Exhibit 10.3

ASSET PURCHASE AND SALE AGREEMENT

This ASSET PURCHASE AND SALE AGREEMENT (“Agreement”) dated this 28th day of
September, 2006, is made by and among STONEMOR OPERATING LLC, a Delaware limited
liability company (“StoneMor LLC”), joined herein by STONEMOR MICHIGAN LLC, a
Michigan limited liability company (“Buyer LLC”) and STONEMOR MICHIGAN
SUBSIDIARY LLC, a Michigan limited liability company (“Buyer NQ Sub” and
individually and collectively with StoneMor LLC and Buyer LLC, “Buyer”), and SCI
FUNERAL SERVICES, INC., an Iowa corporation (“Parent”), SCI MICHIGAN FUNERAL
SERVICES, INC., a Michigan corporation (“SCI Michigan”, and together with
Parent, “SCI”), and HILLCREST MEMORIAL COMPANY, a Delaware corporation
(“Seller”).

W I T N E S S E T H:

WHEREAS, Seller owns and operates the cemetery businesses which are listed on
Exhibit A attached hereto (such locations listed on Exhibit A referred to herein
as the “Locations,” and the businesses conducted at the Locations referred to
individually and collectively as the “Business”);

WHEREAS, SCI Michigan provides certain sales, accounting and other
administrative services for the Business conducted at the Locations pursuant to
a Marketing and Accounting Services Agreement with the Seller, dated July 30,
1993, as amended from time to time (the “Management Agreement”); and

WHEREAS, the parties desire to provide for the purchase, sale and transfer of
the Business, including certain of the personal property located at, used in
connection with, or arising out of, such

ASSET PURCHASE AND SALE AGREEMENT

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Business, together with the real estate utilized in the Business, in exchange
for cash and other consideration, upon the terms and subject to the conditions
herein set forth; and

WHEREAS, this Agreement sets forth the terms and conditions to which the parties
have agreed;

WHEREAS, simultaneously herewith Buyer and Hawes, Inc. are entering into a
transaction to purchase a cemetery business in Michigan (the “Hawes
Transaction”), and affiliates of Buyer and Parent are entering into a
transaction to purchase the funeral, cremation and cemetery businesses in other
jurisdictions (the “Dignity II and III Transactions”);

NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties herein contained, the parties,
intending to be legally bound hereby, agree as follows:

ARTICLE I

Purchase and Sale

Section 1.1 Transfer of Acquired Assets. Subject to the terms and conditions of
this Agreement, and except as provided in Section 1.2, Seller and SCI do hereby
agree to (or, if applicable, cause their Affiliates to) sell, transfer, convey,
assign and deliver to Buyer, and Buyer does hereby agree to purchase and accept
from Seller and SCI (or their Affiliates, if applicable), free and clear of all
Liens and Liabilities (other than the Assumed Liabilities (as defined below)),
all right, title and interest to the following property and rights located at,
used in connection with, arising out of or relating to the Business
(collectively, the “Acquired Assets”):

(a) The real property described in Schedule 1.1(a) to this Agreement, together
with all buildings, structures, improvements, fixtures, easements, benefits and
rights and appurtenances benefiting, belonging or pertaining thereto, (the
“Owned Real Property”);

(b) All furniture, equipment, tools, supplies and other tangible personal
property owned or used by Seller or SCI exclusively or primarily in the
operation of the Business as of

 

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the date hereof or acquired between the date hereof and the Effective Time,
including, without limitation, those items listed on Schedule 1.1(b) to this
Agreement;

(c) All vehicles listed on Schedule 1.1(c) to this Agreement;

(d) All crypts, urns, vaults, monuments, grave spaces, mausoleum spaces, niches,
lawn crypts, supplies and other merchandise inventory of the Business
(“Inventory”), including, without limitation, the items stored for customers at
the cemeteries included in the Business, plus or minus any changes to such
Inventory which result from the ordinary course of operation of the Business,
consistent with past practices, subsequent to the date(s) of such listing(s) and
until the Effective Time (and specifically limited to the rights permitted by or
provided under applicable Laws with regard to merchandise designated as being
“stored” for customers under Pre-/At-Need Contracts (as defined below)), and all
Services in Progress (as hereinafter defined);

(e) All benefits, rights and entitlements of or relating to the Business under
and in all contracts, agreements, leases, licenses and commitments listed on
Schedule 1.1(e) to this Agreement (“Business Contracts”);

(f) All benefits, rights and entitlements under any leases for any real property
at the Location or otherwise exclusively or primarily related to the Business
(whether Seller is lessee or lessor thereunder) (“Real Property Leases”),
including, without limitation, those listed on Schedule 1.1(f) to this
Agreement, together with any security deposits held or paid on account of any of
the Real Property Leases (the real property leased by Seller or SCI as a lessee
or sublessee under the Real Property Leases being referred to herein as “Leased
Real Property” and, together with the Owned Real Property, the “Real Property”);

(g) All benefits, rights and entitlements under all of the Contracts,
engagements and commitments, written or oral, relating to the provision or sale
by the Business of at-need or preneed cemetery or cremation merchandise,
properties or services and all deposits, prepaid amounts, insurance policies and
trust funds relating to such Contracts, engagements and commitments, including,
without limitation, those items listed on Schedule 1.1(g) to this Agreement,
plus or minus any similar items entered into or obtained in the ordinary course
of the operation of the Business subsequent to the date(s) of the listing(s) on
Schedule 1.1(g) until the Effective Time (collectively, the “Pre-/At-Need
Contracts” and, together with the Business Contracts and the Real Property
Leases, the “Assumed Contracts”);

(h) All of the Permits of each of Seller and SCI necessary for the ownership,
operation, maintenance or presently planned expansion (by Seller or SCI) of the
Business, to the extent transferable;

(i) Intentionally omitted;

(j) All utility and other deposits previously paid to and/or held by third
parties in connection with the operation of the Business as of the Effective
Time;

(k) All accounts and notes receivable generated in or relating to the operation
of the Business (“Receivables”), including, without limitation, those listed on
Schedule 1.1(k) to

 

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this Agreement, plus or minus any changes in such receivables which result from
the ordinary course of the operation of the Business, consistent with past
practices, subsequent to the date(s) of the listing(s) on Schedule 1.1(k) until
the Effective Time, but specifically excluding pending trust claims specified in
Section 5.5(b)(ii) and pending insurance claims;

(l) All of the Seller’s and SCI’s rights and incidents of interest in and to
causes of action, suits, proceedings, judgments, claims and demands of any
nature, whenever maturing or asserted, relating to or arising directly or
indirectly out of any of the Acquired Assets or the Business, but specifically
excluding pending trust claims specified in Section 5.5(b)(ii) and pending
insurance claims; and

(m) All goodwill associated with the Business, together with all lists of
present or former customers of the Business, all business books, documents,
records, files, databases and reports relating to the Acquired Assets and
reasonably necessary for Buyer to continue the Business (collectively, “Seller
Records”) (whether or not the Seller Records are physically located at either of
the Locations), the telephone numbers and listings for the Business, and all
Intellectual Property owned and/or used by the Seller and/or SCI exclusively or
primarily in connection with the Business (“Business Intellectual Property”),
including, without limitation, all right, title and interest in and the right to
use the trademarks, service marks and trade names for the Location as listed on
Exhibit A hereto. All Seller Records not physically located at the Location
shall be copied and, at the election of Buyer, either delivered in person to a
representative of Buyer at the location where such Seller Records are held on
the Closing Date or shipped to Buyer by Seller and/or SCI at Buyer’s expense by
such delivery service selected by Buyer. All requests and other communications
from Buyer to Seller or SCI regarding Seller Records, either before or after the
Closing, shall be directed to Michael Lehmann, Service Corporation
International, 1929 Allen Parkway, Houston, Texas 77219, fax: (713) 525-7372.

Except as specifically provided in Section 1.2, it is intended that the assets,
properties and rights of the Business to be sold to Buyer pursuant to this
Agreement shall include all of the assets, properties and rights reflected in
the Schedules relating to the subsections of Section 1.1, other than those
assets, properties and rights that may have been disposed of in the ordinary
course of business prior to the Effective Time, but including all similar
assets, properties and rights of the Business that may have been acquired in the
ordinary course of business since the dates of the listings in the Schedules
relating to the subsections of Section 1.1 until the Effective Time.

Section 1.2 Excluded Assets. Neither Seller nor SCI shall transfer, convey or
assign to Buyer, and Buyer shall not purchase, the following assets
(collectively, the “Excluded Assets”): (a) non-preneed related cash and cash
equivalents, (b) computers, computer software and information

 

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and similar rights (provided, however, that none of the Seller Records shall be
deemed to be an Excluded Asset, whether or not contained or stored in or on the
hard drive of any computers or on any computer system or server, disk or any
other electronic media), (c) corporate records, minutes and records of
shareholders’ and directors’ meetings of Seller or SCI, (d) any pending trust
claims specified in Section 5.5(b)(ii) and any pending insurance claims,
(e) those items specifically identified in Schedule 1.1(b) as being subject to a
corporate lease or otherwise excluded from the sale of the Acquired Assets
hereunder; and (f) all other assets of Seller or SCI which are not used
exclusively or primarily in the ownership, operation or maintenance of the
Business and which are not necessary to the continued operation of the Business
in a manner consistent with the Seller’s and SCI’s past practices, including
training, promotional materials, procedure and policy manuals.

Section 1.3 Consideration for Acquired Assets Payable at the Closing. On the
terms and subject to the conditions of this Agreement, Buyer, in consideration
for the transfer and delivery to it of the Acquired Assets as herein provided,
will, in addition to the assumption of liabilities set forth in Section 1.5(a)
below, pay to Seller at the Closing (as defined below) the sum of Nine Hundred
Fourteen Thousand Dollars ($914,000) (the “Closing Purchase Price”) in cash
(“Cash Purchase Price”), to be delivered by bank wire transfer to such account
as Seller and SCI shall designate to Buyer in writing at least three business
days prior to the Closing Date.

Section 1.4 Intentionally Omitted.

Section 1.5 Liabilities.

(a) Assumed Liabilities. From and after the Effective Time, Buyer agrees to
assume and perform the liabilities and obligations of the Business (“Assumed
Liabilities”) under and pursuant to the terms and conditions of any Assumed
Contract, but only to the extent such obligations arise, accrue or first become
due after the Effective Time under the terms of the Assumed Contracts; provided,
however, that Buyer will not assume or be responsible for any such liabilities
or obligations which arise from any breach or default by Seller and/or SCI under
any Assumed Contract that occurs prior to the Effective Time or that arises out
of or relates to events or circumstances that occur or exist prior to the
Effective Time, all of which liabilities and obligations will constitute
Retained Liabilities (as defined

 

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herein). Notwithstanding anything to the contrary contained in this Agreement or
any document delivered in connection herewith, Buyer’s obligations in respect of
the Assumed Liabilities will not extend beyond the extent to which Seller and/or
SCI were obligated in respect thereof and will be subject to Buyer’s right to
contest in good faith the nature and extent of any liability or obligation (but
such right to contest shall not affect Buyer’s indemnification responsibilities
under Section 8.4(a)(iii)).

(b) Retained Liabilities. Except as provided in Section 1.5(a) hereof, each of
Seller and SCI will retain, and Buyer will not assume or be responsible or
liable with respect to, any Liabilities of the Business that precede the
Effective Time (except as specifically provided in subclause (vii) of this
Section 1.5(b)), whether or not arising out of or relating to the conduct of
Seller and/or SCI or associated with or arising from any of the Acquired Assets,
whether fixed or contingent or known or unknown (collectively, the “Retained
Liabilities”), including, without limitation, the following:

(i) Liabilities relating to any Excluded Asset;

(ii) Liabilities of Seller and/or SCI that constitute trade payables;

(iii) Liabilities of Seller and/or SCI arising under or relating to any Assumed
Contract to the extent such Liabilities relate to periods prior to the Effective
Time or arise from any breach or default by Seller and/or SCI (or any of their
Affiliates) under any Assumed Contract that occurs prior to the Effective Time
or that arises out of or relates to events or circumstances that occur or exist
prior to the Effective Time;

(iv) Liabilities of Seller and/or SCI arising under or relating to any Contract
other than an Assumed Contract;

(v) Liabilities with respect to (A) any Employee Plan maintained, sponsored,
contributed to or participated in by Seller and/or SCI or any of their
Affiliates for the benefit of or relating to any current or former employee of
the Business (“Seller Employee Plan”) and the amendment to or the termination of
any Seller Employee Plan, or (B) any person at any time employed by Seller or
SCI or any of their Affiliates (including, without limitation, any such person
who fails to accept an offer of employment by Buyer or any of its Affiliates),
and any such person’s spouse, children, other dependents or beneficiaries, with
respect to any such person’s employment or termination of employment by Seller
or SCI or any of their Affiliates including, without limitation, claims arising
under health, medical, dental, disability or other benefit plan for products,
supplies or services provided or rendered prior to the Effective Time;

(vi) Seller’s or SCI’s deferred sales commissions;

(vii) Liabilities of Seller or SCI, based in whole or in part on violations of
Law or environmental conditions occurring or existing prior to the Closing and
arising out of or relating to Environmental Requirements, except to the extent
that such Liabilities are identified in the Environmental Reports; provided that
the Seller and SCI shall each remain liable for the environmental Liabilities
identified on Exhibit B until Seller, SCI or Buyers at

 

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Seller or SCI’s expense have remediated, to the extent required by existing
governmental standards, such environmental Liabilities as noted on Exhibit B;

(viii) Except as otherwise specifically provided in this Agreement, all
Liabilities of Seller or SCI for any Tax for (A) operations of the Business
prior to the Effective Time; (B) the transfer of the Acquired Assets; and
(C) income earned by the Pre-Need Trust Funds and the Endowment Care Funds (as
each of these terms is defined in Section 5.4) prior to delivery thereof to
Buyer’s Trustee pursuant to Section 5.5 below to the extent such income (1) is
not taxable to the applicable trusts as independent taxpayer entities, and
(2) is withdrawn by or for any Seller or SCI or otherwise distributed to any
Seller or SCI (whether such withdrawal or distribution is made before or after
the Effective Time); and

(ix) Liabilities of Seller or SCI arising out of or relating to any Proceeding
to which Seller or SCI is a party on the date of this Agreement and relating to
the Business or any of the matters referenced on Schedule 1.5(b)(ix) except for
Liabilities for actions/business changes at the Business that may be required
after Closing pursuant to or arising from the Michigan monument builder’s class
action claim which is identified on Schedule 1.5(b)(ix); and

(x) Liabilities arising out of the management of Seller or SCI’s Business by
SCI; and

(xi) Liabilities relating to any claims arising in connection with monument
sales by the Seller or SCI prior to the Closing.

