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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ____________
COMMISSION FILE NUMBER: 0-28096
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THE YORK GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0490631
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9430 OLD KATY ROAD, HOUSTON, TEXAS 77055
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES) (ZIP CODE)
(713) 984-5500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 par value
(TITLE OF CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes. [X] No. [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 under the Securities Exchange Act of 1934) is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
As of March 17, 1997, there were 7,999,864 shares of The York Group, Inc.
Common Stock, $.01 par value, issued and outstanding, 6,559,684 of which, having
an aggregate market value of approximately $127,913,838, were held by
non-affiliates of the registrant (affiliates being, for these purposes only,
directors, executive officers and holders of more than 5% of the registrant's
Common Stock).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement related to the registrant's 1997 annual
meeting of stockholders, which proxy statement will be filed under the
Securities Exchange Act of 1934 within 120 days of the end of the registrant's
fiscal year ended December 31, 1996, are incorporated by reference into Part III
of this Form 10-K.
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<PAGE>
TABLE OF CONTENTS
PAGE
----
Item 1. Business...................... 1
Item 2. Properties.................... 4
Item 3. Legal Proceedings............. 5
Item 4. Submission of Matters to a
Vote of Security Holders...... 5
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters ...................... 5
Item 6. Selected Financial Data....... 6
Item 7. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations ................... 7
General................ 7
Results of
Operations............. 8
Liquidity and Capital
Resources.............. 8
Selected Quarterly
Operating Results and
Seasonality............ 9
Inflation.............. 10
Foward-Looking
Statements............. 10
Item 8. Financial Statements and
Supplementary Data............ 10
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure ..... 10
Item 10. Directors and Executive
Officers of the Registrant.... 10
Item 11. Executive Compensation........ 11
Item 12. Security Ownership of Certain
Beneficial Owners and
Management.................... 11
Item 13. Certain Relationships and
Related Transactions.......... 11
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form
8-K........................... 11
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PART I
ITEM 1. BUSINESS
INDUSTRY OVERVIEW
The York Group, Inc. (the "Company" or "York") is the second largest casket
manufacturer in the United States and has an approximate 14% share of the
finished casket market. According to industry sources, there are approximately
22,000 domestic funeral homes, which purchase approximately $1.1 billion of
finished caskets annually.
Caskets generally are categorized by the type of material from which they
are produced, with three categories: metal, wood and other. According to
statistics compiled and released by the Casket & Funeral Supply Association of
America, approximately 1.9 million caskets were sold in the United States in
1996, with metal caskets accounting for approximately 1.3 million units, wood
caskets accounting for approximately 300,000 units and other caskets accounting
for approximately 300,000 units.
The number of casket manufacturers, assemblers and distributors has
declined over the past thirty years as a result of industry consolidation. The
Company estimates that the three largest casket manufacturers accounted for over
60% of the finished casket unit volume in 1996.
The casket industry is characterized by generally favorable demographic
trends that have allowed the major manufacturers to enjoy relatively stable,
non-cyclical and fairly predictable business conditions. The number of deaths in
the United States has grown at an annual compound rate of approximately 1%,
increasing from approximately 2.0 million deaths in 1980 to approximately 2.3
million deaths in 1996. According to a 1993 report prepared by the United States
Department of Commerce, Bureau of the Census, the number of deaths in the United
States is expected to increase by approximately 1% per year between the years
1993 and 2000. While an increasing number of annual deaths would be expected to
increase the demand for caskets, a steady, gradual growth in the number of
cremations in the United States has mitigated much of the potential benefit.
According to industry statistics compiled and released by the Cremation
Association of North America ("CANA"), cremation was used in connection with
approximately 21% of the deaths in the United States in 1996, compared with
approximately 10% in 1980. As a result, the number of caskets sold in the United
States has remained fairly constant, with unit volumes of approximately 1.8
million to 1.9 million caskets per year over the past ten years. These same CANA
statistics suggest that cremation could be used in connection with approximately
26% of the deaths in the United States in 2000.
THE COMPANY
The Company produces a wide variety of metal and wood caskets, as well as
casket components. Metal caskets are made from various gauges of cold rolled
steel, stainless steel, copper and bronze. Wood caskets are made from nine
different wood species ranging from poplar to mahogany, as well as from veneer
and paper covered particle and fiber board. Casket components include stamped
metal parts, as well as various other exterior and interior parts. The Company
believes that it is the largest domestic supplier of casket components to other
casket manufacturers and assemblers.
The Company's finished caskets are marketed through a network of
approximately 60 Company and privately owned distributors that serve an
estimated 15,000 domestic funeral homes, as well as certain foreign markets.
PRODUCTS
CASKETS. The Company believes it manufactures a more comprehensive line of
metal and wood caskets than any of its major competitors. The Company produces
many basic styles of metal and wood caskets with various differentiating
elements. Caskets can be customized around several dozen basic designs in
combination with many different options relating to such features as color,
interior design, handles and trim in order to accommodate specific religious,
ethnic, or other personal preferences.
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METAL CASKETS. Metal caskets are generally categorized by whether the
casket is non-gasketed or gasketed and by material (i.e. bronze, copper, or
steel) and in the case of steel, by the gauge, or thickness, of the metal. The
Company's metal casket line consists of non-gasketed 20 gauge steel, gasketed
20, 18 and 16 gauge steel, and gasketed stainless steel, copper and bronze. The
non-gasketed 20 gauge steel line is the least expensive of the metal caskets,
and the prices generally increase in the order listed above.
WOOD CASKETS. The Company's wood caskets are manufactured from nine
different species of wood, as well as from veneer and paper covered particle and
fiber board. The species of wood used are poplar, pine, ash, oak, maple, birch,
cherry, walnut and mahogany. The Company is the largest manufacturer of all-wood
constructed caskets, which are manufactured using pegged and dowelled
construction, and include no metal parts. All-wood constructed caskets are
preferred by certain religious groups.
COMPONENTS. The Company manufactures casket components for its own use and
for sale to other casket manufacturers and assemblers. These components include
stamped metal body parts, metal locking mechanisms for gasketed metal caskets,
adjustable beds, interior fabrics and panels, and metal and plastic handles and
corners. The Company dyes fabrics used for casket interiors and also processes a
line of fabrics for use in the production of cloth-covered caskets. In addition,
embroidered panel fabrics are also processed by the Company.
DISTRIBUTION AND MARKETING
The Company currently markets its finished caskets through approximately 60
Company and privately owned distributors. In 1996 approximately 1.3% of the
Company's net sales were to customers outside the United States. The Company
normally fills orders within one month and, therefore, does not have a
significant backlog of unfilled orders.
Though York's distributors generally concentrate their sales and service
efforts in their primary market area, they are not assigned exclusive
territories. York believes that each of its distributors is committed to
providing the highest quality service to the funeral homes within its primary
market area.
York's major marketing efforts include a recently introduced pre-need
insurance program, a cremation merchandising program, volume purchase programs,
tour/training programs and The York Children's Foundation. Additionally, in late
1996 the Company acquired The Doody Group, Inc., a provider of merchandise
planning and display services to the funeral industry.
PRE-NEED INSURANCE PROGRAM. In recent years, funeral homes have become more
active in the marketing of prearranged funeral plans as a way to maintain and
increase future market share. Through a wholly owned subsidiary, the Company has
introduced a program offering insurance policies to funeral homes for the
funding of prearranged funerals. This program, which includes policies
underwritten by life insurance companies, is designed to provide a financial
incentive to funeral home operators to specify York products through insurance
funded features, which offer additional payments to offset increases in the cost
of a York casket. This program is expected to build the Company's future market
share.
