ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On November 25, 2019, Carriage Services, Inc. (the “Company”), solely in its capacity as a guarantor thereunder, and its subsidiaries, Carriage Funeral Holdings, Inc. (“Funeral Holdings”), Carriage Holdings Virginia, Inc. (“Merger Sub Corp.”) and Carriage Services of Virginia, LLC (“Merger Sub LLC” and, together with Merger Sub Corp., the “Merger Subs”) entered into a Transactions Agreement (the “Transactions Agreement”) with Calvary Memorial Park, Inc. (“CMP”), Fairfax Memorial Home, L.L.C. (“FMFH” and, together with CMP, the “Target Companies”), and David Dodrill, solely in his capacity as the initial holder representative thereunder (the “Holder Representative”). Pursuant to the Transactions Agreement, subject to the satisfaction or waiver of the conditions set forth in the Transactions Agreement, Merger Sub Corp. will merge with and into CMP, with CMP surviving the merger, and Merger Sub LLC will merge with and into FMFH, with FMFH surviving the merger (collectively, the “Mergers”). Following the Mergers, the Target Companies will each be indirect, wholly-owned subsidiaries of the Company. The Target Companies own and operate a combined funeral home/cemetery business in Fairfax, Virginia.
At the closing of the Mergers, the shareholders of CMP will receive $50 million in consideration and the unitholders of FMFH will receive $50 million in consideration, which amounts shall be payable in cash by Funeral Holdings, pursuant to the terms and conditions of the Transactions Agreement.
The respective boards of directors or managers, as applicable, of the Company, Funeral Holdings, the Merger Subs, and the Target Companies have determined that the Transactions Agreement and the transactions contemplated by the Transactions Agreement, are fair to, advisable and in the best interests of their respective stockholders or members, as applicable, and have approved and declared advisable the Mergers and the Transactions Agreement. The transactions contemplated by the Transactions Agreement are subject to certain closing conditions.
The Transactions Agreements may be terminated prior to the consummation of the Mergers by (i) the mutual consent of Holder Representative and Funeral Holdings or (ii) Funeral Holdings if there is a material breach by the Target Companies of certain representations, warranties or covenants set forth in the Agreement or if the closing of the Mergers has not occurred prior to January 31, 2020, provided that neither Funeral Holdings nor either of the Merger Subs is in willful breach of the Transactions Agreement, which breach is the primary cause of the failure to close, or Funeral Holdings has failed to take any action required to fulfill any obligations under the Transactions Agreement.
The Transactions Agreement contains representations and warranties by Funeral Holdings and the Merger Subs, on the one hand, and by the Target Companies, on the other hand, made solely for the benefit of the other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the Transactions Agreement. The disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Transactions Agreement. Moreover, certain representations and warranties in the Transactions Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the Funeral Holdings and the Merger Subs, on the one hand, and the Target Companies, on the other hand. Accordingly, the representations and warranties and other disclosures in the Transactions Agreement should not be relied on by any persons as characterizations of the actual state of facts about the Company, Funeral Holdings, the Merger Subs or the Target Companies at the time they were made or otherwise.
Pursuant to the Transactions Agreement, the parties have generally agreed to indemnify each other for breaches of the representations, warranties and covenants contained in the Transactions Agreement, subject to certain limitations specified therein.
The Company will fully guaranty Funeral Holdings’ obligations under the Transactions Agreement.