Section 1.6 Post-Closing Adjustments to Purchase Price.

(a) Audit Report. Seller, SCI and Buyer acknowledge that Harper & Pearson
Company, P.C. (the “Independent Auditor”) is currently performing a financial
audit and review of the Business and that the report of the Independent Auditor
with respect to such audit and review (the “Audit Report”) is expected to be
delivered to Buyer within 30 days after the Closing Date. For purposes of this
Agreement, the term “Base Gross AR Amount” means the aggregate amount of the
gross accounts receivable of the Business as of the Closing Date (excluding any
trust claims specified in Section 5.5(b)(ii) and any pending insurance claims),
as reflected in the Audit Report (without regard to any allowance for doubtful
accounts or other reserve in respect of accounts receivable of the Business),
and the term “Base Net Merchandise Trust Amount” means the Net Transferred
Merchandise Trust Amount minus the aggregate amount of the Merchandise
Liabilities of all of the cemeteries included in the Business, as of the
Effective Time. Buyer shall deliver a copy of the Audit Report to Seller and SCI
within 15 days after receiving the Audit Report. No later than ten (10) days
after the Closing Date, SCI shall deliver to Buyer a detailed statement of
Merchandise Liabilities as of the Effective Time of each of the cemeteries
included in the Business.

(b) Accounts Receivable Adjustment. If the Base Gross AR Amount is less than
$676,900, then, subject to Section 1.6(e), the Purchase Price shall be decreased
by, and Seller shall pay to Buyer, an amount equal to the discounted present
value of the amount by which the Base Gross AR Amount is less than $712,527,
using a discount rate of .065 and a discount

 

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period of three (3) years. If the Base Gross AR Amount is greater than $748,150,
then, subject to Section 1.6(e), the Purchase Price shall be increased by, and
Buyer shall pay to Seller, an amount equal to the discounted present value of
the amount by which the Base Gross AR Amount is greater than $712,527, using a
discount rate of .065 and a discount period of three (3) years. If the Base
Gross AR Amount is greater than or equal to $676,900, but less than or equal to
$748,150, then no adjustment shall be made to the Purchase Price, and no amount
shall be due by any party hereto, under this Section 1.6(b).

(c) Merchandise Trust Adjustment. If the Base Net Merchandise Trust Amount is
less than $3,092,700, then, subject to Section 1.6(e), the Purchase Price shall
be decreased by, and Seller shall pay to Buyer, the discounted present value of
the amount by which the Base Net Merchandise Trust Amount is less than
$3,255,483, using a discount rate of .065 and a discount period of ten
(10) years. If the Base Net Merchandise Trust Amount is greater than $3,418,250,
then, subject to Section 1.6(e), the Purchase Price shall be increased by, and
Buyer shall pay to Seller, an amount equal to the discounted present value of
the amount by which the Base Net Merchandise Trust Amount is greater than
$3,255,483, using a discount rate of .065 and a discount period of ten
(10) years. If the Base Net Merchandise Trust Amount is greater than or equal to
$3,092,700 but less than or equal to $3,418,250, then no adjustment shall be
made to the Purchase Price, and no amount shall be due by any party hereto,
under this Section 1.6(c).

(d) Endowment Care Trust Adjustment. If the Transferred Endowment Care Trust
Amount is less than $735,546, then, subject to Section 1.6(e), the Purchase
Price shall be decreased by, and Seller shall pay to Buyer, the Net Endowment
Care Adjustment Amount. If the Transferred Endowment Care Trust Amount is
greater than $735,546, then, subject to Section 1.6(e), the Purchase Price shall
be increased by, and Buyer shall pay to Seller, the Net Endowment Care
Adjustment Amount.

(e) Net Purchase Price Adjustment Amount. The Purchase Price adjustment amounts
provided for in Sections 1.6(b), (c) and (d), if any, shall all be aggregated
and netted against each other such that either (i) a single amount shall be
payable to Buyer by Seller and no amount shall be payable by Buyer to Seller
under this Section 1.6, (ii) a single amount shall be payable to Seller and SCI
by Buyer, and no amount shall be payable by Seller to Buyer under this
Section 1.6, or (iii) no amount shall be payable by any party hereto under
either this Section 1.6. By way of example only, if $150,000 is payable by
Seller to Buyer pursuant to Section 1.6(b), $50,000 is payable by Seller to
Buyer pursuant to Section 1.6(c) and $100,000 is payable by Buyer to Seller and
SCI pursuant to Section 1.6(d), then Seller shall pay to Buyer, in accordance
with Section 1.6(f), an amount equal to $100,000 (i.e., $150,000 + $50,000 -
$100,000).

(f) Payment of Purchase Price Adjustment Amounts. Any payment due under
Section 1.6(e) by Seller on the one hand or Buyer on the other hand shall be
paid in full, in cash, no later than seventy-five (75) days after the Closing
Date, or, if later than such time, twenty (20) days after the date that the
Audit Report is delivered to Buyer. Any amounts not paid within such time period
shall accrue interest from the Closing Date through the date of payment at the
prime rate as reported in The Wall Street Journal, Eastern Edition for the date
of the Audit Report.

 

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(g) Tax Treatment. Any payments made pursuant to this Section 1.6 shall be
treated by Seller and Buyer as adjustments to the Purchase Price for all Tax
purposes.

Section 1.7 Prorations; Services in Progress; Transaction Taxes.

(a) Seller and SCI shall be responsible for all Taxes arising as a result of the
operation of the Business or ownership of the Acquired Assets prior to the
Effective Time. At Closing, all real and personal property Taxes shall be
prorated between Seller and SCI on the one hand and Buyer on the other hand on a
per diem basis. Seller and SCI shall also be responsible for all Taxes on income
earned by the Pre-Need Trust Funds and the Endowment Care Funds (which are to be
transferred to Buyer) prior to delivery thereof to Buyer’s Trustee pursuant to
Section 5.5 below to the extent such income (A) is not taxable to the applicable
trusts as independent taxpayer entities, and (B) is withdrawn by or for Seller
or SCI or otherwise distributed to Seller or SCI (whether such withdrawal or
distribution is made before or after the Effective Time), and Seller and SCI
shall make all applicable estimated Tax payments to the relevant Taxing
Authorities associated with such income. For purposes of determining the amount
of Taxes owed by Seller and SCI with respect to the Pre-Need Trust Funds and the
Endowment Care Funds, the amount of such Taxes shall be computed as if the tax
year of such funds ended on the date of the Final Trust Delivery (as defined in
Section 5.5(e) below).

(b) The parties shall cooperate in transferring from the Seller or SCI, as
applicable, to Buyer all water, electrical, gas and other utility services
provided to or benefiting the Real Property, and as and to whatever extent
billings are received by any party relating to services utilized both before the
Effective Time (for which Seller and SCI shall be jointly and severally
responsible) and after the Effective Time (for which Buyer shall be
responsible), the parties will cooperate to make appropriate adjustments and
reimbursements between them to accomplish the proper allocation of such
billings.

(c) All revenues from and direct costs for merchandise paid to third parties in
the ordinary course of business associated with Services in Progress will be
allocated to Buyer. For purposes of this Agreement, “Services in Progress” means
any “at need” cemetery related services for which a Contract has been entered
into, but which have not been completed as of the Effective Time. For purposes
of this Agreement, such cemetery related services are complete when the body or
remains have been cremated or interred.

(d) Except as set forth in Sections 1.7(e) and (f) below, Seller and SCI shall
be responsible, jointly and severally, for the timely payment of, and shall
indemnify and hold harmless Buyer against, all sales, use, value added,
documentary, stamp, gross receipts, registration, transfer (including, without
limitation, real estate), conveyance, excise and other similar Taxes and fees
(collectively, “Transfer Taxes”) arising out of or in connection with or
attributable to (i) the transfer of the Acquired Assets and (ii) the
transactions contemplated by this Agreement. Seller and SCI shall prepare and
timely file all Tax Returns required to be filed in respect of such Transfer
Taxes. Seller and SCI shall be responsible, jointly and severally, for filing
all required notices related to bulk sales laws and shall indemnify and hold
harmless Buyer against all Taxes or other Losses that Buyer become liable for as
a result of the Seller’s and/or SCI’s failure to file any applicable bulk sales
notices or pay any of its Taxes.

 

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(e) The parties shall share in the payment of any recording and other similar
fees arising out of or in connection with or attributable to the transactions
contemplated by this Agreement in accordance with the normal practices in the
applicable states in which the various Acquired Assets are located; provided,
however, that Seller shall pay for the recording of the release of any Lien
(other than Permitted Encumbrances) with respect to any Acquired Asset.

(f) Except to the extent that any Transfer Tax amounts are included in the
amounts paid by Buyer pursuant to Section 1.3(a)(ii), Buyer shall be responsible
for the timely payment of, and shall indemnify and hold harmless Seller and SCI
against, all Transfer Taxes arising out of or in connection with or attributable
to the transfer of the vehicles listed on Schedule 1.1(c) to this Agreement.
Buyer shall prepare and timely file all Tax Returns required to be filed in
respect of such Transfer Taxes.

Section 1.8 Allocation of Closing Purchase Price.

(a) On or prior to the Closing Date, Buyer and Seller and SCI shall mutually
agree upon a written statement (the “Statement of Allocation”) setting forth an
allocation of the Closing Purchase Price (“Purchase Price Allocation”) (which
for such purpose shall be increased by the amount of the liabilities assumed by
Buyer). The Statement of Allocation shall include: (i) the assets to be
purchased by each of Buyer LLC and Buyer NQ Sub; (ii) the portion of the Closing
Purchase Price that will be paid by or on behalf of Buyer LLC and Buyer NQ Sub
to acquire the Acquired Assets, and (iii) an allocation of the portion of the
Closing Purchase Price paid by or on behalf of each of Buyer LLC and Buyer NQ
Sub (“Purchased Acquired Assets Allocation”) among each of the respective
categories of Acquired Assets that are purchased. Buyer, Seller and SCI agree
that each of the allocations required to be prepared pursuant to this
Section 1.8 shall be prepared in accordance with the provisions of Section 1060
of the Code, the Treasury Regulations promulgated thereunder and any similar
provisions of state, local or foreign law, as applicable.

(b) All federal, state, local and foreign income Tax Returns of Seller, SCI and
Buyer shall be filed consistently with the information set forth on the
Statement of Allocation. Moreover, Seller, SCI and Buyer further agree to file
IRS Form 8594 (and any corresponding form required to be filed by a state or
local Taxing Authority) in a manner that is consistent with the Purchased
Acquired Assets Allocation. Seller, SCI and Buyer agree to promptly provide each
other with any information necessary to complete such Tax Returns and IRS Form
8594 (and any corresponding form required to be filed by a state or local Taxing
Authority). Seller, SCI and Buyer shall not take any position on a Tax Return,
tax proceeding or audit that is inconsistent with any information set forth on
the Statement of Allocation.

Section 1.9 Effective Time. The Effective Time of the transfer of the Acquired
Assets shall be 12:01 a.m. on the Closing Date.

 

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ARTICLE II

Closing

Section 2.1 Closing. The closing of the transaction provided for in this
Agreement (the “Closing”) shall take place at the offices of Buyer’s counsel,
Blank Rome LLP, One Logan Square, Philadelphia, PA 19103, on September 28, 2006
(the “Closing Date”), or at such other location, time and date as the parties
shall mutually agree. In the event of any postponement thereof, all references
in this Agreement to the Closing Date shall be deemed to refer to the time and
to the date to which the Closing Date shall have been so postponed as herein
provided.