VOLUME PURCHASE PROGRAMS. York offers several discount and rebate programs
to funeral homes and groups based on the volume of York caskets purchased. The
costs of these programs are shared equally by York and the applicable
distributor.
TOUR/TRAINING PROGRAMS. The Company provides a plant tour program for
funeral directors, including training sessions which are accredited for
continuing education by many states. These programs provide funeral directors
with valuable product information and increase their knowledge of and goodwill
toward the Company.
MERCHANDISING. Through The Doody Group, Inc., the Company provides product
planning, merchandising and display expertise, as well as architectural and
interior design services to funeral homes. These services assist funeral service
professionals in providing value and satisfaction to their client families.
THE YORK CHILDREN'S FOUNDATION. The York Children's Foundation (the
"Foundation") supports charitable children's organizations across the country.
As a means of memorializing persons buried in York caskets, York and the
applicable distributor make a donation to the Foundation in the name of the
deceased.
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Grants made by the Foundation allow the sponsoring funeral home to promote its
name and goodwill within its local community and allow the Company to further
differentiate itself from its competitors.
SUPPLY AGREEMENT WITH SERVICE CORPORATION INTERNATIONAL
The Company is party to a supply agreement (the "Supply Agreement") with an
affiliate of Service Corporation International ("SCI"). The Supply Agreement
requires the purchase of specific annual dollar volumes of the Company's caskets
and expires at the end of 1998. Sales under the Supply Agreement are made
through the Company's distributors at a discount to list price. The discount is
shared equally by the Company and the applicable distributor. Sales under the
Supply Agreement accounted for approximately 23% of the Company's net sales in
1996. Although the Company does not expect to enter into a new multi-year
contract after the Supply Agreement expires, the Company believes its
relationship with SCI is good and expects that it will continue to sell a
significant number of caskets to SCI.
MANUFACTURING
Metal casket parts are produced by stamping steel, copper and bronze into
casket body parts. Locking mechanisms and adjustable beds are produced by
stamping and assembling a variety of steel parts. Casket handles and corners are
produced from stamped or cast metal or injection molded plastic. In the
production of wood caskets, the Company purchases from sawmills various species
of uncured wood, which it dries and cures. The cured wood is cut into casket
components.
The completed metal stampings and wood components are then assembled. A
variety of designs are produced by combining multiple parts and components that
are attached to the main casket body. Other assembly areas continue the
manufacturing process through application of various paints and finishes and
installation of interiors.
SUPPLIERS AND RAW MATERIALS
The primary basic materials required for the Company's casket manufacturing
operations are cold rolled steel and lumber. The Company also purchases copper,
bronze, stainless steel and textiles.
The Company typically negotiates blanket purchase orders or 12-month supply
agreements with large, integrated steel suppliers that have demonstrated timely
delivery, high quality material and competitive prices. The Company purchases
lumber from a number of sawmills and distributors. The Company purchases
approximately 90% of its lumber from approximately 25 sawmills within 150 miles
of its wood casket manufacturing facility in York, Pennsylvania. The Company
normally purchases uncured lumber and cures it at its plant.
The Company's manufacturing and sourcing systems allow it to meet customer
requirements for quick deliveries and minimize its need to carry significant raw
material inventories. The Company has not experienced any significant shortages
of raw materials and normally does not carry inventories of raw materials or
finished products in excess of those reasonably calculated to meet production
and shipping schedules. Although the Company purchases some of its supplies and
raw materials from a limited number of suppliers, the Company believes that
alternative sources are readily available at comparable prices.
COMPETITION
The casket industry is highly competitive. The Company competes with other
casket manufacturers on the basis of product quality, price, service, design
availability and breadth of product line. The Company provides a full line of
metal and wood caskets that it believes is more comprehensive than any of its
major competitors. Although there are a large number of casket industry
participants, the three largest casket manufacturers account for over 60% of the
finished caskets produced. In addition to York, Batesville Casket Company, a
subsidiary of Hillenbrand Industries, Inc., and Aurora Casket Company, Inc. are
the most significant industry participants.
The Company believes that it is the largest supplier of casket components
to other casket manufacturers and assemblers. While price is a significant
factor in the sale of stamped metal parts and other casket
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<PAGE>
components, other factors, including quality, service and design availability,
are also important. The Company has a number of unique design features that are
not available elsewhere, such as embossed steel, copper and bronze parts.
TRADEMARKS
The Company owns a number of domestic trademarks and service marks.
However, the Company believes the loss of any or a significant number of its
trademarks or service marks would not have a material impact on its operations.
EMPLOYEES
The Company has approximately 1,300 employees, substantially all of whom
work full-time. Approximately 80% are engaged in manufacturing activities, 10%
are engaged in field sales and distribution activities with the balance holding
managerial, administrative, clerical or other office positions. Approximately
175 employees are covered by collective bargaining agreements, principally
production workers at the Lynn, Indiana plant, whose agreement expires in June
1998, and certain truck drivers. The Company believes that its relationship with
its employees is good.
ITEM 2. PROPERTIES
The Company owns seven production facilities and one finished casket
distribution warehouse facility. The Company also leases thirteen finished
casket distribution warehouse facilities and one plastic injection molding
facility. The Company believes that its production and distribution warehouse
facilities are adequate to support its current and projected level of
operations. The following table sets forth additional information regarding the
Company's manufacturing facilities.
APPROXIMATE
SQUARE
LOCATION PRINCIPAL PRODUCTS OR ACTIVITY FEET
- --------------------------------------------------------------------------------
York, Pennsylvania........... Manufacture of finished wood caskets 307,000
Marshfield, Missouri......... Manufacture of finished metal caskets 86,000
Lynn, Indiana................ Manufacture of finished metal caskets 76,000
Richmond, Indiana............ Manufacture of finished metal caskets 21,000
Richmond, Indiana............ Metal stamping, manufacture of casket 92,000
beds, locks and hardware items
Anniston, Alabama............ Metal stamping 63,000
Lawrenceville, Georgia....... Manufacture of metal casket handles 129,000
and corners and processing of interior
fabrics
Richmond, Indiana............ Injection molding of plastic parts, 18,000
principally casket corners
The Company operates finished casket distribution warehouse facilities in
Worcester, Massachusetts; New Haven, Connecticut; Lewiston, Maine; Westland,
Michigan; Cleveland, Columbus, and Cincinnati, Ohio; Indianapolis and
Jeffersonville, Indiana; and Chicago and Peoria, Illinois, from which it sells
and distributes caskets to funeral homes. The Worcester, Massachusetts facility
is owned by the Company and provides approximately 22,000 square feet of
warehouse space. The ten leased facilities aggregate approximately 138,000
square feet. Additionally, the Company leases warehouses near its York,
Pennsylvania; Lynn, Indiana; and Marshfield, Missouri assembly plants in order
to stock finished caskets. The finished casket inventory allows the Company to
more effectively schedule its production and better serve its customers. These
three warehouses aggregate approximately 67,000 square feet.
In addition to its production and warehouse facilities, the Company leases
approximately 19,000 square feet of space for executive and administrative
offices in Houston, Texas. The lease term expires November 30, 1998.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incidental to the
conduct of its business. The Company currently is not engaged in any legal
proceeding that is expected to have a material adverse effect on the Company.
REGULATORY MATTERS
The Company is subject to various federal, state and local laws and
regulations relating to the protection of the environment and the health and
safety of employees.
In 1991, the Georgia Department of Natural Resources (the "GDNR") issued a
Notice of Violation -- Consent Order alleging that the Company's Lawrenceville,
Georgia facility was storing and treating hazardous wastes without a permit and
was otherwise in violation of certain hazardous waste regulations in the
operation of its electroplating line and associated wastewater treatment system.
