exv10w21



 





Exhibit 10.21




ASSET PURCHASE AGREEMENT




     THIS AGREEMENT, dated as of December 15, 2006, is by and among CARRIAGE CEMETERY SERVICES,
INC., a Texas corporation (the “Purchaser”), and SEASIDE CEMETERY, INC., a Texas corporation (the
“Company”);



W I T N E S S E T H:




     WHEREAS, the Company owns and operates (i) the Seaside Funeral Home (the “Seaside Home”) and
the Seaside Memorial Park (the “Seaside Cemetery”), both located at 4357 Ocean Drive in Corpus
Christi, Nueces County, Texas, (ii) the Corpus Christi Funeral Home located at 2409 Baldwin Blvd in
Corpus Christi, Nueces County, Texas (the “Corpus Christi Home” and, together with the Seaside
Home, hereafter referred to as the “Homes”), and (iii) the Sunshine Cemetery located at 2501 Rodd
Field Road in Corpus Christi, Nueces County, Texas (“Sunshine Cemetery” and, together with the
Seaside Cemetery, hereafter referred to as the “Cemeteries”); and



     WHEREAS, the parties desire that the Purchaser acquire substantially all of the assets,
rights, and properties of the Homes and the Cemeteries (collectively, the “Businesses”) from the
Company, and that the parties enter into certain related transactions, on the terms and subject to
the conditions hereafter set forth;



     NOW, THEREFORE, the parties agree as follows:



     1. Purchase and Sale of Assets.



     1.1. Transfer of Assets by the Company. Subject to the provisions of this Agreement,
the Company agrees to sell, and the Purchaser agrees to purchase, at the Closing referred to in
Section 2.1, all of the properties, assets, rights and business of the Businesses of every kind and
description, tangible and intangible, real, personal or mixed, wherever located (collectively, the
“Assets”), as they shall exist at the Effective Time (as defined in Section 2.2), including, but
not limited to, all of the following-described assets, rights and properties (but excluding those
described in Section 1.2):




     (i) all preneed and at-need notes and accounts receivable of the Cemeteries, all
preneed notes and accounts receivable of the Homes, and all at-need accounts receivable of
the Homes, other than the Retained At-Need Funeral Receivables described in Section 1.2(iii)
below;




     (ii) inventories of caskets (if any), vaults, urns, accessories and monuments of the
Homes, inventories of vaults, crypts, markers, bases and monuments of the Cemeteries, and
all other goods and inventories of the Businesses;




     (iii) fee simple title to all of the real estate and improvements of the Businesses
described on Schedule 3.5 (collectively, the “Real Property”); the Real Property
specifically includes, but is not limited to, the “Ocean Drive Entrance Tract” (herein so
called and so identified on Schedule 3.5) to be acquired by the Company prior to the Closing
and included in the Assets to be transferred to the Purchaser, as contemplated in Section
7.8 below;



 









 






     (iv) machinery, equipment, motor vehicles, furniture, fixtures, supplies, tools and the
other Fixed Assets and property, plant and equipment, including those described on Schedule
3.8 hereto;




     (v) all preneed contracts of the Businesses, and all rights under policies of insurance
available to fund preneed obligations, together with all cash, securities and other
investments to fund preneed and perpetual care obligations (whether in on deposit in the
applicable preneed or perpetual care account, awaiting deposit or in transit);




     (vi) the agreements, leases and commitments described on Schedule 3.9, excluding any
thereon as not being transferred to the Purchaser;




     (vii) all rights of the Company to the names “Seaside Funeral Home,” “Seaside Memorial
Park,” “Corpus Christi Funeral Home,” and “Sunshine Cemetery,” and all other trade names
used in the Businesses, together with all derivatives thereof, and all trademarks, trade
names, patents, processes, copyrights, know-how and similar intangible rights;




     (viii) all goodwill associated with the foregoing and otherwise with the Businesses;




     (ix) all permits and licenses of the Businesses, to the extent transferable;




     (x) all books, records, work papers, brochures and literature necessary for the
continued operation of or otherwise located at the Businesses (whether in tangible or
electronic format), customer lists, computers and computer software, the telephone and fax
numbers and listings for the Businesses, and all internet domain names (specifically
including www.seasidefuneral.com and www.seasidefuneralcemetery.com); and




     (xi) all other assets, rights and properties owned or leased by the Company that are
used in or necessary for the Businesses at the Effective Time, excluding those described in
Section 1.2.



     At the Closing, the Company shall convey to the Purchaser the Assets free and clear of any and
all liens, security interests, pledges, encumbrances or other title restrictions of any kind
(collectively, “Liens”), other than (i) Permitted Exceptions against Real Property described on
Schedule 3.3, and (ii) vehicle leases listed on Schedule 3.9.



     1.2. Retained Assets. Notwithstanding the foregoing, the following properties,
assets, rights and interests (collectively, the “Retained Assets”) are hereby excluded from the
purchase and sale contemplated hereby and are therefore not included in the Assets:




     (i) all cash on hand or on deposit, including but not limited to bank account balances,
certificates of deposit and marketable securities, whether at Bank of America, N.A. or
elsewhere, excluding, however, the cash, securities and other investments to fund preneed
and perpetual care obligations which are included in the Assets described in Section 1.1(v)
above;




     (ii) accounts receivable of the Homes arising from the at-need sale of funeral services
and merchandise, and for vaults and interment fees, to the extent services have been
performed or merchandise has been delivered in which the date of death has



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occurred prior to the Effective Time, whether such receivables are payable from
insurance proceeds, trust funds or other form of payment, and for which payment is collected
(as provided in Section 1.11 below) within 120 days after the Effective Time (collectively,
“Retained At-Need Funeral Receivables”);




     (iii) all other interests in real property owned or leased by the Company other than
the Real Property, specifically including but not limited to the Company’s interests in the
Lake Placid Estates Property described in Section 7.9; and




     (iv) any other assets and properties that are not used in connection with or are
necessary for the operation of the Businesses.



     1.3. Purchase Price. The purchase price for the Assets shall be $11,105,000 (the
“Purchase Price”). Of the Purchase Price, (i) an amount sufficient to discharge certain
indebtedness of the Company, as determined pursuant to Section 1.4, shall be paid to the holders of
such indebtedness, (ii) the sum of $750,000 (the “Escrow Amount”) shall be placed into escrow on
the Closing Date and thereafter maintained and disbursed in accordance with Section 10.4 and the
Escrow Agreement described therein, (iii) there shall be deducted from the Purchase Price the
amount agreed to by the parties to complete the Seaside Cemetery fence under Section 1.15, as well
as any adjustments for prorations agreed to by the parties under Section 1.7, and (iv) the balance
of the Purchase Price shall be paid to the Company in cash at Closing by wire transfer to such
account as the Company shall designate in writing at least three business days prior to the
Closing. The Purchase Price shall be subject to adjustment as provided in Section 7.7.



     1.4. Adjustment for Unassumed Liabilities. Prior to the Closing, the Company shall
deliver to the Purchaser a written statement, certified by the Company to be accurate and complete,
setting forth a description, and the outstanding balance as of the Effective Time, of all (i)
liabilities and obligations of the Company for borrowed money and indebtedness secured by Liens
against any of the Assets, and (ii) accounts and trade payable of the Businesses, including an
aging thereof (collectively, “Unassumed Liabilities”). At Closing, the Purchaser shall pay out of
the Purchase Price such portion thereof as shall be required to pay and discharge all Unassumed
Liabilities specified in clause (i) and those specified in clause (ii) which as of the Effective
Time are more than 30 days past due. Notwithstanding such payment, the Company shall remain
responsible for paying any remaining Unassumed Liabilities. Payments under this Section 1.4 shall
be deemed downward adjustments in the Purchase Price as provided in Section 1.3.



     1.5. Assumption of Liabilities. The Purchaser, upon the sale and purchase of the
Assets, shall, subject to Section 1.6 below, assume and agree to pay or discharge the following
liabilities and obligations of the Company (collectively, the “Assumed Liabilities”):




     (i) liabilities under those preneed contracts of the Businesses that are included in
the Assets, and for perpetual care at the Cemeteries, which are funded to the extent
required by applicable law (specifically including preneed liabilities for the delivery of
markers, for which preneed income is not required to be trusted and as to which no amounts
have been funded into trust);




     (ii) obligations arising after the Effective Time under the agreements, leases and
commitments of the Businesses described in Schedule 3.9 (other than agreements,



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leases and commitments, if any, which are indicated on such Schedule as not to be
assumed by the Purchaser);




     (iii) obligations to provide mausoleum spaces for crypts sold on a pre-construction
basis under the contracts listed on Schedule 1.5(iii);




     (iv) obligations in respect of employee reserves and residuals, as further described on
Schedule 3.17; and




     (v) vacation and sick leave of employees of the Businesses accrued in the ordinary
course of the Businesses, subject to proration as described in Section 1.7 below.