Section 2.2 Instruments of Conveyance and Transfer. At the Closing, each of
Seller and SCI, as applicable, shall deliver to Buyer such special warranty
deeds, leases, bills of sale, endorsements, assignments, title affidavits and
other documents reasonably requested by the Title Company (as defined in
Section 5.7), and such other instruments of transfer, conveyance and assignment
as may be reasonably requested by Buyer, in forms reasonably satisfactory to
Buyer, in order to more fully vest in Buyer good and marketable title to the
Acquired Assets. Each of Seller and SCI, as applicable, shall take all such
steps as may be reasonably requested by Buyer to put Buyer in actual possession
and control of the Acquired Assets and the Business as of the Closing.

ARTICLE III

Representations and Warranties by Seller and SCI

Each of Seller and SCI, jointly and severally, hereby represent and warrant to
Buyer, both as of the date hereof and as of the Effective Time, as follows:

Section 3.1 Organization; Standing; Authorization; Capacity. Each of Seller and
SCI is a corporation or limited liability company, as applicable, duly
organized, validly existing and in good standing under the laws of its state of
formation as designated in the introductory paragraph of this agreement, with
all requisite power and authority to own the Acquired Assets and to conduct the

 

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Business as it is now being conducted and is presently proposed (by Seller and
SCI) to be conducted. Each of Seller and SCI is duly qualified to conduct
business and is in good standing in each jurisdiction in which the nature of its
business or location of its properties makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect. The execution, delivery and performance of this
Agreement by each of Seller and SCI has been duly and effectively authorized by
all necessary action on the part of Seller and SCI, including authorization by
the board of directors of each of Seller and SCI, and no further action or
Consent is required in connection with such execution, delivery and performance
of this Agreement by Seller or SCI. This Agreement has been duly executed and
delivered by Seller and SCI, and constitutes the valid and binding obligation of
each of Seller and SCI, enforceable against Seller and SCI in accordance with
its terms.

Section 3.2 Financial Information. The unaudited income and expense statements
for the Business for the twelve month periods ending December 31, 2003, 2004 and
2005 (collectively, the “Income Statements”), copies of which are attached
hereto as Schedule 3.2, accurately reflect in all material respects the income
and expenses of such Locations for the periods covered.

Section 3.3 Tax Matters.

(a) (i) each of Seller and SCI has properly and timely filed all Tax Returns
required to be filed by it; (ii) each of Seller and SCI has paid all Taxes
required to be paid by it (whether or not shown on a Tax Return); and
(iii) there are no encumbrances for Taxes on the Acquired Assets other than for
Taxes not yet due and payable.

(b) Each of Seller and SCI has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other person for all periods
for which the statutory period of limitations for the assessment of such Tax has
not yet expired and all IRS Forms W-2 and 1099 (and other applicable forms
required to be filed by a state or local Taxing Authority) required with respect
thereto have been properly completed and timely filed.

(c) Neither the Seller nor SCI is a “foreign person” as such term is defined in
Section 1445(f)(3) of the Code.

 

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(d) All amounts received by Seller or SCI on sales by the Business which are
required under applicable state law to be trusted have been deposited in trust
and all Tax Returns required to be filed concerning such trusts and the income
from such trusts have been filed through all fiscal years ending prior to the
Closing Date.

Section 3.4 No Violation. Neither the execution and delivery of this Agreement
by the Seller or SCI nor the performance of their respective obligations
hereunder or thereunder will, subject to receipt of all Required Consents,
(a) violate, conflict with or result in a breach of any Law, (b) violate,
conflict with or result in a breach or termination of, or otherwise give any
contracting party additional rights or compensation under, or the right to
terminate or accelerate, or constitute (with notice or lapse of time, or both) a
default under the terms of any organizational documents (i.e., charter, bylaws,
operating agreement, partnership agreement or similar document), any note, deed,
lease, instrument, permit, security agreement, mortgage, commitment, contract,
agreement, order, judgment, decree, license or other instrument or agreement,
whether written or oral, express or implied, including, without limitation, the
Assumed Contracts, to which Seller and/or SCI is a party or by which any of the
Acquired Assets or the Business is bound, or (c) result in the creation or
imposition of any Liens with respect to the Acquired Assets or the Business.

Section 3.5 Status of Acquired Assets.

(a) Title to Acquired Assets. Seller has fee simple title to the Owned Real
Property, a valid leasehold interest in the Leased Real Property and good and
marketable title to all of the Acquired Assets, subject to no Liens, except for
Permitted Encumbrances and as otherwise disclosed in Schedule 3.5. At the
Closing, Buyer will acquire fee simple title to the Owned Real Property, a valid
leasehold interest in the Leased Real Property and good and marketable title to
all of the Acquired Assets, in each case free and clear of any and all Liens
except Permitted Encumbrances. Other than as disclosed in Schedule 3.5, neither
Seller nor SCI has entered into any Contract granting rights to third parties in
any real or personal property of Seller or SCI included in the Acquired Assets,
and no Person has any right to possession or occupancy of any of the Acquired
Assets.

(b) Condition of Acquired Assets. The Real Property and the tangible Acquired
Assets that are reasonably necessary for the operation of the Business are in
operating condition and reasonable repair (subject to normal wear and tear) and
are sufficient to permit Buyer to conduct the Business as presently conducted.

 

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Section 3.6 Improvements. To the Knowledge of Seller and SCI, no municipal or
other governmental improvements affecting the Real Property are in the course of
construction or installation, and no such improvement has been ordered to be
made; and any municipal or other governmental improvements affecting the Real
Property which have been constructed or installed have been paid for and will
not hereafter be assessed (except with respect to any currently recorded
assessments which are to become due after the Closing), and all assessments
heretofore made have been paid in full, other than any recorded assessments
which are to become due after the Closing; and neither Seller nor SCI has
entered into any private contractual obligations relating to the installation of
or connection to any sanitary sewers, storm sewers or any other improvements.

Section 3.7 Real Property Approvals. To the Knowledge of Seller and SCI, all
permanent certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals required by all
Governmental Authorities having jurisdiction and the requisite certificates of
the local board of fire underwriters (or other body exercising similar
functions), if applicable, have been issued for the Real Property, have been
paid for, and are in full force and effect.

Section 3.8 Zoning. Except as disclosed on the letters delivered by the zoning
code enforcement officers for the municipalities where the Real Property is
located, neither Seller nor SCI has received notice from any Governmental
Authority that: (i) any parcel of the Real Property is not in compliance with
current zoning and use classifications under the respective municipal zoning
ordinance governing such Real Property; (ii) any cemetery use at or on the Real
Property is not a permitted use or an existing non-conforming use thereunder;
and (iii) the current construction, operation and use of the buildings and other
improvements constituting the Real Property violate any zoning, subdivision,
building or similar law, ordinance, order, regulation or recorded plat or any
certificate of occupancy issued for the Real Property.

 

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Section 3.9 No Violations Relating to Real Property. No portion of the Real
Property, and no current use of the Real Property, is in violation of any
applicable Law, except where such violation would not have a Material Adverse
Effect. Neither Seller nor SCI has received notice of any presently outstanding
and uncured violations of any building, housing, safety or fire ordinances with
respect to the Real Property.

Section 3.10 Real Estate Taxes. Neither Seller nor SCI has received notice of
any proceeding pending for the adjustment of the assessed valuation of all or
any portion of the Real Property. To the Knowledge of Seller and SCI, there is
no abatement, reduction or deferral in effect with respect to all or any portion
of the real estate Taxes or assessments applicable to the Real Property.

Section 3.11 Eminent Domain. Neither Seller nor SCI has received any notice of
any condemnation proceeding or other proceedings in the nature of eminent domain
(“Taking”) in connection with the Real Property and, to the Knowledge of Seller
and SCI, no Taking has been threatened.

Section 3.12 Inventory. Seller has good and marketable title to the Inventories
free and clear of any and all Liens (other than a customer’s rights in items
being stored for such customer). The Inventory does not consist of any material
amount of items that are obsolete or damaged or items held on consignment.
Neither Seller nor SCI has acquired or committed to acquire or produce Inventory
for sale which is not of a quality usable in the ordinary course of business
within a reasonable period of time and consistent with past practice.

Section 3.13 Litigation. No Proceeding before any Governmental Authority,
mediator or arbitrator is pending or, to the Knowledge of Seller and SCI,
threatened, involving Seller and/or SCI wherein a judgment, decree, order,
settlement or other resolution would have a Material Adverse Effect, or which
would prevent the carrying out of this Agreement, declare unlawful the
transactions

 

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contemplated by this Agreement, cause such transactions to be rescinded, or
require Buyer to divest itself of any of the Acquired Assets or the Business. To
the Knowledge of Seller and SCI, no facts or circumstances or other events have
occurred that can reasonably be expected to give rise to any such Proceeding.

Section 3.14 Court Orders and Decrees. There is not outstanding or, to the
Knowledge of Seller and SCI, threatened any order, writ, injunction or decree of
any Governmental Authority, mediator or arbitrator against or affecting Seller
or SCI, relating to any of the Acquired Assets or the Business.

Section 3.15 Trade Names. The Location name set forth on Exhibit A constitutes
the only trade name held for use or used by the Seller and/or SCI in connection
with the Business and, other than such trade name, there are no Trademarks that
are material to the Business. Seller and/or SCI has the legal right to use the
Location name set forth on Exhibit A, as used by Seller and/or SCI in connection
with the Business, without the Consent of any other Person.

Section 3.16 Preneed and Trust Accounts and Contracts.

(a) All monies paid to Seller or SCI for the benefit of the Business in respect
of the Pre-/At-Need Contracts have been, and as of the Closing will be, set
aside and identified as set forth in Schedule 1.1(g). Each of Seller and SCI has
complied with the terms and conditions of the Pre-/At-Need Contracts. Neither
Seller nor SCI is in default or breach of any Pre-/At-Need Contract.

(b) The amounts (including interest) held in trust in respect of each of the
Pre-/At-Need Contracts, including, without limitation, perpetual care funds,
endowment care funds, extended care funds, and merchandise trust funds
(collectively, the “Trust Funds”), are held in conformity with all applicable
Laws. All of Seller’s and SCI’s required contributions to, withdrawals from and
investment and other uses of the Trust Funds have been made in accordance with
all applicable Laws, and each of Seller and SCI will have paid as of the Closing
(or will pay after Closing when due), all commissions due and owing to
commissioned sales people in respect of the Pre-/At-Need Contracts. Neither
Seller nor SCI has Knowledge of any actual or alleged non-compliance on the part
of Seller or SCI (or any Affiliate of Seller or SCI) with respect to the Trust
Funds.

(c) For those Pre-/At-Need Contracts that are funded by insurance or performance
bonds, Seller or SCI has purchased all such insurance policies and performance
bonds

 

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required to legally fund or secure all such Pre-/At-Need Contracts, and no
future premiums or other amounts remain to be paid, except for those instances
where, pursuant to the terms of such insurance policies or performance bonds and
in the ordinary course of business, the policies or performance bonds specify
payment of premiums or other amounts over time. All such insurance policies and
performance bonds are fully identified on Schedule 1.1(g).

(d) All of the Trust Funds are interest bearing trust accounts or other
investment accounts that are permissible under applicable Laws. All of the Trust
Funds are identified and described under Schedule 1.1(g), which Schedule also
attaches copies of any and all trust agreements entered into by either Seller or
SCI and a list of the financial institutions described therein.

Section 3.17 Contracts. Except for the Assumed Contracts (copies of which have
been delivered to Buyer), neither Seller nor SCI, nor any Affiliate of Seller or
SCI, is a party to or bound by any material Contract relating to the Acquired
Assets or the Business. Except as disclosed on Schedule 3.17, all of the Assumed
Contracts are in full force and effect, and there exists no default or breach
thereunder by Seller or SCI or, to the Knowledge of either Seller or SCI, other
than with respect to any Pre-/At-Need Contracts, any other party thereto.
Neither Seller nor SCI has received any notice (written or oral) indicating the
intention of any party to any Assumed Contract to amend, modify, rescind or
terminate such Assumed Contract. All of the Assumed Contracts are in full force
and effect and are enforceable against the Seller and/or SCI and any of their
Affiliates that is a party thereto and, to the Knowledge of Seller and SCI,
against all other parties thereto in accordance with their terms and applicable
Laws.

Section 3.18 Licenses and Permits. Except as set forth on Schedule 3.18, either
the Seller or SCI holds all of the Permits required to own, operate and maintain
the Business under any applicable Law as currently conducted or proposed (by
Seller and/or SCI) to be conducted (“Existing Permits”), and all Existing
Permits are, and as of immediately prior to the Closing will be, in full force
and effect. To the Knowledge of Seller and SCI, except as set forth on Schedule
3.18, there are no material restrictions on Buyer’s ability to replace or renew
any of the Existing Permits. Each of

 

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Seller and SCI is in compliance with all Existing Permits, except where the
failure to be in compliance would not have a Material Adverse Effect.