On November 8, 1991, the Company and the GDNR entered into a Consent Order (the
"1991 Order") in settlement of the allegations. The 1991 Order was subsequently
amended in 1993 to reflect the plan to close the facility as a landfill and to
require some additional remediation, monitoring and investigation commitments on
the Company's part. The GDNR approved the revised closure plan and post-closure
plan for the facility in August 1994. Moreover, the GDNR issued a Hazardous
Waste Facility Permit effective September 27, 1995, to document these
post-closure care requirements. The Company had a reserve of approximately $1.5
million for environmental remediation at December 31, 1996, and has provided
financial assurance in the form of a letter of credit in the amount of
approximately $1.1 million to secure its post-closure obligations. See Note 9 of
Notes to the Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded in the over-the-counter market
since April 2, 1996 and quoted on the Nasdaq National Market under the symbol
"YRKG". On December 31, 1996, 273 stockholders of record held the Company's
7,999,864 shares of outstanding common stock. The Company believes there are
approximately 1,800 beneficial owners of its common stock.
The following table presents the Company's high and low common stock
prices, as well as dividends per share, since April 2, 1996.
HIGH LOW DIVIDENDS
--------- --------- ---------
1996:
Second Quarter.......................... $ 19.00 $ 15.00 $ .04
Third Quarter........................... $ 17.75 $ 14.875 $ .04
Fourth Quarter.......................... $ 19.00 $ 15.00 $ .04
The Company has paid dividends on a quarterly basis since the second
quarter of 1995. Since its stock has been publicly traded, the Company has
issued three consecutive quarterly dividends of $.04 per share, or an annual
rate of $.16 per share. Any future change in the Company's dividend policy will
be made at the discretion of the Board of Directors based upon pertinent
factors, such as financial condition of the Company, bank covenants, capital and
expansion requirements and other factors the Board of Directors may consider.
Effective October 15, 1996, the Company issued 165,000 shares of common
stock to The Doody Group, Inc. pursuant to its acquisition of assets and
assumption of liabilities. The issuance of shares was made pursuant to Section
4(2) of the Securities Act of 1993.
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On December 11, 1996, the Company acquired Brenner Casket Company in a
merger pursuant to which 125,000 shares of common stock were issued, pursuant to
Section 4(2) of the Securities Act of 1933, to William W. Grubbs, the sole
stockholder of Brenner Casket Company.
ITEM 6. SELECTED FINANCIAL DATA (1)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 138,170 $ 129,400 $ 121,725 $ 110,311 $ 101,823
Cost of goods sold...................... 107,931 102,326 96,515 88,191 77,936
----------- ----------- ----------- ----------- -----------
Gross profit............................ 30,239 27,074 25,210 22,120 23,887
Selling, general and administrative
expenses.............................. 11,774 9,932 9,562 8,303 9,074
----------- ----------- ----------- ----------- -----------
Operating income........................ 18,465 17,142 15,648 13,817 14,813
Interest expense, net................... 787 2,884 3,070 2,950 2,191
----------- ----------- ----------- ----------- -----------
Income before taxes and extraordinary
item.................................. 17,678 14,258 12,578 10,867 12,622
Income tax provision.................... 6,626 5,554 4,907 4,237 4,988
----------- ----------- ----------- ----------- -----------
Income before extraordinary item........ 11,052 8,704 7,671 6,630 7,634
Extraordinary item, net of tax.......... (736) -- (436) -- --
----------- ----------- ----------- ----------- -----------
Net income.............................. $ 10,316 $ 8,704 $ 7,235 $ 6,630 $ 7,634
=========== =========== =========== =========== ===========
Earnings per common share before
extraordinary item.................... $ 1.48 $ 1.54 $ 1.38 $ 1.20 $ 0.94
Earnings per common share............... $ 1.39 $ 1.54 $ 1.30 $ 1.20 $ 0.94
Weighted-average number of common shares
and equivalents outstanding........... 7,447,750 5,642,116 5,545,768 5,514,028 8,080,048
Cash dividends per common share......... $ 0.245 $ 0.375 $ -- $ -- $ --
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Working capital......................... $ 53,827 $ 29,703 $ 19,724 $ 7,688 $ 9,216
Total assets............................ 99,935 71,280 60,449 56,986 50,964
Long-term debt, less current
maturities............................ 25,097 34,908 34,231 29,405 37,925
Stockholders' equity (deficit).......... 56,046 18,821 9,750 2,425 (4,205)
OPERATING DATA:
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
Capital expenditures.................... $ 4,659 $ 4,035 $ 3,562 $ 2,640 $ 2,264
Depreciation and amortization........... 3,757 3,885 3,525 3,299 3,132
</TABLE>
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(1) Prior year financial information has been restated and current year
information adjusted to reflect an acquisition made in 1996 which was
accounted for as a pooling of interests. See Note 2 of Notes to the
Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto, included
elsewhere in this Form 10-K. Historical financial information has been restated
to reflect the acquisition of Brenner Casket Company in December 1996, which was
accounted for as a pooling of interests.
GENERAL
The Company is the second largest casket manufacturer in the United States
and produces a wide variety of metal and wood caskets, as well as casket
components. The Company's finished caskets are marketed through a network of
Company and privately owned distributors, which serve an estimated 15,000
domestic funeral homes, as well as certain foreign markets. Casket components
are sold to other casket manufacturers and assemblers (including certain of the
Company's distributors).
In certain markets, the Company believes that its privately owned
distributors will continue to be the most effective way to market the Company's
products and expects to continue to strongly support the efforts of these
privately owned distributors. However, the Company has, and will continue to,
acquire certain of its distributors if the Company believes that such
acquisitions would be complementary and result in operating efficiencies. During
1996, the Company acquired two distribution companies serving certain Midwest
markets and in early 1997, a distribution company serving Texas, New Mexico and
Louisiana was acquired. The Company already owned distribution operations
serving the New England market.
In April 1996, the Company completed an initial public offering (the
"Offering") of 2,145,000 shares of its common stock. Proceeds to the Company
from the Offering, net of associated expenses, were approximately $25.3 million.
The Company used $11.0 million of the proceeds to repay the Subordinated Series
A Note (the "Series A Note") in the second quarter of 1996. The balance of the
proceeds was available for working capital and general corporate purposes,
including acquisitions.
Funeral homes are required by federal regulation to provide price lists to
their customers, and generally publish such price lists annually. As a result,
the casket manufacturing industry has established the industry-wide practice of
setting its prices every January. In setting these prices, the Company considers
expected raw material prices, competitive considerations, the general state of
the economy and inflationary expectations. This industry practice requires the
Company to set its prices in anticipation of, rather than in response to,
changes in raw material and other costs. Over the past three years, the
Company's annual weighted average price increases have ranged from 3.5% to 5.0%.
Limitations on the timing of price increases relative to changes in costs may
cause fluctuations in operating margins, and therefore, make quarterly
year-to-year comparisons less meaningful. The major domestic casket
manufacturers have all developed discount and rebate programs, which are
commonplace in the casket manufacturing industry, designed to encourage volume
purchases by funeral homes. In the case of the Company, these discounts are
absorbed equally between the Company and the distributors.
The following table sets forth certain income statement data of the Company
expressed as a percentage of net sales for the periods presented.
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Net sales............................ 100.0% 100.0% 100.0%
Gross profit......................... 21.9 20.9 20.7
Selling, general and administrative
expenses........................... 8.5 7.7 7.9
--------- --------- ---------
Operating income..................... 13.4 13.2 12.8
Interest expense, net................ .6 2.2 2.5
Income tax provision................. 4.8 4.3 4.0
--------- --------- ---------
Net income before extraordinary
item............................... 8.0 6.7 6.3
Net income........................... 7.5% 6.7% 5.9%
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<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales increased $8.8 million, or 6.8%. The increase reflects a 6.1%
increase in finished casket volume, increased components sales, acquisitions
completed in the fourth quarter of 1996, and increased net sales prices,
partially offset by disproportionate growth in lower priced metal caskets.