     The assumption by the Purchaser of the Assumed Liabilities shall not enlarge any rights or
remedies of any third parties under any contracts or arrangements so assumed. Nothing herein shall
prevent the Purchaser from contesting in good faith any of the Assumed Liabilities. At Closing,
the Purchaser shall deliver to the Company an instrument, dated the Effective Time and reasonably
satisfactory in form and substance to it, pursuant to which the Purchaser will assume the Assumed
Liabilities.



     1.6. Limitations on Assumption. Notwithstanding Section 1.5 above, the Purchaser will
not assume and does not agree to pay or discharge any obligations or liabilities of the Company not
specifically included in the Assumed Liabilities. In particular, without limiting the generality
of the definition of “Unassumed Liabilities” under Section 1.4 above, the Purchaser shall not
assume or agree to pay or discharge any of the following, whether known or unknown:




     (i) any notes or accounts payable or other obligations for borrowed money;




     (ii) any trade payables of any kind, regardless of whether entered into in the ordinary
course of business, no-compete payments, and amounts payable to any employee benefit plan or
to any preneed or perpetual care trust;




     (iii) any federal, state or local tax of any type, whether arising by reason of the
sale of the Assets or by operation of the Businesses prior to the Closing Date;




     (iv) any losses, costs, damages or expense based upon or arising from any claims,
litigation, legal proceedings or other actions against the Company based upon any set of
facts occurring prior to the Closing, including without limitation any litigation disclosed
on Schedule 3.14;




     (v) the liabilities and obligations under any warranties to customers with respect to
goods or products sold or services provided by the Company prior to Closing;




     (vi) all personal injury, product liability claims, claims of environmental damage,
claims of hazards to health, strict liability, toxic torts, enforcement proceedings, cleanup
orders and other similar actions or claims instituted by private parties or governmental
agencies, if any, with respect to the operation of the Businesses prior to Closing; or




     (vii) any other liability or obligation not specifically included within the Assumed
Liabilities.



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     1.7. Certain Prorations. All prepaid expenses and deposits, and all expenses for
which liability has accrued but whose payment is not yet due as of the Effective Time (including
but not limited to (i) utility deposits and charges, including electricity, water and sewer
charges, (ii) transferable business and license fees, including any retroactive adjustments
thereof, (iii) real and personal property taxes in connection with the Assets, (iv) employee wages
and operating expenses, and (v) similar prepaid and deferred items), together with all revenues and
expenses arising from the operation of the Businesses, shall be prorated and adjusted between the
Company and the Purchaser in accordance with the principle that the Company shall retain all
revenues and shall be responsible for all expenses allocable to the conduct of the Businesses up to
11:59 p.m. on December 31, 2006, and the Purchaser shall be entitled to all revenues and shall be
responsible for all expenses allocable to the conduct of said Business after the Effective Time.
Revenues and expenses shall be allocated according to the date of death of the deceased; provided
that the Company shall be responsible to pay all amounts due for markers to be delivered after the
Effective Time to the extent it has received payment from the customer prior to the Effective Time.
Utility services will be transferred to the Purchaser’s name on the Closing Date. If the actual
amounts to be prorated are not known as of the Closing Date, the prorations shall be made on the
basis of the best evidence then available, and thereafter, within thirty (30) days after actual
figures are received, a cash settlement will be made between the Company and the Purchaser.



     1.8. Instruments of Transfer. At the Closing, the Company shall deliver to the
Purchaser such instruments of transfer, assignment and conveyance, including (without limitation)
general warranty deeds, bills of sale, lease assignments and assignments of motor vehicle
registrations, all dated as of the Effective Time, transferring title to the Assets to the
Purchaser as may reasonably be requested by the Purchaser. Such instruments shall be reasonably
satisfactory in form and substance to the Purchaser and shall vest in the Purchaser good and
marketable title to all the Assets, free and clear of all Liens other than (i) Permitted Exceptions
against Real Property and (ii) vehicle leases listed on Schedule 3.9.



     1.9. Delivery of Records, Contracts and Trust Funds. At the Closing, the Company will
deliver to the Purchaser all of the leases, contracts, commitments and rights of the Businesses
constituting a portion of the Assets, with such assignments thereof and consents to assignment as
the Purchaser shall deem necessary to assure the Purchaser of their full benefit. Simultaneously
with such deliveries, the Company shall take all requisite steps to put the Purchaser in actual
possession and operating control of the Assets and all of the records, books and other data
necessary for the operation of the Businesses. In addition, at the Closing, the Company and the
Purchaser shall take all necessary or appropriate action to cause the transfer of the preneed and
perpetual care trust funds referred to in Section 3.10 including, without limitation, the obtaining
of any governmental and third party consents and the substitution of fund trustees.



     1.10. Taxes. Any sales or transfer taxes which may be payable in connection with the
sale of the Assets under this Agreement shall be paid by the Company.



     1.11. Retained At-Need Funeral Receivables. The Purchaser shall have the exclusive
(even as to the Company) right and control over the collection of Retained At-Need Funeral
Receivables. For each full or partial calendar month during the 120-day period following the
Effective Time in which any Retained At-Need Funeral Receivables are collected, the Purchaser shall
remit 100% of such collections to the Company by no later than the 15th day of the following month.
The Purchaser shall pursue collection of Retained At-Need Funeral



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Receivables by substantially the same efforts as used on its collection of other accounts
receivable, but in no event shall the Purchaser be required to institute suit or refer any account
to a collection agency. Any collections on Retained At-Need Funeral Receivables following
expiration of such 120-day period shall be for the account of the Purchaser.



     1.12. Employee Matters. On the Closing Date, the Purchaser may (but shall not be
required to) offer employment to each employee of the Businesses listed on Schedule 3.17. Each
such employee so offered employment who accepts shall, effective as of the Closing Date, cease to
be an employee of the Company and shall thereupon become an employee of the Purchaser. The Company
shall be responsible for satisfying all claims, if any, of such employees as to health benefits,
workers compensation claims, termination and severance benefits, and any withdrawal liability and
vested rights under any pension or profit sharing plans, all arising and accrued to the Closing
Date, and in no event shall the Purchaser have any liability or responsibility in respect thereof.



     1.13. Lockbox/ACH Services. The Company shall permit the Purchaser to utilize the
Company’s existing lockbox account and ACH wire services at American Bank in Corpus Christi, for
transitional purposes until such time (not to exceed 180 days following the Effective Time) that
the Purchaser is able to have customer payments redirected to the Purchaser’s own accounts. The
parties shall coordinate with one another such that the Purchaser receives out of such accounts or
funds transfers all cash which is included in the Assets or otherwise for its account in accordance
with this Agreement, and that the Company receives any cash included in or arising from the
Retained Assets or which is otherwise for its account in accordance with this Agreement.



     1.14. Lakeside Perpetual Care Fund. The parties acknowledge that the Company has
established a perpetual care account or fund with Bank of America, N.A. (the “Lakeside PC Account”)
that was intended for the conversion of Sunshine Cemetery from a family cemetery into a perpetual
care cemetery and the expansion thereof into the Lake Placid Estates Property. The Company
deposited the principal sum of $50,000 into the Lakeside PC Account, has not withdrawn any of the
principal thereof, initially applied for the establishment of a perpetual care cemetery but has not
sold any spaces or other property at this location. The Assets shall include the Company’s
interests in the Lakeside PC Account only insofar as it shall be necessary for the Purchaser to
comply with applicable law with respect to its ownership and operation of the Sunshine Cemetery
(without the Purchaser having to fund any amounts thereto), provided that the Purchaser will not
itself sell any spaces or other property in Sunshine Cemetery on a perpetual care basis supported
by the Lakeside PC Account. It is the Company’s intent to seek to withdraw its application and
permission to dissolve the Lakeside PC Account and cause the distribution of all funds therein. The
Purchaser agrees to reasonably cooperate with the Company in such efforts, at no out-of-pocket cost
to the Purchaser. If the Company demonstrates to the Purchaser’s reasonable satisfaction that it
has received all applicable consents and approvals required to permit the dissolution of the
Lakeside PC Account and the distribution of all funds therein, the Purchaser shall take all such
action reasonably requested of it so that such funds may be distributed to the Company or its
designee.