Section 3.19 Consents. Each of Seller and SCI has, or will have prior to the
Closing, obtained, satisfied or made all Consents (the “Required Consents”) that
are required to be obtained, satisfied or made pursuant to any Laws, Permits,
Assumed Contracts or other agreements by which Seller or SCI, or any of their
properties or business assets, including, without limitation, the Acquired
Assets, are bound in connection with (a) the execution and delivery of this
Agreement by Seller or SCI, or (b) the sale and transfer to Buyer of the
Acquired Assets, including, without limitation, the Assumed Contracts and, if
transferable to Buyer under applicable Law, the Existing Permits.

Section 3.20 Compliance with Laws. The Business presently is conducted, and the
Acquired Assets and their respective uses are, in compliance with all Laws
applicable to them, including, without limitation, the funding of or maintaining
of all Trust Funds in compliance with applicable Laws or to the posting of
performance bonds in lieu thereof, except where the failure to so comply would
not have a Material Adverse Effect. Neither Seller nor SCI has received any
written notice of any administrative, civil or criminal investigation or audit
by any Governmental Authority relating to, or which could result in a Material
Adverse Effect. Neither Seller nor SCI have restricted customers from purchasing
monuments from outside vendors or restricted vendors from installing monuments
at Floral Gardens and Floral Lawn Memorial Gardens.

Section 3.21 OSHA or ADA. There is no Proceeding pending with respect to Seller
or SCI, and, to the Knowledge of Seller and SCI, no charge or claim has been
made against Seller or SCI that has not been dismissed, discharged or otherwise
fully resolved, under the Occupational Safety and Health Act (“OSHA”) or the
Americans with Disabilities Act (“ADA”) pertaining to the facilities and
operations of the Business.

 

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Section 3.22 Labor Relations. Neither Seller nor SCI is a party to any
collective bargaining or union Contract and neither the Seller nor SCI is aware
of any current union organization effort with respect to employees of the
Business. There are no pending or unresolved unfair labor practice complaints
from or with respect to any employees of the Business. Since December 31, 2005,
neither Seller nor SCI has received any written notice of any strikes,
slowdowns, work stoppages, lockouts or threats thereof, by or with respect to
any employees of the Business. Since December 31, 2005, neither Seller nor SCI
has had an “employment loss” within the meaning of the WARN Act or any similar
Law.

Section 3.23 Employees and Independent Contractors. Schedule 3.23 sets forth a
list of all employees of the Business, together with (a) their titles or
responsibilities, (b) their salaries or wages during the 2005 calendar year,
(c) their dates of hire, (d) any employment or severance agreements with them,
and (e) any outstanding loans or advances made to them. Except as limited by any
employment Contracts listed in Schedule 3.23 and except for any limitations of
general application which may be imposed under applicable employment Laws,
either Seller or SCI has the right to terminate the employment of each employee
of the Business at will and without incurring any penalty or liability other
than Retained Liabilities. Each of the Seller and SCI is in compliance with all
Laws respecting employment practices, except where the failure to so comply
would not have a Material Adverse Effect. To the Knowledge of Seller and SCI, no
employee of the Business has provided to Seller or SCI (or any Affiliate of
Seller or SCI) written notice of such employee’s intent to terminate his or her
employment with the Business after the date hereof.

Section 3.24 No Brokers. Neither Seller nor SCI, nor any Person acting on behalf
of Seller or SCI, has agreed to pay to any Person any commission, finder’s or
investment banking fee, or similar payment in connection with this Agreement or
the transactions contemplated thereby, nor has

 

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Seller, SCI or any Person acting on behalf of Seller or SCI, taken any action on
which a claim for any such payment could be based.

Section 3.25 Accounts Receivable. None of the Receivables have been sold and/or
factored. All Receivables arising since December 31, 2005, represent bona fide
claims of Seller and SCI against debtors of the Business for sales made,
services performed or other charges or valid consideration arising on or before
the date hereof. All such Receivables are valid and enforceable claims for
payment consistent with past practices, without, to the Knowledge of Seller and
SCI, setoff or counterclaim.

Section 3.26 Operations in Ordinary Course of Business. Since December 31, 2005,
Seller and SCI have operated and conducted the Business in the ordinary and
usual course consistent with past practices. Since December 31, 2005, there has
been no material adverse change in the financial condition, assets, liabilities,
or operations of the Business, nor have any events occurred, nor to the
Knowledge of Seller and SCI do there exist any circumstances, which would
constitute, either before or after the Closing, any such change. Without
limiting the generality of the foregoing and except as set forth on Schedule
3.26, since December 31, 2005, neither the Seller nor SCI has:

(a) sold, assigned, leased or transferred any of their assets, which are
material to the Business singly or in the aggregate, other than assets sold or
disposed of in the ordinary course of business, consistent with past practice;

(b) canceled, terminated, amended, modified or waived any material term of any
Contract relating to the Business to which either of them is a party or by which
either of them or any of their assets is bound providing for aggregate annual
revenues to Seller or SCI in excess of $25,000;

(c) (i) increased the base compensation payable or to become payable to any of
its employees or independent contractors, except for normal periodic increases
in such base compensation in the ordinary course of business, consistent with
past practice, (ii) increased the sales commission rate payable or to become
payable to any of its employees or independent contractors except in the
ordinary course of business consistent with past practices (including, without
limitation, past practices with respect to amounts and timing), (iii) granted,
made or accrued any loan, bonus, fee, incentive compensation (excluding sales
commissions), service award or other like benefit, contingently or otherwise, to
or for the

 

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benefit of any of its employees or independent contractors, except in the
ordinary course of business consistent with past practices (including, without
limitation, past practices with respect to amounts and timing), or (iv) entered
into any new employment, collective bargaining or consulting agreement or caused
or suffered any written or oral termination, cancellation or amendment thereof
(except for Assumed Contracts or with respect to any employee at will without a
written agreement);

(d) executed any lease for real or personal property for the Business or incur
any Liability therefor except as otherwise disclosed herein;

(e) suffered any damage, destruction or loss (whether or not covered by
insurance) affecting the Business or any assets used in the Business that
exceeds $25,000 in any one instance or $100,000 in the aggregate; or

(f) mortgaged or pledged, or otherwise made or suffered any Lien (other than any
Permitted Encumbrance) on, any material asset of the Business or group of assets
that are material in the aggregate to the Business.

Section 3.27 Investment Company Act. Neither Seller nor SCI is, or has at any
time been, an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.

Section 3.28 Public Utility Holding Company Act. Neither Seller nor SCI is, or
has at any time been, a “holding company,” or a “subsidiary company” of a
“holding company,” or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company,” within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

Section 3.29 Compliance with Cemetery Laws. In connection with the ownership and
operation of the Business, each of Seller and SCI has complied in all material
respects with all applicable Laws governing the operation of cemeteries, the
provision of cemetery services and the sale of cemetery merchandise.
Furthermore, with respect to the ownership and operation of the Business, there
are no pending or, to the Knowledge of Seller and SCI, threatened claims or
suspensions against Seller and/or SCI, by any Person related to the operation of
cemeteries, the provision of cemetery services and the sale of cemetery
merchandise.

 

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Section 3.30 Full Disclosure. None of the representations and warranties made by
Seller or SCI in this Agreement (including the Schedules hereto) or in any
document delivered to Buyer by or on behalf of Seller or SCI pursuant to
Section 7.1, contains any untrue statement of a material fact, or omits any
material fact necessary to make any of them, in light of the circumstances in
which it was made, not misleading.

Section 3.31 No Other Representations or Warranties. Except as expressly stated
in this Agreement, Seller and SCI make no other representation or warranty of
any kind whatsoever.

ARTICLE IV

Representations and Warranties of Buyer

Buyer hereby represents and warrants to Seller and SCI, both as of the date
hereof and as of the Effective Time, as follows:

Section 4.1 Authority.

(a) Each of StoneMor LLC and Buyer LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation. Buyer NQ Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation. The execution, delivery and performance of this Agreement by StoneMor
LLC and each Buyer LLC and Buyer NQ Sub, have been duly authorized and consented
to by the Board of Managers or the Board of Directors of such Person (as the
case may be), and no other or additional consent or authorization on the part of
such Person is required in connection therewith. The consummation of the
transactions contemplated by this Agreement will not result in a breach,
violation or default by StoneMor LLC, Buyer LLC or Buyer NQ Sub of or under any
judgment, decree or Contract applicable to any of them except to the extent that
any such breach, violation or default would not reasonably be expected to have a
material adverse effect on the ability of StoneMor LLC, Buyer LLC and Buyer NQ
Sub to perform their obligations hereunder.

(b) Upon execution and delivery hereof, this Agreement shall constitute the
valid and binding obligation of StoneMor LLC, Buyer LLC and Buyer NQ Sub,
enforceable against each of them in accordance with its terms.

Section 4.2 Intentionally Omitted.

 

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Section 4.3 No Brokers. Neither Buyer, nor any Person acting on behalf of Buyer,
has agreed to pay a commission, finder’s or investment banking fee, or similar
payment in connection with this Agreement or any matter related hereto to any
Person, nor has any such Person taken any action on which a claim for any such
payment could be based.

Section 4.4 Knowledge of Seller Breach. None of the Buyer Representatives (as
defined below) have actual knowledge of a breach by Seller or SCI of any
representation or warranty contained in Article III, or any covenant or
agreement to be performed or complied with by Seller or SCI in accordance with
this Agreement prior to the Effective Time. For purposes of this Section 4.4,
the term “Buyer Representative” means William R. Shane, Paul Waimberg, Frank
Milles, Michael Stache, Gregg Strom, Alan Fisher, Ken Lee, Penny Casey and Tim
Yost, and such persons shall be deemed to have actual knowledge of any breach
referred to in the preceding sentence of which any individual assigned by a
third-party representative or advisor of Buyer to provide substantial services
in connection with the transaction contemplated hereby has actual knowledge.

Section 4.5 No Other Representations or Warranties. Except as expressly stated
in this Agreement, Buyer makes no other representation or warranty of any kind
whatsoever.

ARTICLE V

Covenants

Section 5.1 Access to Business. From and after the date of this Agreement,
Seller and SCI will give Buyer and its representatives full and free access to
all properties, Contracts, books and records of the Business so that Buyer may
have full opportunity to make such investigation as it shall desire to make of
the affairs of the Business, including, without limitation, the conduct of any
environmental investigations or assessments, provided that (i) such
investigation or assessment shall not unreasonably interfere with the operations
of the Business, and (ii) prior to Buyer or any of its representatives or
contractors contacting the Location or Location personnel, Buyer shall first

 

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communicate with and receive approval from Michael Lehmann, which approval shall
not be unreasonably withheld. Seller and SCI agree to furnish to Buyer and its
representatives all data and information concerning the Acquired Assets and the
Business that may be reasonably requested by them to conduct a complete and
thorough due diligence review of the Acquired Assets, the Business and the
employees of the Business.

Section 5.2 Conduct of Business Pending Closing. From and after the date of this
Agreement until the Closing, and except as otherwise permitted by this Agreement
or as consented to by Buyer in writing, each of Seller and SCI covenant that:

(a) Seller and SCI will conduct the Business only in the ordinary course
consistent with past practices, which shall include, without limitation,
compliance in all material respects with all applicable Laws and the maintenance
in force of all insurance policies;

(b) Seller and SCI shall maintain the Acquired Assets in their current state of
repair, excepting normal wear and tear and use their commercially reasonable
efforts to protect the goodwill of the Business and to maintain for the Business
the current relationships with suppliers and customers of the Business and
others having business relations with the Business;

(c) Seller and SCI shall use their commercially reasonable efforts to ensure
that key employees and key independent contractors continue their association
with the Business through the Closing Date; and

(d) Neither Seller nor SCI shall engage in any practice, take, fail to take, or
omit any action, or enter into any transaction, (i) of the kind described in
Section 3.26 or (ii) which would make any of the representations and warranties
in Article III not true.

Section 5.3 Consents and Licenses. Each of Seller and SCI will use its
commercially reasonable efforts to obtain, satisfy or make, prior to the
Closing, all Required Consents.

Section 5.4 Buyer’s Trustee and Endowment Care and Pre-Need Trust Funds. Buyer
shall, prior to Closing, (i) secure all licenses, permits and other governmental
authorizations and approvals required by the State of Michigan as a prerequisite
to Buyer selling Pre-/At-Need Contracts or accepting funds paid by customers
toward Pre-/At-Need Contracts with the Business; and (ii) select and formally
designate a trustee or trustees (“Buyer’s Trustee”) that is qualified under

 

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applicable Laws to receive all bank, trust or other funds or accounts, excluding
insurance premium payments, containing amounts that have been received by Seller
or SCI prior to the Effective Time pursuant to Pre-/At-Need Contracts for
pre-need cemetery merchandise and/or services to be provided by the Business
(“Pre-Need Trust Funds”), or which are being held as endowment care, perpetual
care, extended care or similar trust funds (“Endowment Care Funds”), or which
are being held as pre-construction trust funds (“Pre-construction Trust Funds”)
(all herein collectively the “Trust Funds”). At or prior to Closing, Buyer shall
confirm in writing to Seller its compliance with the above requirements. On the
Closing Date, all amounts held in the Trust Funds shall be transferred for
safekeeping to Buyer’s Trustee, provided that certain amounts shall be
transferred to Buyer’s Trustee after Closing pursuant to Section 5.5. Buyer
agrees that all such amounts will be held, administered and withdrawn in
accordance with state and federal law.