Gross profit increased $3.2 million, or 11.7%. Gross margin increased from
20.9% to 21.9%. The increases primarily reflect the increase in casket and
components volumes, favorable raw material costs, increased margins attributable
to acquired distribution businesses and increased net sales prices, partially
offset by changes in product mix.
Selling, general and administrative expenses increased $1.8 million, or
18.6%, and as a percentage of net sales, increased from 7.7% to 8.5%. The
increase in selling, general and administrative expenses as a percentage of net
sales primarily results from the acquisition of distribution and marketing
companies that incur significant selling, general and administrative costs,
continued investment in preneed insurance marketing efforts, costs associated
with being a public company and increased personnel costs, partially offset by
increased sales volume.
Net interest expense decreased $2.1 million, or 72.7%. The decrease
reflects lower interest expense due to the early extinguishment of the Series A
Note and higher interest earnings due to increased invested cash balances.
The Company's effective tax rate decreased from 39.0% to 37.5%. The
effective rate for 1996 reflects a decrease in state income taxes and
nondeductible expenses, partially offset by an increase in the Company's
effective Federal tax rate.
In 1996, an extraordinary item of $736,000, net of tax, resulted from the
write-off of unamortized debt discount associated with the early extinguishment
of the Series A Note.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net sales increased $7.7 million, or 6.3%. The increase reflects a 3.0%
increase in finished casket volume and increased net sales prices, partially
offset by a 4.5% decrease in sales of casket components.
Gross profit increased $1.9 million, or 7.4%. Gross margin increased from
20.7% to 20.9%. The increases primarily reflect increased finished casket
volume, increased net sales prices and a change in product mix toward higher
priced units, which are generally more profitable, partially offset by higher
lumber and steel costs. In addition, no environmental remediation charges were
incurred in 1995 as compared to environmental remediation charges of $775,000 in
1994.
Selling, general and administrative expenses increased $370,000, or 3.9%,
and as a percentage of net sales, decreased from 7.9% to 7.7%. The decrease in
selling, general and administrative expenses as a percentage of net sales
reflects the effect of increased sales volume partially offset by general cost
increases.
Net interest expense decreased $186,000, or 6.1%. The decrease reflects
higher interest income, partially offset by higher amortization of debt discount
and slightly higher interest rates.
The Company's effective tax rate remained 39.0%.
In 1994, an extraordinary item of $436,000, net of tax, resulted from the
write-off of deferred financing costs associated with the refinancing of the
Company's credit facilities.
LIQUIDITY AND CAPITAL RESOURCES
Until the Offering, the Company had historically relied on cash flow from
operations and borrowings from banks and other lenders to fund its operations.
Cash and cash equivalents were $32.1 million at December 31, 1996,
representing an increase of $21.2 million from December 31, 1995. In 1996, cash
flows from operations totaled approximately $15.3 million,
8
<PAGE>
cash used in investing activities totaled approximately $4.5 million and cash
provided by financing activities totaled $10.4 million.
Capital expenditures were $4.7 million in 1996 and $4.0 million in 1995.
The Company has budgeted capital expenditures for 1997 of approximately $11.1
million. Major 1997 expenditures include productivity improvement and marketing
facilities projects. These expenditures are expected to enable the Company to
increase operating efficiency, reduce costs, further improve product quality and
more effectively present and support the Company's products.
Proceeds from the issuance of common stock were approximately $25.8 million
and $2.3 million in 1996 and 1995, respectively. These proceeds reflect the
Offering, the exercise of warrants issued to the original stockholders in 1990
and the exercise of stock options issued to certain key employees in 1991.
Long-term debt, including current maturities, at December 31, 1996, totaled
$25.2 million, which primarily consisted of $25.0 million of senior notes (the
"Senior Notes").
On June 30, 1994, the Company completed the private placement of $25.0
million of Senior Notes with a major insurance company. The Senior Notes, which
are unsecured, have a final maturity of June 30, 2004 and provide for a fixed
interest rate of 7.87% per annum. Interest is payable semi-annually in arrears,
and principal payments are due in seven equal annual installments beginning on
June 30, 1998. The proceeds of the Senior Notes were primarily used to retire
the Company's then outstanding term loan. The Senior Notes require that certain
financial conditions and ratios be maintained and restrict the level of dividend
payments and additional borrowings.
The Series A Note with a stated interest rate of 9.5% was discounted at
issuance to provide for an effective rate of 18.6%. The Series A Note was
unsecured and provided for the quarterly payment of interest in cash or, at the
Company's option, in kind, in the form of additional Series A Notes. The Series
A Note was repaid with a portion of the proceeds from the Offering. At the time
of the repayment, the Company recorded an extraordinary charge of $736,000, net
of tax, to write-off the then unamortized debt discount.
During 1996, the Company maintained a $10.0 million revolving credit
facility with a major bank. The revolving credit facility, which was scheduled
to expire January 31, 1997, and was unsecured, provided for borrowings and the
issuance of letters of credit up to the lesser of $10.0 million or a borrowing
base, consisting of accounts receivable and inventory. At December 31, 1996, no
borrowings were outstanding, $2.3 million of letters of credit were outstanding
and $7.7 million was available under the revolving credit facility. The terms of
this facility called for an interest rate, at the Company's option, to be based
upon either an adjusted eurodollar rate or an adjusted prime rate. The revolving
credit facility required that certain financial conditions and ratios be
maintained and restricted the level of dividend payments and additional
borrowings. Effective January 31, 1997, the Company reduced the revolving credit
facility to $6.0 million and extended the agreement to expire January 31, 1998.
Management believes that current cash balances, cash flows from operations and
the borrowing capacity available under the revolving credit facility are
sufficient to meet the Company's anticipated capital expenditures and other
operating requirements for the foreseeable future.
SELECTED QUARTERLY OPERATING RESULTS AND SEASONALITY
Historically, the Company's operations have experienced seasonal
variations. Generally, the Company's net sales are highest in the first quarter
and lowest in the third quarter of each year. These fluctuations are due in part
to the seasonal variance in the death rate, with a greater number of deaths
generally occurring in cold weather months, and the timing of the Company's
annual manufacturing facility vacation shutdowns, which occur primarily in the
third quarter. In addition, operating results can vary between quarters of the
same or different years due to, among other things, fluctuations in the number
of deaths, changes in product mix, and the timing of annual price increases
relative to changes in costs. As a result, the Company experiences variability
in its operating results on a quarterly basis, which may make quarterly
year-to-year comparisons less meaningful.
9
<PAGE>
The following table sets forth certain income statement data for each
quarter of 1995 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995 (2)
Net sales............................ $35,697 $ 33,044 $29,154 $ 31,505
Gross profit......................... 8,195 7,097 5,617 6,165
Operating income..................... 5,665 4,544 3,187 3,746
Net income........................... 3,005 2,360 1,546 1,793
Earnings per common share............ .54 .42 .27 .31
1996 (2)
Net sales............................ $38,666 $ 35,197 $28,973 $ 35,334
Gross profit......................... 8,813 7,699 5,976 7,751
Operating income..................... 6,001 4,706 3,284 4,474
Income before extraordinary item..... 3,323 2,906 2,081 2,742
Net income........................... 3,323 2,170 2,081 2,742
Earnings per common share............ .58 .27(1) .26 .34
</TABLE>
- ------------
(1) Includes an extraordinary charge of $.10 per share, net of tax, for the
write-off of unamortized debt discount.