     1.15. Perimeter Fence. The Company is in the process of completing construction of a
fence along the Airline Road side of the Seaside Cemetery. The Company represents that it has
previously purchased and has on hand at the Seaside Cemetery all materials necessary to complete
such construction, and such materials shall be included in the Assets. The Company has heretofore
been utilizing Seaside Cemetery personnel for such construction. If construction



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of the fence is not complete by the Closing Date, then at or prior to the Closing, the parties
shall mutually agree as to the number of labor hours which are estimated to be required to complete
construction and the weighted average cost per hour, and the product of such hours to completion
multiplied by such average cost shall be deducted from the Purchase Price, and the Purchaser shall
be responsible for completing such construction following the Closing.



     1.16. Further Assurances. The Company shall from time to time after the Closing,
without further consideration, execute and deliver such instruments of transfer, conveyance and
assignment (in addition to those delivered pursuant to Section 1.8), and shall take such other
action, as the Purchaser may reasonably request to more effectively transfer, convey and assign to
and vest in the Purchaser, and to put the Purchaser in actual possession and control of, each of
the Assets.



     2. The Closing.



     2.1. Time and Place. The closing of the transactions contemplated under this
Agreement (the “Closing”) shall occur at the offices of Welder Leshin, L.L.P., 800 N. Shoreline,
Suite 300-N, Corpus Christi, Texas 78401 at 9:00 a.m. on January 5, 2007, or at such other date,
time or place as may be mutually agreed upon by the parties, but in no event later than January 31,
2007 (subject to Section 7.4, hereafter the “Outside Closing Date”). The date and time on which
Closing actually occurs is herein called the “Closing Date.” All action to be taken at the Closing
as hereinafter set forth, and all documents and instruments executed and delivered, and all
payments made with respect thereto, shall be considered to have been taken, delivered or made
simultaneously, and no such action or delivery or payment shall be considered as complete until all
action incident to the Closing has been completed.



     2.2. Effective Time. The parties agree that, regardless of when Closing actually
occurs, the purchase and sale of the Assets hereunder shall be deemed to have occurred for all tax,
accounting and other purposes as of 12:01 a.m. on January 1, 2007 (the “Effective Time”), and the
parties agree to reflect the Effective Time for such purposes in all tax returns and reports in
connection therewith. The Company shall take reasonable measures between the Effective Time and
the Closing Date to minimize the amount of deposits made into Company accounts, recognizing that if
Closing occurs, revenues after the Effective Time are for the Purchaser’s account. In any event,
if Closing occurs, the parties shall coordinate with one another at and following Closing so that
all business activity between the Effective Time and the Closing shall be for the Purchaser’s
account.



     2.3. Non-Competition Agreement. In addition to the purchase and sale of the Assets,
at the Closing Michael L. Mintz and Henry Nuss, residents of Nueces County, Texas (together, the
“Directors”) and the Purchaser shall each execute and deliver to the other a Non-Competition
Agreement to be dated the Effective Time and in substantially the form attached as Exhibit 2.2 (the
“Non-Competition Agreement”). The parties acknowledge that the Directors are members of the Board
of Directors of the Company, have had and continue to have access to the trade secrets, customer
information and other confidential and proprietary information of the Businesses and have become
identified with the goodwill of the Homes and the Cemeteries, and that the Purchaser would be
unwilling to consummate the transactions hereunder but for the Directors’ covenants and agreements
under the Non-Competition Agreement.



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     3. Representations and Warranties of the Company. The Company represents and warrants
to and agrees with the Purchaser that:



     3.1. Organization and Existence. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, with all requisite corporate
power to enter into and perform its obligations under this Agreement.



     3.2. Financial Information. The Company has delivered to the Purchaser (i) the
unaudited (compiled) statements of assets, liabilities and stockholders’ equity-income tax basis of
the Company at December 31, 2005 and 2004 and the related unaudited (compiled) statements of
revenues, expenses and retained earnings and cash flows-income tax basis for the respective
twelve-month periods of operations of the Company then ended, together with the footnotes thereto
and the compilation report thereon of Jennings, Hawley & Co., P.C. dated April 21, 2006, and (ii)
the unaudited balance sheet of the Company at September 30, 2006 and the related unaudited income
statement for the nine-month period of operations then ended. All of such financial statements
are, to the Company’s knowledge, true and correct, have been prepared in accordance with the books
and records of the Company, and present fairly the respective financial positions of the Company at
the dates thereof and the respective results of its operations for the periods then ended in
accordance with the accounting basis used by the Company for federal income tax purposes. Schedule
3.2 accurately sets forth for the twelve-month periods ended December 31, 2004 and 2005 and for the
ten months ended October 31, 2006, to the Company’s knowledge, (i) for each Home the number of
contracts entered into in which human remains have been prepared for final disposition or delivery,
and among such contracts the number or percentage in which disposition is by burial, cremation or
other means, and (ii) for each Cemetery, the number of interments performed. Schedule 3.2 also
accurately sets forth, to the Company’s knowledge for each Cemetery, the area which has been
platted, developed and dedicated for cemetery use, the area which is undeveloped but usable, the
area which is unusable for development, and the approximate minimum number of unsold individual
grave spaces, unsold niches, unsold mausoleum crypts and unsold lawn crypts.



     3.3. Title to and Status of Assets. All assets, rights and properties required in the
operation of the Businesses are owned or validly leased by the Company and are included within the
Assets. The Company is in actual possession and control of all properties owned or leased by it
which are required in the operation of the Businesses, and the Company has good and marketable
title to all of the Real Property and the other Assets, free and clear of all Liens other than (i)
Liens described on Schedule 3.3 that are to be released at or prior to Closing, (ii) easements and
other title exceptions to the Real Property described on Schedule 3.3 as “Permitted Exceptions”
(herein so called), (iii) vehicle leases described on Schedule 3.9, and (iv) the Ocean Drive
Entrance Tract, which the Company shall acquire prior to Closing as contemplated in Section 7.8 and
as to which at Closing the Company will have good and marketable title, free and clear of all Liens
other than Permitted Exceptions.



     3.4. Absence of Changes or Events. Since September 30, 2006, there has not been, to
the Company’s knowledge:




     (i) any material adverse change in the financial condition, operations, properties or
prospects of the Businesses;




     (ii) any material damage, destruction or losses against the Businesses or any of its
properties;



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     (iii) any claim made against the Company alleging material damages for alleged
negligence or other tort or breach of contract by or affecting the Company;




     (iv) any sale, transfer or other disposition of, or agreement to sell, transfer or
otherwise dispose of, any of the inventories or other assets or properties of the Company,
except herein or in the ordinary course of business;




     (v) any labor strike or labor dispute, or the entering into of any collective
bargaining agreement, with respect to employees of the Company; or




     (vi) any other material transaction or event entered into or affecting the Company
other than in the ordinary course of the Businesses.



     3.5. Real Property. Schedule 3.5 sets forth a legal description of all parcels of
real property included in the Real Property, and also briefly describes each building and major
structure and improvement thereon. No person other than the Company has any interest in, or other
right to occupy any portion of, the Real Property (except as disclosed on Schedule 3.3, and except
for the lease of the flower shop disclosed on Schedule 3.9). The Real Property is the only
interest in real property required for the conduct of the business of the Businesses as presently
conducted. There is not, to the Company’s knowledge, any pending or threatened proceeding for the
taking or condemnation of the Real Property or any portion thereof. The Company is not a “foreign
person” or a “United States real property holding corporation” (as defined in Section 1445(f)(3) of
the Internal Revenue Code of 1986, as amended [the “Code"], and the regulations issued thereunder).
The Company shall deliver at Closing a non-foreign affidavit in recordable form containing such
information as shall be required by Code Section 1445(b)(2) and the regulations issued thereunder.
All bills and other payments due with respect to the Company’s operation and maintenance of the
Real Property have been (or on the Closing Date will be) paid, and no Liens or other claims for the
same will be in force against any part of the Real Property.



     3.6. Tax Matters. All federal, state, county, local and other taxes due and payable
on or before the date of this Agreement in respect of the operation of the Company and the
ownership of the Assets have been paid. All tax returns and reports required to be filed for all
such taxes have been filed with all taxing authorities, and all such tax returns and reports are,
to the Company’s knowledge, true and correct. True and correct copies of the federal income tax
returns filed by the Company for each of its last three taxable years have been furnished to the
Purchaser. No assessments of deficiencies have been made against the Company which are presently
pending or outstanding. No agreements, waivers or extensions of time are in effect for the
assessment of deficiencies in respect of the business or any of the Assets. Following the Closing,
the Company shall be responsible for accurately and completely preparing, signing and filing all
tax returns and paying all taxes in respect of the assets and operations of the Company through the
Effective Time and for the sale of the Assets.