Section 5.5 Delivery of Trust Funds.

(a) Within the first five (5) business days following the Closing, Seller and
SCI shall cause the trustees that hold the Trust Funds (“Seller’s Trustees”) to
deliver to Buyer’s Trustee, by wire transfer in accordance with the instructions
from Buyer and/or Buyer’s Trustee, amounts from each of the various Trust Funds
equal to approximately 90% of the Closing Date balances thereof (the “Initial
Trust Delivery”).

(b) For a period of not more than 60 days after the Closing Date, Seller and SCI
shall continue to make (i) deposits to the undelivered portion of the Trust
Funds (the “Retained Trust Funds”) as legally and contractually required with
respect to payments upon Pre-/At-Need Contracts received by Seller and/or SCI
after the Closing, and (ii) withdrawals from the Retained Trust Funds for
legally and contractually allowed amounts with respect to Pre-/At-Need Contracts
serviced by Seller and/or SCI or other appropriate withdrawals, all in
accordance with Seller’s and/or SCI’s historical practices in those regards and
consistent with applicable Laws.

(c) Also during the 60-day period referenced in (b) above, Seller and/or SCI
shall cause to be computed and retained/withdrawn from the Retained Trust Funds
(for payment to the applicable Taxing Authorities) such Taxes as are due on
income earned (and recognized) by the Pre-Need Trust Funds and the Endowment
Care Funds prior to their delivery to Buyer’s Trustee.

(d) Notwithstanding anything to the contrary, but except as contemplated/allowed
in (c) preceding, after the Closing, neither Seller nor SCI shall be entitled to
receive any

 

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amounts from, or with respect to, the Endowment Care Funds or the
Pre-construction Trust Funds.

(e) On or before the 60th day following Closing, Seller and/or SCI shall cause
to be delivered to Buyer’s Trustee, by wire transfer in accordance with
instructions from Buyer and/or Buyer’s Trustee, the remaining Trust Funds (the
“Final Trust Delivery”, and herein together with the Initial Trust Delivery, the
“Post-Closing Trust Delivery”), and shall contemporaneously provide to StoneMor
a written reconciliation of the amounts making up the Post-Closing Trust
Delivery, including designation of the specific Pre-/At-Need Contracts to which
the various delivered amounts are attributable. From and after the date of
delivery of the Final Trust Delivery, neither Seller nor SCI shall be entitled
to any further withdrawals from the Trust Funds, and any further deposits made
by Seller and/or SCI to the Trust Funds shall not be considered as additions to
the Post-Closing Trust Delivery for other purposes thereof.

(f) For a period of no more than 60 days after the Closing Date, Buyer shall
permit Seller and SCI reasonable access to the books and records of the Business
as shall be reasonably necessary for Seller and SCI to properly make the
Post-Closing withdrawals and deposits to the Retained Trust Funds as are
contemplated in (b) above.

Section 5.6 Cooperation Regarding Publicity. Neither Seller, SCI nor Buyer shall
make any press release or other public announcement or filing regarding the
transactions contemplated herein without prior consultation and coordination
with the other party(ies) hereto, so that the business interests of all are
properly served. Notwithstanding the foregoing or anything else to the contrary,
Seller, SCI and each of their respective Affiliates on the one hand, and Buyer
and its Affiliates on the other hand, may make one or more public announcements
or filings in connection with the transactions contemplated by this Agreement to
the extent that such announcement or filing is reasonably required for the party
making such announcement or filing (or any of such party’s Affiliates) to avoid
Liability under applicable Laws; provided, however, that the party making such
announcement or filing shall notify the other party(ies) hereto, if reasonably
possible, at least three business days prior to making such filing.

Section 5.7 Title to Real Estate. Buyer has obtained (and provided copies to
Seller and SCI), one-half at Buyer’s expense and one-half at Seller’s expense,
commitments for title insurance in an aggregate amount equal to the portion of
the Closing Purchase Price deemed allocated to the

 

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Real Property as reflected on the Statement of Allocation from Fidelity National
Title Company (the “Title Company”), showing title to the Owned Real Property to
be held in fee simple and good, marketable and vested in Seller subject to the
liens, claims and encumbrances, easements, rights-of-way, reservations,
restrictions, outstanding mineral interests and other matters affecting the Real
Property or the title thereto identified on Schedule 3.5 as Permitted
Encumbrances. At Closing or soon thereafter as practicable, the Title Company
shall issue, one-half at Buyer’s expense and one-half at Seller’s expense, its
title insurance policy(ies) consistent with its previous title commitment(s)
approved by Buyer.

Section 5.8 Inspections. Buyer, Seller and SCI acknowledge that Buyer has
performed and obtained inspections and surveys of the Real Property at Buyer’s
expense.

Section 5.9 Intentionally omitted.

Section 5.10 Satisfaction of Pre-Closing Covenants. Seller, SCI and Buyer shall
use their commercially reasonable efforts to satisfy at or prior to Closing all
of the covenants and agreements to be performed or complied with by each of
them, respectively, pursuant to this Agreement at or prior to Closing.

Section 5.11 Post Closing Access.

(a) For a period of eight (8) years from the Closing Date, Seller and SCI shall
retain and make available to Buyer for any lawful purpose, upon reasonable
notice and at reasonable times, Seller’s and SCI’s Tax records, general ledger
and other books of original entry, and original payroll records with respect to
periods prior to the Effective Time. If either Seller or SCI ceases to conduct
operations prior to the end of such eight-year period, Seller or SCI, as
applicable, shall give Buyer 60 days’ prior written notice and an opportunity to
accept (without charge to Buyer) from Seller or SCI, as applicable, a transfer
of such books and records, and if Buyer elects not to accept such books and
records, the Seller’s or SCI’s obligations under this paragraph (a) shall cease.

(b) For a period of eight (8) years from the Closing Date, Buyer shall retain
and make available to Seller and SCI for any lawful purpose, upon reasonable
notice and at reasonable times, the books and records of the Business with
respect to periods prior to the Effective Time and to actions and events after
the Effective Time, to the extent they relate to periods prior to the Effective
Time. If Buyer ceases to conduct operations prior to the end of

 

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such eight-year period, Buyer shall give Seller and SCI 60 days’ prior written
notice and an opportunity to accept (without charge to Seller or SCI) from Buyer
a transfer of such books and records from Buyer, and if Seller and SCI elect not
to accept such books and records, Buyer’s obligations under this paragraph
(b) shall cease.

(c) After the Closing, for a period of 30 days, Buyer shall provide and allow
each of Seller and SCI reasonable access, at such times as are mutually agreed
upon in advance by Seller and SCI, as applicable, and Buyer, to the facilities
in which the Business is conducted as reasonably necessary to collect and remove
the Excluded Assets; provided, however, Buyer’s employees shall not be obligated
to physically assist in the collection and removal of Excluded Assets and in no
event shall such collection and removal of Excluded Assets unreasonably disrupt
or interfere with the operations of the Business, and provided, further that,
Seller and SCI, jointly and severally, shall fully indemnify Buyer for any and
all Losses arising from or relating to Seller’s or SCI’s collection and removal
of the Excluded Assets.

Section 5.12 Tax Matters.

(a) Seller and SCI shall be responsible for preparing and filing, at Seller’s
and SCI’s expense, as applicable, within the times and in the manner prescribed
by law (subject, however, to filing under any extension) all Tax Returns of
Seller and SCI, as applicable, for all Tax periods.

(b) Seller, SCI and Buyer shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with any Tax proceeding relating to:
(i) the Acquired Assets; (ii) the Business; or (iii) the transactions
contemplated by this Agreement. Such cooperation shall include the retention and
(upon the other party’s request) the provision of records and information which
are reasonably relevant to any Tax audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Seller and SCI
agree to retain all books and records with respect to Tax matters pertinent to
Seller relating to any taxable period beginning before the Closing Date until
the longer of (x) sixty (60) days after the expiration of the statute of
limitations of the respective taxable periods or (y) eight years, and to abide
by all record retention agreements entered into with any Taxing Authority.

(c) Seller, SCI and Buyer agree, upon request, to use their commercially
reasonable efforts to obtain any ruling, certificate or other document from any
Taxing Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed solely with respect to the transactions
contemplated by this Agreement.

Section 5.13 Employees.

(a) Buyer may, but shall not be obligated to, offer employment to any employees
of the Business on such terms and conditions as Buyer may determine. Seller and
SCI shall retain all obligations and liabilities arising on or prior to the
Closing in respect of their current and former employees under any and all
employee benefit plans, policies or practices of each of Seller or SCI or any of
their Affiliates and applicable Laws. Prior to the Closing, Buyer shall notify
the Seller and SCI, as applicable, of those employees of the Business to whom
Buyer expects to make an offer of employment. Buyer shall not assume or
otherwise be

 

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responsible for any obligation or liability of employee benefit plans, policies
or practices of the Seller or SCI or any of their Affiliates, or from any
employee’s employment with or termination of employment by Seller or SCI or any
Affiliate of Seller or SCI at or prior to the Closing.

(b) Each of Seller and SCI (or any of their Affiliates), as applicable, shall be
responsible for providing health benefit continuation coverage under
Section 162(k) and Section 4980B of the Code with respect to (i) any former
employee of Seller or SCI (or any of their Affiliates) and any other qualified
beneficiary under any group health plan who as of the Closing is receiving or is
eligible to receive such continuation coverage, and (ii) any employee of the
Seller or SCI (or any of their Affiliates) and any qualified beneficiary with
respect to such employee.

(c) Seller and SCI shall be responsible for, and shall comply with, any and all
WARN Act obligations relating to periods prior to Closing or associated with, or
incurred as a result of, the transactions contemplated by this Agreement.

Section 5.14 No Solicitation; Notification.

(a) No Solicitation. Prior to Closing, neither Seller nor SCI shall, and Seller
and SCI each shall cause their representatives (including, without limitation,
investment bankers, attorneys and accountants), employees, directors, members,
partners and other Affiliates not to, directly or indirectly, enter into,
solicit, initiate, conduct or continue any discussions or negotiations with, or
encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any Person other than Buyer and its representatives concerning
any sale of all or any portion of the assets of the Business of, or of any
shares of capital stock or other units of equity interests in, either Seller or
SCI, or any merger, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving either Seller or SCI that encompasses any portion
of the Business or the Acquired Assets (each such transaction being referred to
herein as a “Proposed Acquisition Transaction”). Each of Seller and SCI hereby
represents and warrants that it is not now engaged in discussions or
negotiations with any party other than Buyer with respect to any Proposed
Acquisition Transaction. Neither Seller nor SCI shall, and each of Seller and
SCI shall cause its representatives (including, without limitation, investment
bankers, attorneys and accountants), employees, directors, members, partners and
other Affiliates not to, agree to release any third party from, or waive any
provision of, any confidentiality or standstill agreement that relates in any
way to all or a portion of the Business.

(b) Notification. Seller and SCI each shall (i) immediately notify Buyer if any
written offer, inquiry or proposal is made or given to Seller or SCI (or any of
their Affiliates) with respect to any Proposed Acquisition Transaction, and
(ii) promptly provide Buyer with a copy of any such offer, proposal or inquiry;
provided, however, that no such notice hereunder shall relieve Seller or SCI of
its respective obligations under Section 5.14(a).

Section 5.15 Confidentiality. The parties acknowledge that the transactions
described herein are of a confidential nature and shall not be disclosed except
to consultants, advisors, lenders

 

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or other financial sources and Affiliates, or as required by Law, until such
time as the parties make a public announcement regarding the transaction as
provided hereunder. In connection with the negotiation of this Agreement, the
preparation for the consummation of the transactions contemplated hereby, and
the performance of obligations hereunder, each party acknowledges that it has
had, and will continue to have, access to confidential information relating to
the other party. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not disclose such information, except
to its advisors, consultants and other representatives and to Affiliates, or as
required by Law, in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, Buyer may disclose this Agreement and the
information and data in Buyer’s possession in connection herewith to its
lenders, but shall advise them of the requirement to maintain the
confidentiality of such information and data. This Section 5.15 shall not apply
to any information that is (a) in the public domain through no fault on the part
of the receiving party hereto or any of their Affiliates or the employees,
agents or representatives of such party or any of its Affiliates, or (b) learned
or discovered through any independent source that is not obligated to maintain
such information as confidential. Because of the difficulty of measuring
economic loss as a result of a breach of the foregoing covenants in this
Section 5.15, and because of the immediate and irreparable damage that would be
caused for which there may be no other adequate remedy at law, the parties
hereto agree that, in the event of a breach by any of them of the foregoing
covenants in this Section 5.15, such covenants may be enforced against them by
injunction or restraining order.