(2) Previously issued quarterly financial information has been restated to
reflect an acquisition which occurred in the fourth quarter of 1996 and was
accounted for as a pooling of interests. See Note 2 of Notes to the
Consolidated Financial Statements.
INFLATION
Inflation has not had a material net impact on the Company over the past
three years nor is it anticipated to have a material impact for the foreseeable
future.
FORWARD-LOOKING STATEMENTS
This Form 10-K includes forward-looking statements. Such statements are
based upon management's current expectations and assumptions. Important factors
that could cause actual results to differ materially from those in
forward-looking statements included herein include, among others, customer
demands and the Company's reaction to such demands, changes in mortality and/or
cremation rates, further consolidation in the funeral service industry, and
fluctuations in the prices of raw materials and other manufacturing costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item 8 are incorporated under
Item 14 in Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item as to the directors and executive
officers of the Company is hereby incorporated by reference from the information
appearing under the captions "Proposal No. 1 -- Election of Directors" and
"Compliance with Section 16(a) of the Exchange Act" in the Company's definitive
proxy statement which involves the election of directors and is to be filed with
the Commission pursuant to the Exchange Act of 1934, as amended (the "Exchange
Act"), within 120 days of the end of the Company's fiscal year ended December
31, 1996.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item as to the management of the Company
is hereby incorporated by reference from the information appearing under the
caption "Proposal No. 1 -- Election of Directors" in the Company's definitive
proxy statement which involves the election of directors and is to be filed with
the Commission pursuant to the Exchange Act within 120 days of the end of the
Company's fiscal year ended December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item as to the ownership by management and
others of securities of the Company is hereby incorporated by reference from the
information appearing under the caption "Common Stock Outstanding and Principal
Holders Thereof" in the Company's definitive proxy statement which involves the
election of directors and is to be filed with the Commission pursuant to the
Exchange Act within 120 days of the end of the Company's fiscal year ended
December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item as to certain relationships and
transactions with management and other related parties of the Company is hereby
incorporated by reference from the information appearing under the caption
"Certain Transactions" in the Company's definitive proxy statement which
involves the election of directors and is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year ended December 31, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1 FINANCIAL STATEMENTS
The following financial statements and the Report of Independent
Accountants are filed as a part of this report on the pages indicated.
PAGE
----
Report of Independent Public
Accountants........................ F-2
Consolidated Balance Sheets as of
December 31, 1996 and 1995......... F-3
Consolidated Statements of Income for
the Years Ended
December 31, 1996, 1995 and 1994... F-4
Consolidated Statements of
Stockholders' Equity for the Years
Ended
December 31, 1996, 1995 and 1994... F-5
Consolidated Statements of Cash Flows
for the Years Ended
December 31, 1996, 1995 and 1994... F-6
Notes to the Consolidated Financial
Statements......................... F-7
(A) 2 FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedule and the Report of Independent
Accountants on Financial Statement Schedule are included in this report on the
pages indicated:
PAGE
----
Report of Independent Accountants on
Financial Statement Schedule....... F-2
Financial Statement Schedule
II -- Valuation and Qualifying
Accounts........................... S-1
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
11
<PAGE>
(A) 3 EXHIBITS
The exhibits to this report have been included only with the copies of this
report filed with the Securities and Exchange Commission. Copies of individual
exhibits will be furnished to stockholders upon written request to the Company
and payment of a reasonable fee.
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS
------- --------------------------
3.1 -- Certificate of Incorporation dated January 22, 1996
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 [Reg. No. 333-00846])
("Form S-1")
3.2 -- Bylaws (incorporated by reference to Exhibit 3.2 to Form
S-1)
4.1 -- Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to Form S-1)
10.1 -- Representation Agreement effective August 1, 1992, by and
between The York Group, Inc. and International Funeral
Associates (incorporated by reference to Exhibit 10.1 to Form
S-1)
10.2 -- Agreement between York Casket Company-IN and District Lodge
90, and Local Lodge No. 2532 of the International Association
of Machinists and Aerospace Workers, AFL-CIO dated June 12,
1995 (incorporated by reference to Exhibit 10.2 to Form S-1)
10.3 -- Inventory Purchase Agreement by and among The York Group,
Inc., Yorktowne Caskets, Inc. and Meridian Bank dated February
22, 1994 (incorporated by reference to Exhibit 10.3 to Form
S-1)
10.4 -- Casket Supply and Requirements Agreement by and between
York Acquisition Corp. n/k/a The York Group, Inc. and SCI
Funeral Services, Inc., and the First Amendment to Casket
Supply and Requirements Agreement dated December 30, 1992
(incorporated by reference to Exhibit 10.5 to Form S-1)
10.5 -- Credit Agreement between The York Group, Inc. and Texas
Commerce Bank National Association dated June 30, 1994, as
amended (incorporated by reference to Exhibit 10.7 to Form
S-1)
10.6 -- Second Amendment to Credit Agreement between The York
Group, Inc. and Texas Commerce Bank National Association,
effective January 31, 1997
10.7 -- Senior Note Purchase Agreement among The York Group, Inc.
and The Variable Annuity Life Insurance Company dated June 30,
1994 (incorporated by reference to Exhibit 10.8 to Form S-1)
10.8 -- Form of Distributor Agreement (incorporated by reference to
Exhibit 10.9 to Form S-1)
10.9 -- 1990 Stock Incentive Plan (incorporated by reference to
Exhibit 10.10 to Form S-1)
10.10 -- 1991 Stock Incentive Plan (incorporated by reference to
Exhibit 10.11 to Form S-1)
10.11 -- 1996 Employee Stock Option Plan (incorporated by reference
to Exhibit 10.12 to Form S-1)
10.12 -- 1996 Independent Director Stock Option Plan (incorporated
by reference to Exhibit 10.13 to Form S-1)
10.13 -- The York Group, Inc. Nonqualified Deferred Compensation
Plan
21.1 -- Subsidiaries of the Registrant (incorporated by reference
to Exhibit 21.1 to Form S-1)
23.1 -- Consent of Arthur Andersen LLP
27.1 -- Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
THE YORK GROUP, INC.
By:/s/ DAVID F. BECK
DAVID F. BECK
VICE PRESIDENT -- FINANCE, CHIEF
FINANCIAL OFFICER,
TREASURER AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ELDON P. NUSS Chairman of the Board March 26, 1997
ELDON P. NUSS
/s/BILL W. WILCOCK President, Chief Executive Officer, March 26, 1997
BILL W. WILCOCK Chief Operating Officer and Director
(Principal Executive Officer)
/s/DAVID F. BECK Vice President -- Finance, March 26, 1997
DAVID F. BECK Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
/s/KEITH E. PLOWMAN Controller, Assistant Secretary and March 26, 1997
KEITH E. PLOWMAN Assistant Treasurer
(Principal Accounting Officer)
/s/GEORGE L. FOLEY, JR. Director March 26, 1997
GEORGE L. FOLEY, JR.
