management Company IV, LLC, its general
partner

By:

 

/s/    Robert B. Hellman, Jr.

   

Name:

 

Robert B. Hellman, Jr.

   

Title:

 

CEO and Managing Director

McCOWN DE LEEUW & CO. IV ASSOCIATES, L.P. By: MDC Management Company IV, LLC,
its general partner

By:

 

/s/    Robert B. Hellman, Jr.

   

Name:

 

Robert B. Hellman, Jr.

   

Title:

 

CEO and Managing Director

MDC MANAGEMENT COMPANY IV, LLC

By:

 

/s/    Robert B. Hellman, Jr.

   

Name:

 

Robert B. Hellman, Jr.

   

Title:

 

CEO and Managing Director

DELTA FUND LLC

By:

 

/s/    Robert B. Hellman, Jr.

   

Name:

 

Robert B. Hellman, Jr.

   

Title:

 

CEO and Managing Director

 

Signature Page to Omnibus Agreement

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed this Agreement on, and effective
as of, the Closing Date.

 

CFSI LLC

By:

  /S/    LAWRENCE MILLER    

Name:

 

Lawrence Miller

   

Title:

 

President and CEO

STONEMOR GP LLC

By:

  /S/    LAWRENCE MILLER    

Name:

 

Lawrence Miller

   

Title:

 

President and CEO

STONEMOR PARTNERS L.P. By: STONEMOR GP LLC, its general partner

By:

  /S/    LAWRENCE MILLER    

Name:

 

Lawrence Miller

   

Title:

 

President and CEO

STONEMOR OPERATING LLC

By:

  /S/    LAWRENCE MILLER    

Name:

 

Lawrence Miller

   

Title:

 

President and CEO

 

Signature Page to Omnibus Agreement

 

--------------------------------------------------------------------------------

 

Exhibit A

 

Estimated Formation Taxes

   $600,000

 

A-1

--------------------------------------------------------------------------------

 

Exhibit B

 

Federal         

NOL Carryovers from the Operations of the Predecessor Entities

   $ 24,697,692  

Estimated NOL Carryovers from Formation Transactions

   $ 11,167,761       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 35,865,453   State         

Alabama NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 694,179  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 694,179  

Connecticut NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 662,503  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 662,503  

Delaware NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 589,957  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 589,957  

Georgia NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 0  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 0  

Maryland NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 7,503,304  

Estimated NOL Carryover from Formation Transactions

   $ (3,502,841 )     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 4,000,463  

New Jersey NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 753,021  

Estimated NOL Carryover from Formation Transactions

   $ (32,934 )     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 720,087  

 

B-1

--------------------------------------------------------------------------------

New York NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 1,432  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 1,432  

Ohio NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 532,008  

Estimated NOL Carryover from Formation Transactions

   $ (339,601 )     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 192,407  

Pennsylvania NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 28,696,720  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 28,696,720  

Rhode Island NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 847,308  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 847,308  

Tennessee NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 0  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 0  

Virginia NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 0  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 0  

West Virginia NOL Carryovers

        

NOL Carryovers from the Operations of the Predecessor Entities

   $ 12,915,144  

Estimated NOL Carryover from Formation Transactions

   $ 0       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total NOL Carryovers

   $ 12,915,144  

 

B-2