Section 5.16 Cooperation Regarding Financial Information. After the Closing,
without limiting the generality of any other provision of this Agreement, and
without further consideration, Seller and SCI shall, and shall cause their
respective Affiliates to, provide reasonable cooperation (including reasonable
access to Seller’s and SCI’s files, records and employees) to Buyer and its
agents and representatives (including Buyer’s external auditors) in connection
with the preparation of

 

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financial statements and financial information and disclosures relating to the
Business and the Acquired Assets, including, without limitation, disclosures
required under Items 2.01 and 9.01 of Form 8-K adopted by the Securities and
Exchange Commission, including all requirements for pro forma financial
information.

Section 5.17 Further Assurances. From time to time after the Closing, at the
request of Buyer, and without further consideration but at no cost to Seller or
SCI, Seller and SCI will execute and deliver such additional documents and will
take such other actions as Buyer reasonably may request to more fully and
absolutely convey, assign, transfer, deliver and vest in Buyer title to the
Acquired Assets and the Business and to otherwise carry out the terms of this
Agreement.

Section 5.18 Notice of Breaches. Each of the Seller and SCI shall give prompt
notice to Buyer of (a) the occurrence, or failure to occur, of any event, which
occurrence or failure causes or would reasonably be expected to cause any
representation or warranty of Seller or SCI contained in this Agreement or in
any Exhibit or Schedule hereto to be untrue or inaccurate, (b) any Material
Adverse Effect, and (c) any failure of Seller or SCI or any of their respective
Affiliates, shareholders or representatives to comply with, perform or satisfy
any covenant, condition or agreement to be complied with, performed by or
satisfied by them under this Agreement or any Exhibit or Schedule hereto; and if
after receiving such disclosure Buyer shall elect to proceed with the Closing,
such disclosure shall be deemed to cure, and shall relieve Seller and SCI of any
Liability with respect to any breach of, or failure to satisfy, any
representation, warranty, covenant, condition or agreement hereunder to the
extent such breach or failure was fully and accurately described in such
disclosure.

ARTICLE VI

Conditions Precedent to Closing

Section 6.1 Conditions to Seller and SCI Closing. The obligations of Seller and
SCI to consummate the transactions contemplated by this Agreement are subject to
the satisfaction on or

 

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before the Closing of the following conditions, any one or more of which may be
waived by Seller and SCI at their option:

(a) the representations and warranties of Buyer contained in this Agreement
shall be true and correct, both on the date of this Agreement and at and as of
the Closing, except for representations or warranties made as of some other
specified date, which as of the Closing shall remain true and correct as of such
specified date;

(b) Buyer shall have discharged, performed or complied with, in all material
respects, all covenants and agreements contemplated by this Agreement to be
performed or complied with by Buyer at or prior to the Closing; and

(c) Buyer shall have delivered, or caused to be delivered, to Seller and SCI
each of the documents required by Section 7.2. and

(d) The Dignity II and III Transaction and the Hawes Transaction shall have
closed or closing is contemplated in the near term.

Section 6.2 Conditions to Buyer Closing. The obligations of Buyer to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
on or before the Closing of the following conditions, any one or more of which
may be waived by Buyer at its option:

(a) the representations and warranties of Seller and SCI contained in this
Agreement shall be true and correct, both on the date of this Agreement and at
and as of the Closing, except for representations or warranties made as of some
other specified date, which as of the Closing shall remain true and correct as
of such specified date;

(b) Seller and SCI shall have discharged, performed or complied with, in all
material respects, all covenants and agreements contemplated by this Agreement
to be performed or complied with by Seller and/or SCI at or prior to the
Closing;

(c) Seller and SCI shall have delivered, or caused to be delivered, to Buyer
each of the documents required by Section 7.1;

(d) Buyer shall have obtained financing for the cash portion of the Closing
Purchase Price on terms satisfactory to Buyer in Buyer’s reasonable discretion;

(e) There shall have been no material adverse change in the condition
(financial, physical or otherwise), assets, commercial relationships, business
or operations of the Business or the Acquired Assets from and after December 31,
2005;

(f) No Law, order or judgment shall have been enacted, entered, issued or
promulgated by any Governmental Authority, arbitrator or mediator, which
challenges, or seeks to prohibit, restrict or enjoin the consummation of the
transactions contemplated hereby, nor shall there be pending or threatened, any
action, suit or proceeding by or before any

 

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Governmental Authority, arbitrator or mediator, challenging any of the
transactions contemplated by this Agreement, seeking monetary relief by reason
of the consummation of such transactions or seeking to effect any material
divestiture or to revoke or suspend any material Contract or Permit of the
Business by reason of any or all of the transactions contemplated by this
Agreement;

(g) Buyer shall have obtained all required Permits for the operation of the
Business;

(h) All Required Consents shall have been made, obtained or given, including
without limitation, those of Buyer’s existing lenders, and such Consents shall
be in full force and effect;

(i) Seller and SCI shall have terminated the Management Agreement;

(j) The Dignity II and III Transaction and the Hawes Transaction shall have
closed or closing is contemplated in the near term; and

(k) Buyer shall have received written assurance from its auditors that audited
financial statements for each of the Seller and SCI Michigan (covering only the
portions of the Business owned and operated by each) sufficient, in the opinion
of Deloitte & Touche, to permit StoneMor Partners L.P. to satisfy its disclosure
obligations under Items 2.01 and 9.01 of Form 8-K adopted by the Securities and
Exchange Commission, including all requirements for pro forma financial
information, will be received within thirty (30) days after the date of the
Closing.

ARTICLE VII

Closing Deliveries

Section 7.1 Seller’s and SCI’s Closing Deliveries. At the Closing, Seller and
SCI will deliver to Buyer the following documents, duly executed as required,
and each in form and substance reasonably acceptable to Buyer and its counsel:

(a) motor vehicle transfer/tax forms transferring the automobiles comprised in
the Acquired Assets to Buyer, free and clear of all Liens (one for each
automobile) and duly endorsed certificates of title for the automobiles
evidencing that title to such vehicles are held in Buyer and are free and clear
of all Liens (one for each automobile); provided, however, that as to all such
vehicles which are covered by leases from Wheels, Inc., as referenced above,
Buyer recognizes that Wheels, Inc. will cause new certificates of title to be
issued and delivered to Buyer after Closing according to the standard procedures
of the applicable states regarding such matters;

(b) Intentionally Omitted;

 

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(c) a bill of sale conveying the applicable Acquired Assets to Buyer, in form
and substance reasonably acceptable to Buyer;

(d) an Assignment and Assumption Agreement assigning to Buyer all of the Assumed
Contracts;

(e) an assignment agreement assigning to Buyer (and/or to Buyer’s Trustee, as
appropriate), all Trust Funds, insurance policies and Receivables related to the
Pre-/At-Need Contracts (other than those specified in Section 5.5);

(f) a certificate of Seller and SCI, to the effect that the conditions set forth
in Sections 6.2(a), (b) and (f) hereof have been satisfied;

(g) a certificate of each of Seller and SCI to the effect that Seller or SCI, as
applicable, is not a foreign person within the meaning of Section 1445 of the
Code (or any comparable law);

(h) Special Warranty Deeds conveying to Buyer title in fee simple to the Owned
Real Property;

(i) fully executed counterparts of any and all required transfer tax forms;

(j) such title affidavits, opinions and indemnities as may be requested by the
Title Company to issue the policy to Buyer;

(k) all other bills of sale, deeds, leases, transfers, assignments, acts, things
and assurances as may be required in the reasonable opinion of Buyer for more
perfectly and absolutely assigning, transferring, conveying, assuring to and
vesting in Buyer title to the Acquired Assets free and clear of all Liens;

(l) copies of all Required Consents, duly executed by the Person from whom
consent is required to be obtained;

(m) written evidence reasonably satisfactory to Buyer that the Management
Agreement and any other related relationship between SCI (including its
Affiliates) and Seller related to the Locations has been terminated; and

(n) such other documents as may be reasonably required to consummate the
transaction contemplated hereunder.

Section 7.2 Buyer’s Closing Deliveries. At the Closing, Buyer will deliver to
Seller and SCI the following:

(a) in the form and manner specified in Section 1.3 hereof, the Closing Purchase
Price, as adjusted pursuant to this Agreement;

(b) Intentionally Omitted;

 

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(c) a certificate of Buyer, signed by an executive officer thereof, to the
effect that the conditions set forth in Sections 6.1(a) and (b) hereof have been
satisfied; and

(d) such other documents as may be reasonably required to consummate the
transaction contemplated hereunder.

ARTICLE VIII

Survival of Representations, Warranties and Covenants; Indemnification;
Enforcement of Agreement

Section 8.1 Nature of Representations. For purposes of this Agreement, the
contents of all Exhibits, certificates, Schedules, and other items incorporated
herein by reference shall, in addition to the representations, warranties and
covenants made in this Agreement, constitute representations, warranties and
covenants made in this Agreement by Seller, SCI or Buyer, as the case may be.

Section 8.2 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of the parties made in this Agreement
shall survive the Closing, without regard to any investigation by the parties
with respect thereto, as follows:

(a) The representations and warranties set out in Sections 3.1 (Organization,
Standing; Authorization; Capacity)), 3.3 (Tax Matters), 3.5(a) (Title to
Acquired Assets), 3.10 (Real Estate Taxes), 3.16(b) (Preneed and Trust Accounts
and Contracts), 3.24 (No Brokers) and 4.1 (Authority) (claims with respect to
any of the foregoing representations and warranties referred to herein as
“Special Claims”), and the indemnification obligations of the parties with
respect to breaches of such representations and warranties, shall survive for a
period equal to the statute of limitations pertaining thereto;

(b) All other representations and warranties made in this Agreement, and the
indemnification obligations of the parties with respect to breaches of such
representations and warranties, shall survive for a period of two (2) years
after the Closing;

(c) Any claims, actions or suits that either the Seller and/or SCI, on the one
hand, or the Buyer, on the other hand, may have against the other that arise
from any actual fraud on the part of such other party in connection with this
Agreement or the transactions contemplated hereunder, shall continue in full
force and effect without limitation;

(d) All covenants and agreements made in this Agreement, and the indemnification
obligations of the parties with respect to breaches of such covenants and
agreements, shall survive for a period equal to the statute of limitations or
the period of time specified herein for a particular covenant or agreement;
provided, however that the covenants

 

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contained in Section 5.17 (Further Assurances) and the indemnification
obligations of the parties with respect to breaches thereof, shall survive the
Closing indefinitely; and

(e) Notwithstanding the foregoing or anything else to the contrary, if any claim
or proceeding is to be made or brought by an Indemnitee (as defined in
Section 8.8) within the applicable time period set forth above in this
Section 8.2, such claim, and the representation, warranty and/or covenant
alleged to have been breached in such claim or proceeding, and all
indemnification obligations of the parties with respect thereto, shall survive
until the final resolution of such claim by settlement, arbitration, litigation
or otherwise.

Section 8.3 Indemnification by Seller and SCI.

(a) Seller and SCI, jointly and severally, agree to indemnify and hold each
Indemnitee (as defined in Section 8.8), harmless from all Losses incurred,
suffered or paid, directly or indirectly, as a result of or arising out of:

(i) any breach or default in the performance by Seller or SCI of any covenant or
agreement of Seller or SCI contained in this Agreement or any related document
executed pursuant hereto;

(ii) any breach of warranty or inaccurate or erroneous representation made by
Seller or SCI herein (except to the extent that a Buyer Representative had
actual knowledge thereof in breach of Section 4.4);

(iii) any Retained Liabilities;

(iv) any Taxes of Seller or SCI, including, without limitation, (A) Transfer
Taxes; (B) the portion of real and personal property Taxes for which Seller or
SCI is liable for pursuant to Section 1.7.; (C) Taxes on income earned (and
recognized) by the Pre-Need Trust Funds and the Endowment Care Funds prior to
delivery thereof to Buyer’s Trustee; and (D) Taxes payable by any trust (as an
independent taxpayer entity) of or relating to any Seller or SCI or any
Affiliate of any Seller or SCI and to any or all of the Business, including,
without limitation, Taxes relating to or arising from income earned (and
recognized) by the Pre-Need Trust Funds and the Endowment Care Funds prior to
the delivery thereof to Buyer’s Trustee; and

(v) any unpaid Taxes of any Person including under United States Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law) as a transferee or successor, by Contract or otherwise.

(b) Notwithstanding anything herein to the contrary, Buyer shall have no claim
for indemnification hereunder until the total amount of all Losses incurred
which would otherwise be subject to indemnification hereunder exceeds $20,000,
and then only to the extent of such excess, but in no event shall the aggregate
amount of all Losses subject to indemnification under this Section 8.3 exceed
the Closing Purchase Price; provided, however, that the amounts set forth in
this Section 8.3(b) shall not apply to any Losses resulting from or arising out
of, directly or indirectly, (i) any Special Claims, (ii) claims under Sections
8.3(a)(i), 8.3(a)(iii) (other than the Retained Liabilities identified in
Section 1.5(b)(vii)),

 

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8.3(a)(iv) or 8.3(a)(v) or (iii) claims arising from any actual fraud on the
part of Seller and/or SCI, as to each of which Seller and SCI shall have
liability for the entire amount of such Loss without any limitation; and

(c) Except as provided in Section 8.7, the indemnification obligations of Seller
and SCI hereunder shall be exclusive remedy of Buyer with respect to any matter
subject to indemnification hereunder.