/s/BRUCE E. ELDER Director March 26, 1997
BRUCE E. ELDER
/s/KIRK P. PENDLETON Director March 26, 1997
KIRK P. PENDLETON
/s/GERALD D. RUNNELS Director March 26, 1997
GERALD D. RUNNELS
/s/ROBERT T. RAKICH Director March 26, 1997
ROBERT T. RAKICH
13
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent Public
Accountants.................... F-2
Consolidated Balance Sheets as
of December 31, 1996 and
1995........................... F-3
Consolidated Statements of
Income for the Years Ended
December 31, 1996, 1995 and
1994........................... F-4
Consolidated Statements of
Stockholders' Equity for the
Years Ended
December 31, 1996, 1995 and
1994........................... F-5
Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1996, 1995 and
1994........................... F-6
Notes to the Consolidated
Financial Statements........... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of The York Group, Inc.:
We have audited the accompanying consolidated balance sheets of The York
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The York
Group, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for metal stamping
and casket product inventories to the last-in, first-out (LIFO) method.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of valuation and qualifying
accounts is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Lancaster, Pennsylvania
February 7, 1997
F-2
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
--------------------
ASSETS 1996 1995
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents......... . $ 32,056 $ 10,867
Trade accounts and notes
receivable, net of allowance for
doubtful accounts and returns
and allowances of $1,755 in 1996
and $1,586 in 1995..............
Stockholders and affiliates... 5,377 6,457
Other......................... 6,848 4,959
Inventories........................ 19,101 17,551
Prepaid expenses................... 1,555 416
Deferred tax asset................. 2,258 1,918
--------- ---------
Total current assets....... 67,195 42,168
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements.............. 2,956 2,897
Buildings and improvements......... 10,515 9,973
Equipment.......................... 31,092 26,796
Construction-in-progress........... 1,134 1,197
--------- ---------
45,697 40,863
Less accumulated depreciation...... 16,377 12,943
--------- ---------
Property, plant and
equipment, net.......... 29,320 27,920
--------- ---------
NOTES RECEIVABLE:
Related party...................... 175 903
Other.............................. 171 28
GOODWILL (Note 1).................... 2,806 --
DEFERRED COSTS (net of accumulated
amortization of $114 in 1996 and
$86 in 1995) and other noncurrent
assets 268 261
--------- ---------
Total assets............... $ 99,935 $ 71,280
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 70 $ --
Demand note to bank................ -- 357
Accounts payable................... 3,699 3,656
Income taxes payable............... -- 164
Accrued rebates.................... 3,782 2,635
Accrued compensation............... 2,699 2,205
Accrued interest................... 5 1,158
Other accrued expenses............. 3,113 2,290
--------- ---------
Total current
liabilities............. 13,368 12,465
--------- ---------
LONG-TERM DEBT....................... 25,097 34,908
--------- ---------
OTHER NONCURRENT LIABILITIES......... 1,275 1,400
--------- ---------
DEFERRED TAX LIABILITY............... 4,149 3,686
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note
9)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized and
unissued........................ -- --
Common stock, $.01 par value,
25,000,000 shares authorized;
7,999,864 and 5,513,864 shares
issued and outstanding.......... 80 55
Additional paid-in capital......... 30,939 2,428
Retained earnings.................. 25,027 16,338
--------- ---------
Total stockholders'
equity.................. 56,046 18,821
--------- ---------
Total liabilities and
stockholders' equity.... $ 99,935 $ 71,280
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
NET SALES (including sales to
stockholders and affiliates of
$74,909 in 1996, $75,595 in 1995
and $70,846 in 1994)............... $ 138,170 $ 129,400 $ 121,725
COST OF SALES........................ 107,931 102,326 96,515
---------- ---------- ----------
Gross profit............... 30,239 27,074 25,210
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 11,774 9,932 9,562
---------- ---------- ----------
Operating income........... 18,465 17,142 15,648
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income................. 1,673 742 374
Interest expense................ (2,460) (3,626) (3,444)
---------- ---------- ----------
(787) (2,884) (3,070)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM................. 17,678 14,258 12,578
INCOME TAX PROVISION................. 6,626 5,554 4,907
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM..... 11,052 8,704 7,671
EXTRAORDINARY ITEM, net of applicable
income taxes of $442 in 1996 and
$262 in 1994 (Note 13)............. (736) -- (436)
---------- ---------- ----------
NET INCOME........................... $ 10,316 $ 8,704 $ 7,235
========== ========== ==========
EARNINGS PER SHARE:
Income before extraordinary
item.......................... $ 1.48 $ 1.54 $ 1.38
========== ========== ==========
Net income...................... $ 1.39 $ 1.54 $ 1.30
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
ADDITIONAL
NUMBER COMMON PAID-IN RETAINED
OF SHARES STOCK CAPITAL EARNINGS
--------- --- ------- --------
BALANCE AT JANUARY 1, 1994 ........... 4,539,800 $45 $ -- $ 2,380
Exercise of common stock
options ....................... 39,200 -- 90 --
Net income ...................... -- -- -- 7,235
--------- --- ------- --------
BALANCE AT DECEMBER 31, 1994 ......... 4,579,000 45 90 9,615
Exercise of common stock
options ....................... 174,000 2 433 --
Exercise of warrants ............ 758,400 8 1,889 --
Common stock awards ............. 2,464 -- 16 --
Net income ...................... -- -- -- 8,704
Dividends paid ($.375 per
share) ........................ -- -- -- (1,981)
--------- --- ------- --------
BALANCE AT DECEMBER 31, 1995 ......... 5,513,864 55 2,428 16,338
Exercise of common stock
options ....................... 176,000 2 438 --
Proceeds from issuance of common
stock,
net of issuance costs ......... 2,310,000 23 28,073 --
Net income ...................... -- -- -- 10,316
Dividends paid ($.245 per
share) ........................ -- -- -- (1,627)
--------- --- ------- --------
BALANCE AT DECEMBER 31, 1996 ......... 7,999,864 $80 $30,939 $ 25,027
========= === ======= ========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................... $ 10,316 $ 8,704 $ 7,235
Adjustments to reconcile net
income to net cash
provided by operating
activities --
Depreciation and
amortization............... 3,757 3,885 3,525
Provision for doubtful
accounts................... (86) 31 89
Loss on disposition of
property, plant and
equipment.................. 68 46 141
Deferred income tax
provision.................. 165 352 234
Write-off of debt discount in
1996 and
deferred financing costs in
1994....................... 1,178 -- 698
Decrease/(increase) in:
Accounts receivable........ 729 (1,046) (1,828)
Inventories................ 814 (996) (2,281)
Prepaid taxes.............. (937) -- 10
Prepaid expenses........... (265) 82 (39)
Other noncurrent assets.... 8 -- 138
Increase/(decrease) in:
Accounts payable........... (874) 133 1,030
Accrued expenses........... 780 766 (32)
Income taxes payable....... (164) 147 46
Other noncurrent
liabilities............. (175) (60) 360
-------- --------- ---------
Net cash provided by
operating
activities......... 15,314 12,044 9,326
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections of notes
receivable.................... 286 294 2,330
Advances under notes
receivable.................... -- -- (750)
Capital expenditures............ (4,659) (4,035) (3,562)
Securities purchased............ -- (11) --
Acquisitions, net of cash
acquired of
$49 in 1996 and $88 in 1994... (167) -- (1,047)
--------- --------- ---------
Net cash used in
investing
activities......... (4,540) (3,752) (3,029)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock,
net of issuance costs......... 25,772 2,348 90
Proceeds from issuance of
long-term debt................ -- 73 25,000
Repayment of line of credit..... -- -- (2,063)
Repayment of long-term debt..... (13,730) (515) (29,341)
Payment of deferred financing
costs......................... -- (5) (303)
Dividends paid.................. (1,627) (1,981) --
--------- --------- ---------
Net cash provided by
(used in) financing
activities......... 10,415 (80) (6,617)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 21,189 8,212 (320)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR............................ 10,867 2,655 2,975
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF
YEAR............................... $ 32,056 $ 10,867 $ 2,655
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
The York Group, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated. Prior
year financial information has been restated and current year information
adjusted to reflect an acquisition made during 1996 which was accounted for as a
pooling of interests. See Note 2.