     3.7. Accounts Receivable; Inventory. The accounts receivable of the Businesses are,
and on the Closing Date will be, valid and legally enforceable obligations of the account parties
and are not subject to any claim of offset or deduction against the Company. The Company does not
own any of its inventory of caskets; all such inventory is held on consignment. At the Closing,
the Company will deliver to the Purchaser a list of (i) all accounts receivable of the Businesses,
segregated according to those included in the Assets and those retained by the Company among the
Retained Assets, in each case as of a date no earlier than January 1, 2007, and after giving effect
to any bad debt reserves or charge-offs taken by the Company in 2007 as



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show on such list, and (ii) a list of its consigned inventory of caskets and a list of the
Cemeteries’ inventory of vaults and granite bases, as of the Effective Time.



     3.8. Fixed Assets. Schedule 3.8 lists all motor vehicles and other material items of
equipment, fixtures, furniture and other fixed assets used in the operation of the Businesses
(“Fixed Assets”), all of which are included in the Assets. ALL IMPROVEMENTS ON THE REAL PROPERTY,
AND ALL FIXED ASSETS OF THE BUSINESSES, ARE BEING SOLD TO THE PURCHASER HEREUNDER “AS IS,” IN THEIR
PRESENT CONDITION, WITHOUT REPRESENTATION OR WARRANTY WHATSOEVER REGARDING THEIR PHYSICAL
CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.



     3.9. Contracts and Commitments. Schedule 3.9 sets forth a complete description of:




     (i) all (i) contracts or commitments for capital expenditures for the Company involving
obligations aggregating in excess of $5,000, (ii) leases under which personal property is
leased by the Company and which are not cancelable by either party thereto without penalty
upon notice of 30 days or less or pursuant to which rentals exceed $1,000 per annum or
$5,000 in the aggregate, or (iii) contracts and agreements of the Company which do not
terminate or are not terminable by the Company upon notice of 30 days or less or which
involves an obligation on its part in excess of $1,000 per annum or $5,000 in the aggregate;




     (ii) any other contract and commitment of the Company entered into outside the ordinary
course of business; and




     (iii) all other contracts and commitments of the Company to be included in the Assets
and transferred to and assumed by the Purchaser at Closing.



     Each contract and other document required to be described in Schedule 3.9 is, to the Company’s
knowledge, valid and in full force and effect, with neither party in default thereunder. A true
and correct copy of each document listed on Schedule 3.9 has been delivered to the Purchaser by the
Company.



     3.10. Preneed Contracts and Trust Accounts. Schedule 3.10 accurately lists, to the
Company’s knowledge, as of the date of this Agreement (or as of a date no older than 45 days prior
to the date hereof), all preneed agreements included in the Assets, including contract number,
customer name, sale date, contract price and other data normally included in the Company’s internal
records in a compilation of preneed agreements; a list of all insurance policies used to fund
preneed agreements, including policy number, insured and owner names, issue date, current and face
amount of insurance, and other data included in the Company’s internal records in a compilation of
insurance policies (and for each carrier providing such insurance benefits, the contact
information for the carrier, including contact person, address and phone number); and the trust
liability report for each trust account (preneed and perpetual care) relating to the Businesses,
indicating the location of each and the amount held in trust, with detail of principal, income or
earnings, withdrawals and outstanding balance. The Company has separately provided to the
Purchaser true and complete copies of the trust agreements for such trusts, as amended and
currently in effect, together with bank statements or other periodic report of the trustee for each
trust, tax returns, and the audit or other reports furnished to or prepared by the state regulatory
agency which oversees such trusts. All preneed contracts required to be listed on Schedule 3.10
(x) have largely been, to the Company’s knowledge, entered into in the



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normal course of business at regular retail prices, or pursuant to a sales promotion program,
solely for use by the named customers and members of their families on terms not more favorable
than shown on the specimen contracts which have been delivered to the Purchaser, (y) are subject to
the rules and regulations of the Businesses as now in force (copies of which have been delivered to
the Purchaser), and (z) on the date hereof are in full force and effect, subject to no offsets,
claims or waivers, and the Company is not in default thereunder. All funds received by the Company
under preneed contracts and for perpetual care which are required to have been deposited have been,
to the Company’s knowledge, deposited in the appropriate accounts and administered and reported in
accordance with the terms thereof as required by applicable laws and regulations. The aggregate
market value of such preneed accounts, trusts and other deposits is equal to or greater than the
aggregate cost to provide the services and merchandise covered thereby (it being understood that
the foregoing does not apply to markers, for which preneed income is not required to be trusted).
The services heretofore provided by the Businesses have been, to the Company’s knowledge, generally
rendered in a professional and competent manner consistent with prevailing professional standards,
practices and customs.



     3.11. IP Rights. Schedule 3.11 accurately and completely lists all trade names used
in the operation of the Businesses. The Company owns such intellectual property rights as are
necessary to the conduct of the Businesses as presently conducted, including without limitation the
use of the trade names referred to in Section 1.1(vii). The Company has not been charged with
infringement of any intellectual property rights of any other person, nor does the Company know of
any infringement of the Company’s trade names.



     3.12. Insurance and Claims. The Company maintains such policies of insurance in such
amounts, and which insure against such losses and risks, as it reasonably deems appropriate. Valid
policies for such insurance will remain outstanding and duly in force at all times until the
Closing.



     3.13. Licenses, Permits, Etc. Schedule 3.13 lists all licenses, franchises, permits,
certificates, consents, rights and privileges currently held by or issued to the Company, and by
each funeral director and embalmer of the Homes and each employee holding an insurance agent’s
license, which are all that the Company reasonably deems necessary or appropriate for the
operation of the Businesses. All such items are in full force and effect.



     3.14. Litigation. There are no claims, actions, suits, proceedings or investigations
pending or, to the Company’s knowledge, threatened against the Company affecting the Businesses or
the Company, or any of the Assets, at law or in equity or before or by any court or federal, state,
municipal or other governmental department, commission, board, agency or instrumentality, except
for lawsuit disclosed on Schedule 3.14. To its knowledge, the Company is not subject to, and its
assets are not affected by, any continuing court or administrative order, writ, injunction or
decree, except for findings arising in Texas Department of Banking audits that have been fulfilled
and which the Company has previously disclosed to the Purchaser; nor is the Company in default with
respect to any order, writ, injunction or decree issued by any court or foreign, federal, state,
municipal or other governmental department, commission, board, agency or instrumentality.



     3.15. Compliance with Laws. To the Company’s knowledge, the Businesses are currently
operating in all material respects with federal, state, municipal and other statutes, rules,
ordinances and regulations applicable to them and the Assets (including without limitation all



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occupational safety and health rules, regulations and laws, and laws and regulations
applicable to preneed contracts and trust accounts, including the so-called “FTC Funeral Rule”).



     3.16. Environmental Matters. The Purchaser will have full opportunity under Section
7.7 to conduct environmental site assessments of the Real Property and perform other due diligence
in connection therewith. The following representations of the Company are therefore qualified in
their entirety (i) by any information obtained by the Purchaser in such investigations and (ii) to
the extent of the Company’s knowledge.



     The Company has complied and is in compliance in all material respects with all Environmental
Laws (as hereinafter defined). The Company has not received any written notice that the Businesses
or the Real Property is subject to any liabilities or investigatory, remedial or corrective
obligations arising under any Environmental Laws. There does not exist on any portion of the Real
Property any underground storage tank or surface impoundments (the Company has disclosed to the
Purchaser the existence of a removed underground storage tank for which a final site closure report
was filed in July 2002); any asbestos-containing material that is in friable or frayed condition;
or any materials or equipment containing polychlorinated biphenyls. The Company has not treated,
stored, disposed of, arranged for or permitted the disposal of, transported, handled, or Released
any substance, including without limitation any Hazardous Materials, or owned or operated any
facility or property, so as to give rise to liabilities for response costs, natural resource
damages or attorneys fees pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”), as amended, or similar state Environmental Laws, except for
formaldehyde and other chemicals used in the ordinary course of the conduct of the Businesses,
which the Company has obtained, used, stored and disposed of in accordance with all Environmental
Laws. For purposes of this Section 3.16:



     “Environmental Laws” means all laws concerning pollution or protection of the environment
(including without limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or cleanup of any Hazardous Materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).