(d) Seller and SCI will be entitled to receive as a credit against any
indemnification amount owing to Buyer hereunder an amount equal to the net
proceeds of any insurance policy actually received by Buyer for any Loss for
which Seller and/or SCI agreed to indemnify Buyer under this Section 8.3.

Section 8.4 Indemnification by Buyer.

(a) Buyer agrees to indemnify and hold each Indemnitee (as defined in
Section 8.8) harmless from all Losses incurred, suffered or paid, directly or
indirectly, as a result of or arising out of:

(i) any breach or default in the performance by Buyer of any covenant or
agreement of Buyer contained in this Agreement or any related document executed
pursuant hereto;

(ii) any breach of warranty or inaccurate or erroneous representation made by
Buyer herein (except to the extent that Seller or SCI had actual knowledge
thereof prior to the Closing); and

(iii) the failure of Buyer to fully pay and discharge as and when same are due
the Assumed Liabilities or any of the obligations, liabilities and/or duties
relating to or arising from the Business from and after the Effective Time.

(b) Except as provided in Section 8.7, the indemnification obligations of Buyer
hereunder shall be exclusive remedy of Seller and SCI with respect to any matter
subject to indemnification hereunder.

(c) Buyer will be entitled to receive as a credit against any indemnification
amount owed to Seller or SCI hereunder an amount equal to the net proceeds of
any insurance policy actually received by Seller or SCI for a Loss for which the
Buyer agreed to indemnify Seller or SCI under this Section 8.4.

Section 8.5 Defense of Claims; Payment.

(a) Any Indemnitee seeking indemnification with respect to any actual or alleged
Loss shall give notice to the applicable Indemnitor within the applicable
survival period set forth in Section 8.2. If any claim, suit, demand or action
is asserted or threatened by a third party (“Claim”) after the Closing Date for
which an Indemnitor may be liable under the terms of Article VIII, then the
Indemnitee shall notify the Indemnitor within thirty (30) days after such Claim
is known to the Indemnitee (provided, however, that failure to provide such
notice

 

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will not affect the Indemnitee’s rights to indemnity hereunder from Indemnitor,
unless the Indemnitee can show actual material prejudice resulting from such
failure and then only to the extent of such actual material prejudice) and shall
give the Indemnitor a reasonable opportunity: (i) to take part in any
examination of any books and records; (ii) to conduct any proceedings or
negotiations in connection therewith and necessary or appropriate to defend the
Indemnitee; (iii) to take all other required steps or proceedings to settle or
defend any such Claim; and (iv) to employ counsel to contest any such Claim in
the name of the Indemnitee or otherwise (except as set forth below in
Section 8.5(b)).

(b) If the Indemnitor intends to assume the defense of such Claim, it shall give
written notice of such intention to the Indemnitee within 15 days after
Indemnitor first receives written notice of such Claim, whereupon Indemnitee
shall permit, and Indemnitor shall assume, the defense of any such Claim,
through counsel reasonably satisfactory to the Indemnitee. Notwithstanding the
foregoing, the Indemnitee may participate in such defense of such Claim (with
one or more counsel of its own choice) at its own expense, provided, however,
that if the parties to any such Claim (including any impleaded parties) include
both the Indemnitor and the Indemnitee, and the Indemnitor shall have been
advised in writing by counsel for the Indemnitee that there may be one or more
defenses available to the Indemnitee that are not available to the Indemnitor or
legal conflicts of interest pursuant to applicable rules of professional conduct
between the Indemnitor and the Indemnitee, the Indemnitor shall not have the
right to assume the defense of such Claim on behalf of the Indemnitee and the
fees and expenses of one such separate counsel employed by the Indemnitee shall
be at the expense of the Indemnitor.

(c) If the Indemnitor fails to assume the defense of any Claim within 15 days
after Indemnitor first receives written notice of such Claim, the Indemnitee may
defend against such Claim in such manner as it may deem appropriate (provided
that the Indemnitor may participate in such defense at its own expense) and a
recovery against the Indemnitee in such Claim for damages suffered by it in good
faith, shall be conclusive in its favor against the Indemnitor.

(d) The Indemnitor shall not, without the written consent of the Indemnitee,
settle or compromise any Claim or consent to the entry of any judgment with
respect thereto which does not include, as an unconditional term thereof, the
giving to the Indemnitee a release by all other participants from all liability
in respect of such Claim. Unless the Indemnitor shall have elected not to assume
the defense of any claim subject to Article VIII or, after reasonable written
notice of any Claim that is subject to the indemnification provisions of this
Article VIII shall have failed to assume or participate in the defense thereof,
the Indemnitee may not settle or compromise such Claim without the written
consent of the Indemnitor, such consent not to be unreasonably withheld.

(e) Upon determination of the amount due to an Indemnitee (“Indemnification
Amount”) in connection with any matter for which indemnification is sought under
this Article VIII (“Indemnification Matter”) (whether by agreement between the
Indemnitor and the Indemnitee or after a settlement agreement is executed or a
final judgment or order is rendered by an arbitrator or court of competent
jurisdiction with respect to the Indemnification Matter), the Indemnitor shall
promptly (and in any event, not later than 10 days after such determination) pay
the Indemnification Amount, in cash, to the Indemnitee.

 

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Any Indemnification Amount that is not paid in full within 10 days after final
determination of the Indemnification Amount as set forth above, such unpaid
amount shall thereafter accrue interest through the date of payment at the prime
rate as reported in The Wall Street Journal, Eastern Edition for the date of
such final determination.

Section 8.6 Dispute Resolution.

(a) Except as provided in Section 8.6(g), any and all disputes among the parties
to this Agreement (defined for the purpose of this provision to include their
respective officers, directors, managers, members, partners, shareholders,
agents and/or other Affiliates) arising out of or in connection with the
negotiation, execution, interpretation, performance or nonperformance of this
Agreement and the transactions contemplated herein shall be solely and finally
settled by arbitration, which shall be conducted in such city in Michigan as the
parties shall mutually agree, or if they are unable to agree, in Wilmington,
Delaware, by a single arbitrator selected by the parties. The arbitrator shall
be a lawyer familiar with business transactions of the type contemplated in this
Agreement who shall not have been previously employed by or affiliated with any
of the parties hereto. If the parties fail to agree on the arbitrator within
thirty (30) days of the date one of them invokes this arbitration provision,
either party may apply to the American Arbitration Association to make the
appointment.

(b) The parties hereby renounce all recourse to litigation and agree that the
award of the arbitrator shall be final and subject to no judicial review. The
arbitrator shall conduct the proceedings pursuant to the Commercial Arbitration
Rules of the American Arbitration Association, as now or hereafter amended (the
“Rules”).

(c) The arbitrator shall decide the issues submitted (i) in accordance with the
provisions and commercial purposes of this Agreement, and (ii) with all
substantive questions of Law determined under the Laws of the State of Delaware
(without regard to its principles of conflicts of laws). The arbitrator shall
promptly hear and determine (after giving the parties due notice and a
reasonable opportunity to be heard) the issues submitted and shall render a
decision in writing within six (6) months after the appointment of the
arbitrator. No fees shall be paid to the arbitrator with respect to services
rendered by the arbitrator after the elapse of six (6) months after the
appointment of the arbitrator.

(d) The parties agree to facilitate the arbitration by (i) conducting
arbitration hearings to the greatest extent possible on successive days, and
(ii) observing strictly the time periods established by the Rules or by the
arbitrator for submission of evidence or briefs.

(e) The parties shall share equally the fees and expenses of the arbitrator.

(f) Judgment on the award of the arbitrator may be entered in any court having
jurisdiction over the party against which enforcement of the award is being
sought and the parties hereby irrevocably consent to the jurisdiction of any
such court for the purpose of enforcing any such award.

(g) The parties hereto agree that the provisions of this Section 8.6 shall not
be construed to prohibit any party from obtaining, in the proper case, specific
performance or

 

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injunctive relief in any court of competent jurisdiction with respect to the
enforcement of any covenant or agreement of another party to this Agreement as
provided herein.

Section 8.7 Enforcement of Agreement. Each party hereto acknowledges that
irreparable damage would result if this Agreement is not specifically enforced.
Therefore, the covenants, agreements, rights and obligations of the parties
under the Agreement, including, without limitation, their respective rights and
obligations to sell and purchase the Acquired Assets and the Business and the
rights and obligations of the parties under Articles V, VIII and X, shall be
enforceable by a decree of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for and granted
in connection therewith. Each party hereto agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive the defense that
a remedy at law may be adequate in any action for specific performance
hereunder.

Section 8.8 Definitions.

(a) In the case of a claim of indemnification brought pursuant to Section 8.3,
“Indemnitee” shall mean Buyer and Buyer’s Affiliates and the directors,
officers, partners, members, managers, employees, successors and assigns of
Buyer or any of its Affiliates, and in the case of a claim of indemnification
brought pursuant to 8.4, it shall mean each of Seller and SCI and their
respective Affiliates and the directors, officers, partners, members, managers,
employees, successors and assigns of Seller or SCI or any of their respective
Affiliates.

(b) In the case of a claim of indemnification brought pursuant to Section 8.3,
“Indemnitor” shall mean Seller and SCI, and in the case of a claim of
indemnification brought pursuant to Section 8.4, it shall mean Buyer.

Section 8.9 Cooperation. If Buyer or Seller or SCI submits to an insurance
carrier for any of their respective insurance policies, a claim arising from or
relating to a claim or action by a third party which may otherwise be subject to
indemnification pursuant to Section 8.3 or Section 8.4, as the case may be, and
if such insurance carrier agrees to defend such claim, then the defense of such
claim shall be tendered to such insurance carrier and the rights of the parties
between themselves

 

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regarding the assumption and control of such defense shall be subject to the
reasonable requirements of such insurance carrier.

ARTICLE IX

Termination of Agreement

Section 9.1 Termination. Except where a right to terminate this Agreement is
otherwise specifically provided for herein, this Agreement may be terminated by
written notice of termination at any time before the Closing Date only as
follows:

(a) by mutual consent of Seller, SCI and Buyer;

(b) by Buyer, upon written notice to Seller and SCI given at any time after
December 31, 2006 if any or all of the conditions precedent to Buyer’s
obligations hereunder set forth in Section 6.2 hereof have not been met, without
fault of Buyer; or

(c) by SCI and Seller, upon written notice to Buyer given at any time after
December 31, 2006 if any or all of the conditions precedent to Seller’s and
SCI’s obligations hereunder set forth in Section 6.1 hereof have not been met,
without fault of Seller or SCI.

Section 9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 9.1: (a) this Agreement shall
become void and have no effect, without any liability on the part of any of the
parties except for the provisions of Section 5.15 and except as provided below
in this Section 9.2; (b) each party shall return all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same; and (c) no confidential information received by any party
with respect to the business of any other party or its Affiliates shall be
disclosed to any third party, unless required by Law. Notwithstanding the
foregoing or anything else to the contrary, neither Seller nor SCI nor Buyer
shall be relieved of liability under, and as provided in, this Agreement for a
breach of this Agreement occurring prior to such termination, or for a breach of
any provision of this Agreement which specifically survives termination
hereunder.

 

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ARTICLE X

Miscellaneous

Section 10.1 Certain Defined Terms. The following terms shall have the following
meanings for purposes of this Agreement, which meanings shall be equally
applicable to both the singular and plural forms of such terms:

“Affiliate” means, with respect to any Person, one who at such time controls, is
controlled by, or is under common control with, such Person.

“Code” means the Internal Revenue Code of 1986, as amended, and all rules and
regulations promulgated thereunder.

“Consent” means any consent, waiver, approval, order or authorization of, or
registration, declaration or filing with or notice to, any Governmental
Authority or other Person.

“Contract” means and includes all contracts, agreements, indentures, leases,
franchises, licenses, commitments or legally binding arrangements, express or
implied, written or oral.

“Employee Plans” means all employee benefit plans as defined in Section 3(3) of
ERISA and all severance, bonus, retirement, pension, profit sharing and deferred
compensation plans and other similar material, fringe or employee benefit plans,
programs or arrangements, and all material employment or compensation
agreements, written or otherwise.

“Endowment Care Adjustment Amount” means the product of (i) the absolute value
of the difference between the Transferred Endowment Care Trust Amount and
$735,546, multiplied by (ii) .05.

“Environmental Reports” means the Phase I and/or Phase II Environmental
Assessment Reports specifically identified on Exhibit C.

“Environmental Requirements” means all applicable Laws, Permits and similar
items of any Governmental Authority relating to the protection of the
environment, including all requirements pertaining to reporting, licensing,
permitting, investigation, and remediation of emissions, discharges, releases,
or threatened releases of Hazardous Materials.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Governmental Authority” means any federal, state, local or foreign government
or any subdivision, authority, department, commission, board, bureau, agency,
court or other instrumentality thereof.

“Hazardous Materials” means any substance: (A) the presence of which requires
investigation or remediation under any Law; (B) which is or has been identified
as a potential hazardous waste, hazardous substance, pollutant or contaminant
under any applicable Law, or (C)

 

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which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, reactive, or otherwise hazardous and has been
identified as regulated by any Governmental Authority.