NATURE OF OPERATIONS
The Company manufactures wood and metal caskets and casket components in
the United States and sells its products primarily for use domestically.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The ultimate results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue when products are shipped.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less at the date of acquisition to be cash
equivalents. At December 31, 1996, cash equivalents represented commercial paper
and an interest in cash management funds that invest in government securities
that are subject to daily redemption. At December 31, 1995, cash equivalents
represented an interest in cash management funds that invested in government
securities that were subject to daily redemptions.
INVENTORIES
Inventories are stated at the lower of cost or market. Effective January 1,
1994, the Company changed its method of accounting for the cost of metal
stamping and casket product inventories from the first-in, first-out (FIFO)
method to the last-in, first-out (LIFO) method. The Company also values wood
product inventories using the LIFO method. All other inventories are valued
using the FIFO method. See Note 6 for further information.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and include alterations
and betterments which improve or extend useful lives. Maintenance and repairs
are reflected in operations as incurred. Depreciation is provided using the
straight-line method over the estimated useful lives of the various assets.
Estimated useful lives range from 15 to 20 years for buildings and building
improvements and 5 to 10 years for machinery, equipment, furniture and fixtures.
Depreciation expense for the periods ended December 31, 1996, 1995 and 1994 was
$3,535,000, $3,226,000 and $2,822,000, respectively. When property is retired or
otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts and any resulting gains or losses are reflected in results of
operations.
F-7
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
Cost in excess of the fair value of net assets acquired is amortized on a
straight-line basis over the estimated useful life, not to exceed 40 years.
Amortization expense recognized during 1996 and accumulated amortization at
December 31, 1996 were approximately $39,000. Goodwill at December 31, 1996 was
$2,806,000.
ACCRUED REBATES
The Company offers price discounts to funeral homes participating in
programs for volume purchases. In addition, the Company has a supply contract
with Service Corporation International ("SCI") that requires price discounts
(see Note 12). The cost of these programs is based on a percentage of the
distributors' selling prices. Discounts and rebates are reported as a reduction
of revenues at the time the Company's products are sold by a distributor to a
participating funeral home.
DEFERRED COSTS
Deferred costs include financing costs related to debt issuance which are
amortized over the terms of the borrowings on a straight-line basis.
DEFINED CONTRIBUTION PLANS
The Company maintains two defined contribution plans for eligible
employees, as defined. Contributions to the plans totaled $424,000, $381,000 and
$284,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" (SFAS No. 109). Under SFAS No. 109, a current tax liability or asset is
recognized for the estimated taxes payable or refundable as reported in the
Company's Federal and state tax returns. A deferred tax liability or asset is
recognized for the estimated future tax effects attributable to temporary
differences. Deferred taxes are determined based upon current tax laws and rates
and any impact from changes in these tax regulations and rates is recorded in
the period when the related change is enacted.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of shares and
common stock equivalents outstanding (see Note 10). All options and warrants
outstanding are considered common stock equivalents for all periods presented.
1996 1995 1994
----------- ----------- -----------
Weighted-average common shares
outstanding........................ 7,308,421 5,134,864 4,548,776
Weighted-average common stock
equivalents outstanding............ 139,329 507,252 996,992
----------- ----------- -----------
7,447,750 5,642,116 5,545,768
=========== =========== ===========
For purposes of computing common stock equivalents outstanding, the
treasury stock method was applied using the fair value of the common stock in
the respective periods prior to the Company's initial public offering in April
1996, and the closing market price thereafter. Fully diluted earnings per share
are not presented because such amounts approximate primary earnings per share.
F-8
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS:
On September 30, 1996, the Company completed the acquisition of
substantially all the business assets and assumed the associated debts and
liabilities of Hamilton Distributing Company ("Hamilton"), a casket distributor,
with locations in Ohio, Michigan and Indiana. The acquisition was accounted for
using the purchase method of accounting and the results of operations of
Hamilton have been included in the consolidated financial statements since the
acquisition date. The purchase price was $625,000 which includes forgiven debt
owed to the Company of $588,000. In addition, two major stockholders of Hamilton
entered into four year non-competition agreements. The Company will recognize
the cost ratably over the term of the agreements.
Effective October 15, 1996, the Company acquired the business assets and
assumed the associated debts and liabilities of The Doody Group, Inc. ("Doody").
Doody is located in Louisiana and is a provider of architectural and interior
design services and merchandising programs to the funeral service industry. The
acquisition was accounted for using the purchase method of accounting and the
results of operations of Doody have been included in the consolidated financial
statements since the date of the acquisition. Total consideration was
$2,810,000, which includes 165,000 shares of The York Group, Inc. common stock
valued at $16.75 per share. The purchase price was allocated based on the fair
values of assets and liabilities at the date of acquisition. The excess of
purchase price over net assets acquired amounted to approximately $2,845,000 and
is being amortized on a straight-line basis over 15 years. In addition, certain
employees of Doody entered into non-competition agreements that require the
Company to pay a total of $117,500 annually for five years, beginning in 1996.
The Company will recognize the cost ratably over the terms of the agreements.
Pro forma unaudited consolidated operating results of the Company and the
acquired companies for the years ended December 31, 1996 and 1995, assuming the
acquisitions had been made as of January 1, 1996 and 1995, are summarized and
included in the table below.
PROFORMA RESULTS OF OPERATIONS
(UNAUDITED)
- ------------------------------------- DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE ----------------------
AMOUNTS) 1996 1995
---------- ----------
Net sales............................ $ 147,067 $ 141,497
Net income........................... 10,247 8,464
Net earnings per share............... 1.38 1.50
On December 11, 1996, the Company issued 125,000 shares of its common stock
for all the outstanding shares of Brenner Casket Company ("Brenner"), a
distributor of caskets with locations in Illinois. The merger has been accounted
for as a pooling of interests and, accordingly, the Company's consolidated
financial statements have been restated to include the accounts and operations
of Brenner for all periods prior to the merger.
F-9
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Separate net sales and net income for each of the merged entities for the
nine months ended September 30, 1996 are presented in the following table. In
connection with the merger, $26,000 of merger costs and expenses were incurred
and have been charged to expense in the fourth quarter of 1996. The merger costs
and expenses consisted of legal, accounting and other professional fees.
SEPTEMBER 30,
1996
---------------
(IN THOUSANDS)
Net sales:
The York Group, Inc............. $ 99,038
Brenner......................... 3,798
---------------
Total...................... $ 102,836
===============
Net income:
The York Group, Inc............. $ 7,472
Brenner......................... 102
---------------
Total...................... $ 7,574
===============
3. RECAPITALIZATION:
On January 24, 1996, the stockholders voted to reincorporate the Company in
the State of Delaware and issued four shares in the new company for each share
outstanding in the old company. This transaction has been accounted for as a
stock split and all shares and per share information is restated for all periods
presented.
4. INITIAL PUBLIC OFFERING:
In April 1996, the Company completed an initial public offering (the
"Offering") of 2,145,000 shares of its common stock. Proceeds to the Company
from the Offering, after deduction of associated expenses, were approximately
$25,300,000.
5. NOTES RECEIVABLE:
Long-term notes bear interest at prime to prime plus 2% with maturities
through 2000. Annual maturities are as follows:
(IN THOUSANDS)
---------------
1997................................. $ 115
1998................................. 305
1999................................. 34
2000................................. 7
---------------
461
Less current portion................. 115
---------------
Total long-term notes receivable..... $ 346
===============
F-10
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES:
Inventories consisted of the following:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Raw materials........................ $ 7,414 $ 8,173
Work in process...................... 2,568 2,871
Finished goods....................... 9,119 6,507
--------- ---------
$ 19,101 $ 17,551
========= =========
The Company values substantially all of its metal stamping and casket
product inventories and its wood product inventories under the LIFO method,
which approximates 91% of consolidated inventories. All other inventories are
valued under the FIFO method of inventory valuation. At December 31, 1996 and
1995, the replacement value of inventories was approximately $20,400,000 and
$18,800,000, respectively.