     “Hazardous Materials” means any hazardous, toxic, dangerous or other waste, substance of
material defined as such in, regulated by or for purposes of any Environmental Law.



     “Release” has the meaning set forth in CERCLA.



     3.17. Employees. Schedule 3.17 correctly and completely lists the names and annual or
hourly rates of salary and other compensation of all the employees and agents of the Company, and
the outstanding balance of and method for calculating employee reserves and residuals. By the time
of Closing, the Purchaser will have interviewed each of the Company’s employees and made such
decisions as it has deemed appropriate under Section 1.12. Schedule 3.17 also sets forth each such
employee’s tenure for purposes of determining vacation time and sick leave, and upon hiring any
such employee under Section 1.12, the Purchaser agrees to give each such employee credit on the
same basis as that vacation and sick leave is provided for Purchaser’s other employees, crediting
such employee’s longevity to the beginning date of such employee’s employment by the Company.
Schedule 3.17 also lists all employment, agency, compensation, noncompetition, confidentiality,
severance, bonus and other similar agreements with employees



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and agents of the Businesses, true and complete copies of which have been delivered to the
Purchaser. By the time of Closing, the Company shall have fully funded all obligations accrued
through Closing under its 401(k) or profit sharing plan and shall have provided the Purchaser with
reasonable assurance thereof. There are not pending nor, to the Company’s knowledge, threatened
against the Company any general labor disputes, strikes or concerted work stoppages, and there are
no discussions, negotiations, demands or proposals that are pending or have been conducted or made
with or by any labor union or association with respect to any employees of the Company. The
Company believes that the relations between the Company and its employees are good.



     3.18. Books and Records. To the Company’s knowledge, all books and records of the
Company have been maintained in all material respects in accordance with good business practice and
in accordance with all laws, regulations and other requirements applicable to the Businesses.



     3.19. Finders. The Company is not a party to or in any way obligated under any
contract or other agreement, and there are no outstanding claims against the Company, for the
payment of any broker’s or finder’s fee in connection with the origin, negotiation, execution or
performance of this Agreement.



     3.20. Authority. The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all necessary corporate action required on its part. This
Agreement is legally binding and enforceable against the Company in accordance with its terms.
Neither the execution, delivery nor performance of this Agreement by the Company will result in a
violation of the Articles of Incorporation or Shareholders’ Agreement governing the Company, nor
violate any order, writ, injunction or decree of any court, administrative agency or governmental
body.



     3.21. Schedules. The Schedules referred to in this Section 3 will be prepared in a
separate binder or volume, signed for identification by the President of the Company and will be
delivered in the manner described in Section 7.6.



     4. Representations and Warranties of the Purchaser. The Purchaser represents and
warrants to and agrees with the Company that:



     4.1. Organization and Existence. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, and has all requisite
corporate power to enter into and perform its obligations under this Agreement.



     4.2. Authority of the Purchaser. The execution, delivery and performance by the
Purchaser of this Agreement have been duly authorized by all necessary corporate action required on
its part. This Agreement is valid and binding upon the Purchaser and enforceable against it in
accordance with their respective terms. Neither the execution, delivery or performance by the
Purchaser of this Agreement will conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under, the Articles of Incorporation or bylaws of the
Purchaser or under any indenture, mortgage, deed of trust or other contract or agreement to which
it is a party or by which the Purchaser or its property is bound, or violate any order, writ,
injunction or decree of any court, administrative agency or governmental body.



     4.3. Finders. The Purchaser is not a party to or in any way obligated under any
contract or other agreement, and there are no outstanding claims against it, for the payment of



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any broker’s or finder’s fee in connection with the origin, negotiation, execution or
performance of this Agreement.



     5. Covenants of the Company Pending Closing. The Company covenants with the Purchaser
that:



     5.1. Conduct of Business. From the date of this Agreement to the Closing Date, the
Businesses will be operated only in the ordinary course, and, in particular, without the prior
written consent of the Purchaser, the Company will not:




     (i) cancel or permit any insurance to lapse or terminate, unless renewed or replaced by
like coverage;




     (ii) commit any act or permit the occurrence of any event or the existence of any
condition of the type described in Section 3.4;




     (iii) enter into, modify or renew any contract, agreement or commitment of the type
described in Section 3.9;




     (iv) hire, fire, reassign or make any other change in key personnel of the Company, or
increase the rate of compensation or make any other material changes in the terms of their
employment; or




     (v) take any other action which would cause any of the representations and warranties
made in Section 3 hereof not to be true and correct in all material respects on and as of
the Closing Date with the same force and effect as if the same had been made on and as of
the Closing Date.



     The Company may, without the Purchaser’s prior approval, pay cash bonuses or compensation to
employees of the Businesses as the Company deems appropriate, to the extent related to the sale of
Assets hereunder, provided that (i) such bonuses or compensation are completely fulfilled by the
Company out of the cash included in Retained Assets, and (ii) any communications to employees
regarding such bonuses or compensation (as well as any other communications to employees relating
to the sale of Assets or their possible employment following the Closing) shall be conducted
jointly with the Purchaser.



     5.2. Access to Information. Prior to Closing, the Company has given, and will
continue to give, to the Purchaser and its counsel, accountants and other representatives, full and
free access to all of the properties, books, contracts, commitments and records of the Company so
that the Purchaser may have full opportunity to make such investigation as it shall desire to make
of the Businesses and the affairs of the Company and the Assets. The Company has provided, and
will also continue to provide, the Purchaser and its representatives with access to all employees
of the Businesses to afford the Purchaser the opportunity to conduct such interviews and
evaluations as the Purchaser deems appropriate.



     5.3. Consents and Approvals. The Purchaser shall be responsible for obtaining all
consents, approvals, authorizations and other actions of or by any administrative agency, bureau or
other governmental authority, including without limitation the Texas Department of Banking and the
Texas Funeral Commission, and for any declaration, filing, or registration with any public body,
governmental or regulatory authority, that is necessary or required as a condition to the
Purchaser’s operation of the Businesses being purchased pursuant to this Agreement. The




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Company will cooperate with the Purchaser in its efforts to obtain the necessary
consents and approvals of other persons which may be required to be obtained on their part to
consummate the transactions contemplated by this Agreement, including the giving of such notices as
may be required under applicable law as requested by the Purchaser.




     5.4. No Shop. For so long as this Agreement remains in effect, the Company agrees
that it will not enter into any agreements or commitments, or initiate, solicit or encourage any
offers, proposals or expressions of interest, or otherwise hold any discussions with any potential
buyers, investment bankers or finders, with respect to the possible sale or other disposition of
all or any substantial portion of the Assets, the sale of all or a controlling interest in the
stock of the Company, or the merger or consolidation of the Company, other than with the Purchaser.
If the Company or anyone acting on its behalf (including either Director) receives from any third
party any inquiry regarding such a transaction, the Company shall promptly notify the Purchaser.



     5.5. Employee Training; Systems Installation. To help prepare for and facilitate the
transition of the Businesses to the Purchaser’s ownership at and following the Effective Date, the
Purchaser intends prior to Closing to begin providing certain training to select employees of the
Businesses and to begin installation of certain of the Purchaser’s management information systems.
The Company agrees to allow the Purchaser to provide such training and installation. All training
modules and all such systems shall remain the sole and exclusive property of the Purchaser, but the
Purchaser’s training and installation shall be at its sole cost, expense and risk. The Company
shall not be required to incur any out-of-pocket expenses in connection with such training and
installation. The Company makes no representation or warranty whatsoever regarding the
compatibility of the Businesses’ systems with those of the Purchaser. If this Agreement is
terminated for any reason, the Purchaser will be entitled to remove, at its sole risk and expense,
all training modules and systems so provided or installed by it.



     6. Covenants of the Purchaser Pending Closing. The Purchaser covenants with the
Company that:



     6.1. Consents and Approvals. The Purchaser will use its best efforts to obtain the
necessary consents and approvals of other persons which may be required to be obtained on its part
to consummate the transactions contemplated in this Agreement.



     6.2. Confidentiality. Prior to the Closing, the Purchaser and its representatives
will hold in confidence all data and information obtained with respect to the Businesses from any
representative or employee of the Company, including the accountants or legal counsel of the
Company, or from any books, records or computer files of any of them, in connection with the
transactions contemplated by this Agreement. If the transactions contemplated hereby are not
consummated, neither the Purchaser nor its representatives shall use such data or information or
disclose the same to others, except as such data or information is published or is a matter of
public knowledge or is required by an applicable law or regulation to be disclosed. If this
Agreement is terminated for any reason, all written data and information obtained by the Purchaser
from the Company or their representatives in connection with the transactions contemplated by this
Agreement shall be returned to the Company.