“Intellectual Property” means all intellectual property and all intellectual
property and industrial property rights owned, held or used, including but not
limited to (i) inventions, designs, algorithms and discoveries, know-how,
methods, and processes, and all enhancements and improvements thereto, whether
patentable or unpatentable, and whether or not reduced to practice, and all
patents therefor or in connection therewith, whether U.S. or foreign, and all
patent applications, patent disclosures, and all divisions, continuations,
continuations-in-part, reissues, re-examinations and extensions thereof;
(ii) trademarks, trade names and service marks, trade dress, logos, fictitious
names, internet domain names, slogans, and symbols (collectively, “Trademarks”),
and all goodwill and similar value associated with any of the foregoing, and all
applications, registrations, and renewals therefor or in connection therewith
(collectively, “Trademark Applications”); (iii) mask works, written works
(excluding computer software programs and applications and documentation of or
for such software programs), audio works, multimedia works, works of authorship,
lists, databases and copyrights (whether or not registered) and all
registrations and applications for registration and renewals thereof, as well as
moral, paternity, and integrity rights; (iv) trade secrets (as such are
determined under applicable law), and other confidential business information,
including trade secret or confidential technical information, marketing plans,
research, designs, plans, methods, techniques, and processes, any and all
technology, supplier lists, statistical models, e-mail lists, inventions,
databases, and data, whether in tangible or intangible form and whether or not
stored, compiled or memorialized physically, electronically, graphically,
photographically or in writing; (v) any and all other rights to existing and
future registrations and applications for any of the foregoing and any and all
rights in or under, or relating to, any of the foregoing, including, without
limitation, remedies against and rights to sue for past infringements, and
rights to damages and profits due or accrued in or relating to any of the
foregoing; and (vi) any and all other intangible proprietary property,
information and materials and rights therein and thereto.

“IRS” means the United States Internal Revenue Service.

“Laws” means any laws, statutes, rules, regulations, ordinances, orders, codes,
common laws, arbitration awards, judgments, decrees, orders or other legal
requirements of any Governmental Authority.

“Liability” means any direct or indirect indebtedness, liability, assessment,
expense, obligation or responsibility (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether disputed or
undisputed, whether choate or inchoate, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.

“Liens” means any and all liens, mortgages, security interests or other
encumbrances.

“Losses” means any and all demands, claims, assessments, judgments, losses,
liabilities, damages, costs and expenses (including interest, penalties,
reasonable attorney’s fees and expenses, reasonable accounting fees and
investigation costs).

“Material Adverse Effect” means any effect, change or circumstance that,
individually or in the aggregate with any other like effect, change or
circumstance, is materially adverse to the Business

 

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(including with respect to any one particular Location), including, without
limitation, the financial condition and the results of operations of the
Business.

“Merchandise Liabilities” means Seller’s and SCI’s current cost of products and
services that have been sold, but have not yet been delivered to the customer.

“Net Endowment Care Adjustment Amount” means the amount equal to the present
value of the future stream of ten annual payments (as though payable on the
Closing Date and each of the first nine anniversaries of the Closing Date), each
equal to the Endowment Care Adjustment Amount, calculated using a discount rate
of .065.

“Net Transferred Merchandise Trust Amount” means the amount equal to (i) the
aggregate amount transferred to Buyer’s Trustee at the Closing as part of the
Initial Trust Delivery in respect of the Pre-Need Trust Funds of the cemeteries
included in the Business in accordance with Section 5.5(a), plus (ii) the
aggregate amount transferred to Buyer’s Trustee as part of the Final Trust
Delivery in respect of pre-need merchandise and/or services relating to the
Pre-/At-Need Contracts of the cemeteries included in the Business.

“Permits” means any licenses, permits, approvals, registrations, certificates
(including, but not limited to, certificates of occupancy and any licensure
required for the operation of cemeteries) and other evidence of authority.

“Permitted Encumbrances” means (i) liens, encumbrances or restrictions related
to taxes not yet due or payable or which are being contested in good faith and
for which appropriate reserves have been taken, (ii) any matters shown on the
title commitment(s) not objected to by Buyer as provided for in this Agreement
or, if objected to by Buyer, later waived by Buyer as provided for in this
Agreement and (iii) liens, encumbrances or restrictions that are created by
Buyer.

“Person” means any individual, firm, corporation, partnership, trust, estate,
association or other entity.

“Proceeding” means any suit, action, litigation, investigation, notice of
violation, audit, arbitration, administrative hearing or any other similar
proceeding.

“Purchase Price” means the Closing Purchase Price plus any contingent
consideration payable pursuant to Section 1.4 plus the assumption of the Assumed
Liabilities by Buyer, as adjusted pursuant to and in accordance with the terms
and conditions of this Agreement.

“Seller’s and SCI’s Knowledge”, “Knowledge of the Seller and SCI” or any other
reference to the “Knowledge” of the Seller or SCI means the knowledge of
(i) Michael Lehmann, Margie Stewart-Runnels, Eileen Farrell and Michael Smith,
(ii) any other individual who is serving as a director, officer, manager or
member of Seller or SCI, and (iii) any manager of any of the Locations, in each
case, after reasonable inquiry. For purposes of this definition, the persons
referenced in the immediately preceding sentence shall be deemed to have
knowledge of matters of which any individual assigned by a third-party
representative or advisor of Seller or SCI to provide substantial services in
connection with the transaction contemplated hereby has actual knowledge.

 

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“Tax” means any income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental, windfall profit,
customs, vehicle, airplane, boat, vessel or other title or registration, capital
stock, franchise, employees’ income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer (including, without limitation, realty transfer
and burial lot transfer), value added, alternative, add-on minimum and other
tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and
any interest, penalty, addition or additional amount thereon imposed, assessed
or collected by or under the authority of any governmental body or payable under
any tax-sharing agreement or any other Contract.

“Taxing Authority” shall mean any domestic, foreign, federal, national, state,
county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising tax
regulatory authority.

“Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any governmental body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any law
relating to any Tax, including any amendment thereto.

“Transferred Endowment Care Trust Amount” means the amount equal to the
aggregate amount transferred to Buyer’s Trustee at the Closing as part of the
Initial Trust Delivery in respect of the Endowment Care Funds of the cemeteries
included in the Business in accordance with Section 5.5(a), plus (ii) the
aggregate amount included in the Final Trust Delivery in respect of the
Endowment Care Funds of the cemeteries included in the Business.

“WARN Act” means the Worker Adjustment and Retraining Notification Act, as the
same may be amended from time to time.

Section 10.2 Notices. All notices and other communications required or provided
for hereunder shall be in writing and shall be deemed to be given:

(a) When delivered personally to the individual, or to an officer of the
company, to which the notice is directed;

(b) Three (3) business days after the same has been deposited in the United
States mail, sent Certified or Registered mail with Return Receipt Requested,
postage prepaid and addressed as provided in this Section; or

 

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(c) One (1) business day after the same has been deposited with a generally
recognized overnight delivery service (including United States Express Mail),
with receipt acknowledged and with all charges prepaid by the sender addressed
as provided in this Section. Except as specifically provided otherwise herein,
notices and other communications relating to this Agreement or the transactions
contemplated hereby shall be directed as follows:

 

  (1) if to Seller or SCI, to:

President

SCI Michigan Funeral Services, Inc.

1929 Allen Parkway

Houston, Texas 77019

and to:

President

Hillcrest Memorial Company

G 9506 North Dort Highway

Mt. Morris, MI 48458

with a copy to:

General Counsel

Service Corporation International

1929 Allen Parkway

Houston, Texas 77019

and if before Closing, also with a copy to:

John Burleson

Pakis, Giotes, Page & Burleson, P.C.

P.O. Box 58

Waco, Texas 76703-0058

 

  (2) if to Buyer, to:

STONEMOR OPERATING LLC

Attention: Lawrence Miller, President & Chief Executive Officer

155 Rittenhouse Circle

Bristol, Pennsylvania 19007

with a copy to:

BLANK ROME LLP

Attention: Lewis J. Hoch

One Logan Square

18th & Cherry Streets

Philadelphia, Pennsylvania 19103-6998

or at such other place or places or to such other person or persons as shall be
designated by like notice by any party hereto.

 

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Section 10.3 Expenses. Subject to the terms of Section 1.3(a)(i) above, and
except as otherwise specifically provided in Sections 5.7 and 5.8 and any other
provision of this Agreement, each party hereto shall pay its own expenses,
including without limitation, fees and expenses of its agents, representatives,
counsel, auditors, and accountants, incidental to the consideration,
negotiation, preparation and carrying out of this Agreement and the transactions
contemplated hereby.

Section 10.4 Attorney’s Fees. In the event of any controversy, claim or dispute
between or among any of the parties hereto arising out of or relating to this
Agreement, or any default or breach or alleged default or breach hereof, each
party shall pay its own attorney’s fees, costs and expenses associated with any
such action except as provided in Article VIII. If any party hereto shall be
joined as a party in any judicial, administrative, or other legal proceeding
arising from or incidental to any obligation, conduct or action of another party
hereto, the party so joined shall be entitled to be reimbursed by the other
party for its reasonable attorney’s fees and costs associated therewith.

Section 10.5 Assignment; Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be assigned by any
party hereto without the prior written consent of the other parties, except that
prior to Closing, Buyer may assign its rights and obligations hereunder to any
one or more of its direct or indirect subsidiaries, provided that any such
assignment shall not relieve Buyer from its obligations and liabilities
hereunder. Except as provided in Article VIII, nothing in this Agreement,
expressed or implied, is intended to confer upon any third person any rights or
remedies under or by reason of this Agreement.

 

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Section 10.6 Entire Agreement; Amendment; Waiver.

(a) This Agreement together with the Schedules and Exhibits hereto and the other
agreements and documents delivered, or to be delivered, pursuant to Section 7.1
and Section 7.2 (all of which are hereby incorporated herein by reference)
embody the whole agreement of the parties with respect to the subject matter
hereof and thereof, and there are no promises, terms, conditions, or obligations
other than those contained herein and therein. All previous negotiations between
the parties, either verbal or written, not herein contained are hereby withdrawn
and annulled. This Agreement, together with the Schedules and Exhibits hereto,
supersedes all previous communications, representations, or agreements, either
verbal or written, between the parties hereto with respect to the subject matter
hereof.

(b) This Agreement may not be amended except by an instrument in writing signed
on behalf of each party hereto.

(c) No provision of this Agreement may be waived unless such waiver is in
writing and signed by the party against whom the waiver is to be effective. No
waiver by any party of any provision of this Agreement in a particular instance
shall be deemed to constitute a waiver of such provision thereafter unless
otherwise agreed in writing and signed by the party against whom the waiver is
to be effective.

(d) No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.

Section 10.7 Severability. If one or more provisions of this Agreement shall be
held invalid, illegal or unenforceable, such provision shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement. In either
case, the balance of this Agreement shall be interpreted as if such provision
were so modified or excluded, as the case may be, and shall be enforceable in
accordance with its terms.

Section 10.8 Certain Interpretive Matters. The section and subsection headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Unless the context
otherwise requires, all references in this Agreement to Sections, Articles,
Exhibits or Schedules are to Sections, Articles, Exhibits or Schedules of or to
this Agreement. No provision of this Agreement will be interpreted in favor of,
or

 

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against, any of the parties to this Agreement by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof or thereof. The singular form of any word used herein shall be deemed to
include the plural form of such word and vice versa. References herein to
feminine, masculine or neuter gender shall be deemed to include all genders. As
used herein, the words “and” and “or” shall be deemed to mean “and/or” as the
context requires. The word “including” (and with correlative meaning, the word
“include”) means including without limiting the generality of any description
preceding such word.

Section 10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Section 10.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of laws.

[Signature Pages Follow]

 

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In Witness Whereof, the undersigned parties hereto have duly executed this
Agreement on the date first above written.

 

BUYERS: STONEMOR OPERATING LLC, a Delaware limited liability company By:   /s/
Paul Waimberg PAUL WAIMBERG, Vice President of Finance and Assistant Secretary
STONEMOR MICHIGAN LLC, a Michigan limited liability company By:   /s/ Paul
Waimberg PAUL WAIMBERG, Vice President of Finance STONEMOR MICHIGAN SUBSIDIARY
LLC, a Michigan limited liability company By:   /s/ Paul Waimberg PAUL WAIMBERG,
Vice President of Finance

 

PARENT: SCI FUNERAL SERVICES, INC., an Iowa corporation By:   /s/ Michael D.
Lehmann  

Michael D. Lehmann, Vice President

{Signatures continued on the following page}

ASSET PURCHASE AND SALE AGREEMENT

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

SCI MICHIGAN: SCI MICHIGAN FUNERAL SERVICES, INC., a Michigan corporation By:  
/s/ Michael D. Lehmann  

Michael D. Lehmann, Vice President

SELLER: HILLCREST MEMORIAL COMPANY, a Delaware corporation By:   /s/ Robert C.
Hubble  

Robert C. Hubble, President

 

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