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     7. Conditions to Obligations of the Purchaser. The obligations of the Purchaser under
this Agreement shall be subject to the following conditions, any of which may be expressly waived
by the Purchaser in writing:



     7.1. Representations and Warranties True; Covenants Performed. The Purchaser shall
not have discovered any material error, misstatement or omission in the representations and
warranties made by the Company in Section 3 hereof; the representations and warranties made by the
Company herein shall be deemed to have been made again at and as of the time of Closing and shall
then be true and correct; the Company shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by them at or prior to the
Closing; and the Purchaser shall have received a certificate, signed by the President of the
Company, to the effect of the foregoing provisions of this Section 7.1.



     7.2. Opinion of Counsel. The Company shall have caused to be delivered to the
Purchaser an opinion of Welder Leshin, L.L.P., counsel for the Company, dated the Closing Date, in
substantially the form of Exhibit 7.2.



     7.3. Consents and Approvals. The Purchaser shall have obtained all consents and
approvals of other persons and governmental authorities to the transactions contemplated by this
Agreement.



     7.4. No Loss or Damage. Prior to the Closing there shall not have occurred any loss
or damage to any substantial portion of the Assets, regardless of whether such loss or damage was
insured. In the event of any such loss or damage, the Company shall promptly inform the Purchaser,
and the Company shall be allowed a reasonable time thereafter (not to exceed sixty (60) days after
the Outside Closing Date) within which to repair or replace such loss or damage. The Company,
however, shall be under no obligation to repair or replace such loss. In the event the Company
does not promptly begin such repair or replacement or do not complete such repair or replacement
within said 60-day period, the Purchaser may (in its sole discretion) either (a) complete the sale
contemplated by this Agreement (with such Assets in their damaged condition) and receive an
assignment of the Company’s insurance claim or claims relating to such loss or damage, or (b)
terminate this Agreement without any obligation to pay any amounts to the Company.



     7.5. Approval by Counsel. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or incidental thereto and all
other related legal matters shall have been approved by counsel for the Purchaser.



     7.6. Pre-Acquisition Review; Schedule Delivery. The Purchaser and its representatives
shall have completed a pre-acquisition review of the financial information, books and records, and
properties and assets of the Company and the Businesses and shall have discovered no change in the
business, assets, operations, financial condition or prospects of the Company or the Businesses
which could, in the sole determination of the Purchaser, have an adverse effect on the value to the
Purchaser of the Assets and business being acquired hereunder. In addition, the Company shall have
delivered to the Purchaser the Schedules to this Agreement in the manner described in Section 3.21
on or before January 3, 2007, the disclosures in which shall be as of such date (except to the
extent that a different date is called for in the applicable Section), and the disclosures in such
Schedules shall be acceptable to the Purchaser in its sole determination. Also, the lists of
accounts receivable and inventory delivered to the Purchaser under Section 3.7 shall be acceptable
to the Purchaser.



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     7.7. Environmental, OSHA and Structural Reports. There shall have been conducted, at
the Purchaser’s expense, (i) a Phase I (and, if deemed necessary by Purchaser, a Phase II)
environmental inspection of the Businesses and the Real Property by an environmental consulting
firm selected by Purchaser, (ii) a health and safety inspection of the Businesses by a person (who
may be an employee of the Purchaser) or firm selected by the Purchaser and who is qualified and
experienced in such matters in the funeral industry, and (iii) a structural inspection of the
Businesses by an engineering firm selected by the Purchaser. If any remedial or corrective actions
are recommended as a result of such inspections, then the cost thereof in an amount not to exceed
$50,000 in the aggregate shall be deducted from the Purchase Price; if the cost of such actions
exceeds $50,000, then the Purchaser may (in its sole discretion) either (a) proceed with Closing
and deduct $50,000 from the Purchase Price, or (b) terminate this Agreement without any obligation
to pay any amounts to the Company. In any event, it shall be a condition to the Purchaser’s
obligations hereunder that the results of the reports of such firms or persons shall be
satisfactory to Purchaser in its sole discretion.



     7.8. Ocean Drive Entrance Tract. The Company shall have acquired fee simple title to
the Ocean Drive Entrance Tract and be prepared to transfer title thereto to the Purchaser, together
with all other Real Property, free and clear of all Liens other than Permitted Exceptions.



     7.9. Lake Placid Estates Property. There shall have been imposed in favor of the
Purchaser on the real property located within the Lake Placid Estates Subdivision and the related
real property connecting Lake Placid Estates to Sunshine Cemetery, all as further described on
Schedule 7.9 (collectively, the “Lake Placid Estates Property”) a restriction prohibiting the use
thereof as a funeral home, mortuary, crematory, cemetery or related business for 25 years after the
Closing Date, pursuant to a written instrument signed and notarized by the Company or other owner
of the Lake Placid Estates Property, suitable for recordation and in form and content reasonably
satisfactory to the Purchaser. In addition, the Purchaser shall be reasonably satisfied that no
prior Liens exist against the Lake Placid Estates Property which would have priority over such deed
restriction, or that any holders of such Liens shall have consented to such deed restriction.



     7.10. Title Insurance. The Purchaser shall have received a Owner’s Policy of Title
Insurance issued to Purchaser insuring its ownership interest in the Real Property. Such policy
shall have been issued in an agreed-upon amount by First American Title Insurance Company or
another title company reasonably acceptable to the parties (the “Title Company”) and shall be
subject only to Permitted Exceptions and any standard printed exceptions included in a Texas
standard form Policy of Title Insurance; provided, however, that such policy shall have deleted any
exceptions regarding restrictions or be limited to restrictions that are Permitted Exceptions, any
standard exceptions pertaining to discrepancies, conflicts or shortages in area shall be deleted
except for “shortages in area”, and any standard exceptions for taxes shall be limited to
subsequent years. All premiums and other costs associated with issuing such policy shall be borne
equally between the Company and the Purchaser.



     7.11. Survey. The Purchaser shall have received an ALTA/ACSM survey prepared by a
licensed surveyor approved by the Purchaser and acceptable to the Title Company, with respect to
each parcel of the Real Property, which survey shall comply with any applicable standards under
Texas law, be sufficient for Title Company to delete any survey exception contained in the Owner’s
Policy of Title Insurance referred to in Section 7.10, and otherwise be in form and content
acceptable to Purchaser. The fees and costs associated with such survey shall be borne equally
between the Company and the Purchaser.



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     7.12. Lien Releases. The holders of any Liens against any of the Assets shall have
executed and delivered written releases of such Liens, all in recordable form and otherwise
acceptable to the Purchaser.



     7.13. Shareholder Consent. The Purchaser shall have received a written instrument,
reasonably acceptable to the Purchaser, signed by every shareholder of the Company in which such
shareholders acknowledge the transactions contemplated by this Agreement and the exhibits hereto
(specifically including but not limited to the Non-Competition Agreement, including the
consideration payable to the Directors thereunder), and such shareholders provide their consent
thereto and waive any dissenters’ rights in connection therewith.



     7.14. Non-Competition Agreement. The Directors shall have executed and delivered the
Non-Competition Agreement to the Purchaser.



     8. Conditions to Obligations of the Company. The obligations of the Company under
this Agreement shall be subject to the following conditions, any of which may be expressly waived
by the Company in writing:



     8.1. Representations and Warranties True; Covenants Performed. The Company shall not
have discovered any material error, misstatement or omission in the representations and warranties
made by the Purchaser in Section 4 hereof; the representations and warranties made by the
Purchaser herein shall be deemed to have been made again at and as of the time of Closing and shall
then be true and correct; the Purchaser shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it at or prior to the
Closing; and the Company shall have received a certificate, signed by an executive officer of the
Purchaser, to the effect of the foregoing provisions of this Section 8.1.



     8.2. Opinion of Counsel. The Purchaser shall have caused to be delivered to the
Company an opinion of Thompson & Knight, LLP, counsel for the Purchaser, dated the Closing Date, in
substantially the form of Exhibit 8.2.



     8.3. Consents and Approvals. The Purchaser shall have obtained all consents and
approvals of other persons and governmental authorities to the transactions contemplated by this
Agreement.



     8.4. Approval by Counsel. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or incidental thereto and all
other related legal matters shall have been approved by counsel for the Company.



     8.5. Non-Competition Agreement. The Purchaser shall have executed and delivered the
Non-Competition Agreement to the Directors and shall have paid to them the consideration called for
thereunder to be paid to them on the Closing Date.



     9. Nature and Survival of Representations and Warranties; Damage Claims for Breach.



     9.1. Nature of Statements. All statements contained in this Agreement or any Schedule
hereto shall be deemed representations and warranties only of the party executing or delivering the
same.



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     9.2. Survival of Representations and Warranties. Regardless of any investigation made
at any time by or on behalf of any party hereto, all covenants, agreements, representations and
warranties made hereunder or pursuant hereto or any Schedule hereto or in connection with the
transactions contemplated hereby and thereby shall not terminate but shall survive the Closing and
continue in effect thereafter for a period of 540 days following the Closing, at which time said
covenants, agreements, representations and warranties shall terminate for all purposes (except as
to any covenant, agreement, representation or warranty as to which a written claims notice has been
delivered prior to expiration of such 540-day period, in which case the same shall continue to
survive and remain in effect until such claim has been finally resolved).



     9.3. Damage Claims. In case of either party’s breach of any covenant, agreement,
representation or warranty made hereunder or pursuant hereto or any Schedule hereto or in
connection with the transactions contemplated hereby and thereby, the other party shall be entitled
to recover all such losses, damages, liabilities, obligations, costs or expenses, including
attorneys fees, court costs, and interest (or the time value of money) from the date the Loss is
incurred (any one such item being herein called a “Loss” and all such items being herein
collectively called “Losses”), as shall be available to it under this Agreement and/or the laws of
the State of Texas, (i) provided that any such covenant, agreement, representation or warranty
shall not have expired as provided in Section 9.2, (ii) subject to the limitations described in
Section 9.4 below, and (iii) provided that the exclusive remedy for recovering Losses shall be
pursuant to the Escrow Agreement described in Section 10.4. Any recovery hereunder shall include
any indemnification rights for third party claims as described in Section 10 below.



     9.4. Certain Limitations. Each party agrees that it shall not assert a claim against
the other party for damages arising under this Agreement or for third party indemnification until
the aggregate of all Losses claimed by it shall be at least $50,000, but once such threshold has
been reached, such party shall be entitled to recover all of its Losses to which it is entitled
hereunder, including the first $50,000. The foregoing shall not apply to claims arising in respect
of Assumed Liabilities or Unassumed Liabilities. In no event shall the Purchaser be entitled to
assert any claim in respect of the accounts receivable included in the Assets unless at least 25%
in face amount of such accounts receivable, as reflected in the statement to be delivered to the
Purchaser under Section 3.7, prove to be uncollectible.



     10. Third Party Indemnification.



     10.1. Indemnification by the Company. The Company agrees to indemnify and hold
harmless the Purchaser and its successors and permitted assigns from and against any and all Losses
to any third party incurred by any of them or to which any of them may become subject, which are
caused by or arise out of (i) any breach or default in the performance by the Company of any
covenant or agreement of the Company contained in this Agreement, (ii) any breach of warranty or
inaccurate or erroneous representation made by the Company herein, in any Schedule delivered to the
Purchaser pursuant hereto or in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto, (iii) any claim made against the Purchaser in respect of any of the
Unassumed Liabilities, and (iv) any and all actions, suits, proceedings, claims, demands,
judgments, costs and expenses (including reasonable legal fees) incident to any of the foregoing.



     10.2. Indemnification by the Purchaser. The Purchaser agrees to indemnify and hold
harmless the Company and its successors and permitted assigns from and against any and all Losses
to any third party incurred by any of them or to which any of them may become subject,



-19-









 




which are caused by or arise out of (i) any breach or default in the performance by the
Purchaser of any covenant or agreement of the Purchaser contained in this Agreement, (ii) any
breach of warranty or inaccurate or erroneous representation made by the Purchaser herein or in any
certificate or other instrument delivered by or on behalf of the Purchaser pursuant hereto, (iii)
any claim made against the Company in respect of the Assumed Liabilities, and (iv) any and all
actions suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable
legal fees) incident to any of the foregoing.




     10.3. Third Party Claims. If any third person asserts a claim against an indemnified
party hereunder that, if successful, might result in a claim for indemnification against an
indemnifying party hereunder, the indemnifying party shall be given prompt written notice thereof
and shall have the right (i) to participate in the defense thereof and be represented, at his, her
or its own expense, by advisory counsel selected by him, her or it, and (ii) to approve any
settlement if the indemnifying party is, or will be, required to pay any amounts in connection
therewith. Notwithstanding the foregoing, if within ten business days after delivery of the
indemnified party’s notice described above, the indemnifying party indicates in writing to the
indemnified party that, as between such parties, such claims shall be fully indemnified for by the
indemnifying party as provided herein, then the indemnifying party shall have the right to control
the defense of such claim, provided that the indemnified party shall have the right (i) to
participate in the defense thereof and be represented, at his, her or its own expenses, by advisory
counsel selected by him, her or it, and (ii) to approve any settlement if the indemnified party’s
interests are, or would be, affected thereby.



     10.4. Escrow. Of the Purchase Price, the sum of $750,000 shall be placed into escrow
pursuant to an Escrow Agreement to be entered into on the Closing Date among the Company, the
Purchaser and Wells Fargo Bank, N.A. or another financial institution with banking offices in
Nueces County, Texas having total assets of at least $100 million and otherwise mutually acceptable
to the parties, which shall act as escrow agent, such Escrow Agreement to be in substantially the
form attached as Exhibit 10.4 hereto (the “Escrow Agreement”). The amount so held under the Escrow
Agreement shall be maintained as security for the payment of any and all claims by Purchaser and
its successors and permitted assigns against the Company arising under or in connection with this
Agreement, subject to the limitations contained in section 9.4 hereof. Subject to the terms of the
Escrow Agreement, (i) on the 270th day following the Closing Date, one-half of such
escrow amount, less the amount of any Losses for which distributions to Purchaser have already been
made out of escrow or for which there are claims then pending, shall be distributed to the Company,
and (ii) on the 540th day following the Closing Date, the balance of such escrow amount,
less the amount of any such Losses theretofore distributed to Purchaser or subject to pending
claims, shall be distributed to the Company. Interest earned on such escrow account shall be
disbursed in accordance with disbursements of principal. IF CLOSING OCCURS, THE PURCHASER
ACKNOWLEDGES THAT ITS SOLE RECOURSE FOR ANY LOSSES ARISING HEREUNDER SHALL BE PURSUANT TO THE
ESCROW AGREEMENT, AND THAT IN NO EVENT SHALL THE COMPANY OR ANY OF ITS SHAREHOLDERS OR THE
DIRECTORS HAVE ANY LIABILITY FOR ANY SUCH LOSSES IN EXCESS OF AMOUNTS AVAILABLE THEREFOR UNDER THE
ESCROW AGREEMENT.



     11. Termination.



     11.1. Best Efforts to Satisfy Conditions. The Company agrees to use its best efforts
to bring about the satisfaction of the conditions specified in Section 7 hereof, and the Purchaser



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agrees to use its best efforts to bring about the satisfaction of the conditions specified in
Section 8 hereof.




     11.2. Termination. This Agreement may be terminated prior to Closing by:




     (a) the mutual written consent of the Company and the Purchaser;




     (b) the Purchaser if a material default shall be made by the Company in the observance
or in the due and timely performance by any of the Company’s covenants herein contained, or
if there shall have been a material breach or misrepresentation by the Company of any of the
Company’s warranties and representations herein contained, or if the conditions of this
Agreement to be complied with or performed by the Company at or before the Closing shall not
have been complied with or performed at the time required for such compliance or performance
and such noncompliance or nonperformance shall not have been expressly waived by the
Purchaser in writing;




     (c) the Company if a material default shall be made by the Purchaser in the observance
or in the due and timely performance by the Purchaser of any of its covenants herein
contained, or if there shall have been a material breach or misrepresentation by the
Purchaser of any of its warranties and representations herein contained, or if the
conditions of this Agreement to be complied with or performed by the Purchaser at or before
the Closing shall not have been complied with or performed at the time required for such
compliance or performance and such noncompliance or nonperformance shall not have been
expressly waived by the Company in writing; or




     (d) under the circumstances described in Section 7.4 or 7.7; or




     (e) either the Company or the Purchaser, if the Closing has not occurred by the Outside
Closing Date.



     11.3. Liability Upon Termination. If this Agreement is terminated under paragraph
(a), (d) or (e) of Section 11.2, then no party shall have any liability to any other party
hereunder. If this Agreement is terminated under paragraph (b) or (c) of Section 11.2, then (i)
the party so terminating this Agreement shall not have any liability to any other party hereto,
provided the terminating party has not breached any representation or warranty or failed to comply
with any of its covenants in this Agreement, and (ii) such termination shall not prejudice the
rights and remedies of the terminating party against any other party which has breached any of its
representations, warranties or covenants herein prior to such termination.



     12. Change of Name. Promptly following the Closing (but in no event later than 30
days thereafter), the Company shall cause the corporate documents of the Company to be amended so
as to change its name to one wholly dissimilar to “Seaside Cemetery” or its equivalent (or any of
the other trade names included in the Assets), and the Company will furnish the Purchaser with
written evidence of such amendment.



     13. Miscellaneous.



     13.1. Expenses. Regardless of whether the Closing occurs, the parties shall each pay
their own expenses in connection with the negotiation, preparation and carrying out of this
Agreement and the consummation of the transactions contemplated herein.



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     13.2. Notices. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been given on the date personally delivered, three
business days following the date mailed, first class, registered or certified mail, postage
prepaid, or when sent by fax or telecopy and receipt is confirmed, as follows:


(i) if to the Company, to:



Seaside Cemetery, Inc.

3318 S. Alameda

Corpus Christi, Texas 78411

Attn: Michael L. Mintz



with a copy to:



Welder Leshin, L.L.P.

800 N. Shoreline, Suite 300-N

Corpus Christi, Texas 78401

Attn: Henry Nuss



(ii) if to the Purchaser, to:



Carriage Cemetery Services, Inc.

3040 Post Oak Blvd., Suite 300

Houston, Texas 77056

Attention: President



with a copy to:



Thompson & Knight, LLP

333 Clay, Suite 333

Houston, Texas 77002

Attention: Mr. W. Christopher Schaeper




     or to such other address as shall be given in writing by any party to the other parties
hereto.



     13.3. Assignment. This Agreement may not be assigned by any party hereto without the
prior written consent of the other parties, provided, however, that (i) prior to Closing, the
Purchaser may assign the right to purchase the Assets associated with the Homes to the Purchaser’s
affiliate, Carriage Management, L.P., but without relieving the Purchaser of its obligations
hereunder, and (ii) following the Closing the Purchaser (and, as to the Homes, such affiliate) may
assign its rights hereunder without the consent of the Company to a successor-in-interest to the
Purchaser or such affiliate (whether by merger, sale of assets or otherwise). Nothing in this
Agreement, express or implied, is intended to confer upon any person, other than the parties to
this Agreement and their successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.



     13.4. Successors Bound. Subject to the provisions of Section 13.3, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives.



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     13.5. Section and Paragraph Headings. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or interpretation of
this Agreement.



     13.6. Amendment. This Agreement may be amended only by an instrument in writing
executed by both parties hereto.



     13.7. Entire Agreement. This Agreement and the Exhibits, Schedules, certificates and
other documents referred to herein constitute the entire agreement of the parties hereto, and
supersede all prior understandings with respect to the subject matter hereof and thereof
(including, without limitation, the letter of intent between the Purchaser and the Company dated
October 31, 2006).



     13.8. Governing Law; Dispute Resolution.




     (a) This Agreement shall be construed and enforced under and in accordance with and
governed by the law of the State of Texas.




     (b) UPON THE WRITTEN REQUEST OF THE COMPANY OR THE PURCHASER, ANY DISPUTE, CONTROVERSY
OR CLAIM (“CONTROVERSY”) CONCERNING THIS AGREEMENT AND ANY OTHER CONTROVERSY BETWEEN ANY OF
THE PARTIES (INCLUDING ANY CLAIM BASED ON OR ARISING FROM NEGLIGENCE AND/OR AN ALLEGED TORT)
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, WILL BE DETERMINED BY ARBITRATION.
THERE SHALL BE A SINGLE ARBITRATOR WHO SHALL BE MUTUALLY SELECTED BY THE PARTIES FROM A
PANEL OF NEUTRALS PROVIDED BY JAMS, UNLESS THE AMOUNT IN CONTROVERSY IS $1 MILLION OR MORE,
IN WHICH CASE THE ARBITRATION PANEL SHALL CONSIST OF THREE ARBITRATORS. IF A SINGLE
ARBITRATOR IS TO BE DESIGNATED, THE ARBITRATOR SHALL BE JOINTLY SELECTED BY THE PARTIES
ACCORDING TO A LIST PROVIDED BY JAMS, BUT IF THE PARTIES ARE UNABLE TO AGREE, THEN JAMS
SHALL DESIGNATE THE ARBITRATOR. IF A PANEL OF THREE ARBITRATORS IS TO BE USED, EACH PARTY
MAY DESIGNATE ONE ARBITRATOR FROM JAMS’ LIST AND THE TWO SO SELECTED SHALL SELECT THE THIRD.
THE ONLY JUDICIAL ACTION TAKEN CONCERNING A CONTROVERSY SHALL BE TO COMPEL ARBITRATION AND
TO ENFORCE THE ARBITRATOR’S DECISION, EXCEPT AS SET FORTH IN PARAGRAPH (C) BELOW.
ARBITRATION HEREUNDER SHALL BE CONDUCTED IN NUECES COUNTY, TEXAS IN ACCORDANCE WITH THE JAMS
COMPREHENSIVE ARBITRATION RULES AND PROCEDURES, EXCEPT TO THE EXTENT MODIFIED HEREBY. THE
ARBITRATOR SHALL DETERMINE THE AMOUNT AND RESPONSIBILITY FOR ATTORNEYS’ FEES AND COSTS TO BE
AWARDED IN CONNECTION WITH THE ARBITRATION. NO ACTION OR INACTION OF EITHER PARTY INCLUDING
BUT NOT LIMITED TO THE PROSECUTION OF A LAWSUIT, SHALL EVER BE CONSTRUED TO CONSTITUTE
WAIVER OF SUCH PARTY’S RIGHT TO REQUIRE THAT THE DISPUTE BE RESOLVED BY ARBITRATION. NOTHING
HEREIN SHALL BE CONSTRUED TO PREVENT THE PARTIES FROM MEDIATING ANY CONTROVERSY.



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     (c) Notwithstanding the foregoing, the Purchaser retains the right to seek injunctive
relief in a court of applicable jurisdiction in the case of any breach or threatened breach
of the Non-Competition Agreement.



     13.9. The Company’s “Knowledge”. When used in this Agreement, the words “the
Company’s knowledge” or “the knowledge of the Company” and similar words shall mean that no
information with respect to the statements to which those words refer has come to the actual,
conscious attention of either of the Directors or the Manager of the Businesses, Debbie Newman,
which, after reasonable inquiry, would lead Ms. Newman or either such Director to reasonably
conclude that any such statement is untrue or incomplete.



     13.10. Construction. As the context requires or permits: pronouns used herein shall
include the masculine, the feminine and neuter; terms used in plural shall include the singular,
and singular terms shall include the plural; “hereof”, “herein”, “hereunder” and “hereto” shall
refer to this Agreement; and section and paragraph references, when not expressly referring to
another agreement or document, shall mean sections or paragraphs in this Agreement.



     13.11. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute the same instrument.



[the remainder of this page has intentionally been left blank]




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     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first above
written.



	 	 	 	 	 	 	 
	 	 	THE PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 

	 	CARRIAGE CEMETERY SERVICES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ Melvin C. Payne	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	MELVIN C. PAYNE, President and	 	 
	 

	 	 	 	     Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	SEASIDE CEMETERY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/
Michael L. Mintz	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	MICHAEL L. MINTZ, President	 	 






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	Exhibit	 	Description

	 
	2.2

	 	Non-Competition Agreement
	7.2

	 	Opinion of Counsel for the Company
	8.2

	 	Opinion of Counsel for the Purchaser
	10.4

	 	Escrow Agreement






	 	 	 	 
	Schedules	 	Description

	 	
	1.5(iii)

	 	 	Preconstruction Mausoleum Contracts
	3.2

		 	Financial Information
	3.3

		 	Liens and Permitted Exceptions
	3.5

		 	Real Property
	3.8

		 	Fixed Assets
	3.9

		 	Contracts and Commitments
	3.10

		 	Preneed Contracts and Trust Accounts
	3.11

		 	IP Rights
	3.13

		 	Licenses, Permits, Etc.
	3.14

		 	Litigation
	3.17

		 	Employees
	7.9

		 	Lake Placid Estates Property