7. LONG-TERM DEBT:
Long-term debt consisted of the following:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Senior notes with interest due semi-annually
through June 30, 2004 and principal
due annually June 1998 through June 2004.... $ 25,000 $ 25,000
Subordinated Series A Note due April
1998, net of unamortized discount
of $1,340,000 at December 31,
1995............................... -- 9,660
Other, interest payable at 8.77% to
9.25%.............................. -- 248
Capitalized lease obligations........ 167 --
--------- ---------
25,167 34,908
Less current portion................. 70 --
--------- ---------
Total long-term debt................. $ 25,097 $ 34,908
========= =========
On June 30, 1994, the Company completed the private placement of $25
million of senior notes (the "Senior Notes") with a major insurance company. The
Senior Notes, which are unsecured, have a final maturity of June 30, 2004 and
provide for a fixed interest rate of 7.87% per annum. Interest is payable
semi-annually in arrears, with principal payments due in seven equal annual
installments beginning on June 30, 1998. The proceeds of the Senior Notes were
primarily used to retire the Company's then outstanding term loan. The Senior
Notes require that certain financial conditions and ratios be maintained and
restrict the level of dividend payments and additional borrowings. Further, the
Senior Notes contain cross-default provisions with the Company's other borrowing
facilities.
The Company maintained a $10 million revolving credit facility with a major
bank. The revolving credit facility, which was scheduled to expire January 31,
1997, and was unsecured, provided for borrowings and the issuance of letters of
credit up to the lesser of $10 million or a borrowing base, as defined. At
December 31, 1996, no borrowings were outstanding, $2.3 million of letters of
credit were outstanding and $7.7 million was available under the revolving
credit facility. The terms of this facility called for an interest rate, at the
Company's option, to be based upon an adjusted eurodollar rate or an adjusted
prime rate. Adjustment factors to the eurodollar rate and prime rate were based
upon certain financial ratios, as defined, with specified ceilings (eurodollar +
2.375%; prime + 1.25%) and floors (eurodollar + 1.375%; prime). The revolving
credit facility required that certain financial conditions and
F-11
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ratios be maintained, restricted the level of dividend payments and contained
cross-default provisions with the Company's other borrowing facilities. The
revolving credit facility required a fee of 3/8 of 1%, payable quarterly, on the
unused portion of the facility. Effective January 31, 1997, the Company reduced
the revolving credit facility to $6 million and extended the agreement to expire
January 31, 1998.
In April 1996, the Company repaid the Subordinated Series A Note (the
"Series A Note"), which had a stated interest rate of 9.5% and was discounted at
issuance in 1990 to provide for an effective rate of 18.6% (see Note 13). The
Series A Note was unsecured and provided for quarterly payments of interest in
cash, or at the Company's option, in kind, in the form of additional Series A
Notes. The Company utilized a portion of the proceeds from the Offering (see
Note 4) to repay the Series A Note.
Aggregate annual maturities of long-term debt, excluding capitalized
leases, for each of the five years subsequent to December 31, 1996 are as
follows:
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
------------------------------------- ---------------
1997............................ $ --
1998............................ 3,571
1999............................ 3,571
2000............................ 3,571
2001............................ 3,571
2002 and thereafter............. 10,716
---------------
$ 25,000
===============
Interest paid during 1996, 1995 and 1994 totaled $3,450,000, $2,156,000 and
$3,302,000, respectively.
The estimated fair value of the Company's long-term debt at December 31,
1996 approximates the carrying value. The fair value was estimated using market
interest rates for similar types of instruments. The fair value of all other
financial instruments approximates the carrying value.
8. INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
The components of income tax expense are as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Current:
Federal......................... $ 5,961 $ 4,740 $ 4,320
State........................... 500 462 353
--------- --------- ---------
6,461 5,202 4,673
--------- --------- ---------
Deferred:
Federal......................... 143 340 222
State........................... 22 12 12
--------- --------- ---------
165 352 234
--------- --------- ---------
$ 6,626 $ 5,554 $ 4,907
========= ========= =========
Prepaid income taxes of $937,000, which were included in prepaid expenses
in the accompanying balance sheet, at December 31, 1996, represent the
difference between interim estimated federal and state income tax payments made
during 1996 and the current estimated income taxes due for the period.
F-12
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities result from temporary differences
between the financial statement and tax bases of assets and liabilities. The
significant components of deferred tax assets/(liabilities) are as follows:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Environmental reserves............... $ 597 $ 648
Self-insurance reserves.............. 137 194
Bad debt reserves.................... 290 305
Employee benefit accruals............ 340 314
Rebate reserves...................... 753 615
Depreciable assets................... (3,237) (3,040)
Other, net........................... (771) (804)
--------- ---------
Net deferred tax
liability............... $ (1,891) $ (1,768)
========= =========
No valuation allowance has been provided against the deferred tax assets as
the Company has concluded these tax benefits are realizable either through
carryback availability against prior years' taxable income, the reversal of
existing deferred tax liabilities or future taxable income.
A reconciliation between the Federal statutory rate and the Company's
effective tax rate is as follows:
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
---- ---- ----
Federal statutory rate............... 34.6% 34.3% 34.1%
State income taxes, net of Federal
tax benefit........................ 1.8 2.2 2.1
Miscellaneous other non-deductible
expenses........................... 1.1 2.5 2.8
---- ---- ----
37.5% 39.0% 39.0%
==== ==== ====
On a cash basis, income taxes paid during 1996, 1995 and 1994 were
$7,104,000, $4,953,000 and $4,307,000, respectively.
9. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain office and warehouse facilities and data
processing and transportation equipment under noncancelable operating and
capital leases. The leases vary from periods of one to six years and interest
rates on capital leases approximate 7.0%. In most cases, operating leases
contain renewal options. The leases generally provide that the Company shall pay
for utilities, insurance, taxes and maintenance. At December 31, 1996, the
capital leases are collateralized by vehicles with a book value of $204,000 (net
of accumulated amortization of $19,000).
F-13
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under the Company's lease commitments as of
December 31, 1996 are as follows:
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASES LEASES
- ------------------------------------- ---------- --------
(IN THOUSANDS)
1997................................. $1,033 $ 79
1998................................. 866 51
1999................................. 377 44
2000................................. 170 8
2001................................. 64 --
2002 and thereafter.................. 4 --
---------- --------
Total minimum lease payments......... $2,514 182
==========
Less amount representing interest.... 15
--------
Present value of future minimum lease
payments............................. 167
Less current portion of principal
payments............................. 70
--------
$ 97
========
The Company's rental expense under operating leases for the years ended
December 31, 1996, 1995 and 1994 amounted to $1,485,000, $1,385,000, and
$1,323,000, respectively.
ENVIRONMENTAL MATTERS
In 1991, the Georgia Department of Natural Resources (the "GDNR") issued a
Notice of Violation -- Consent Order alleging that the Company's Lawrenceville,
Georgia facility was storing and treating hazardous wastes without a permit and
was otherwise in violation of certain hazardous waste regulations in the
operation of its electroplating line and associated wastewater treatment system.
On November 8, 1991, the Company and the GDNR entered into a Consent Order (the
"1991 Order") in settlement of the allegations. The 1991 Order was subsequently
amended in 1993 to reflect the plan to close the facility as a landfill and to
require some additional remediation, monitoring and investigation commitments on
the Company's part. The GDNR approved the revised closure plan and post-closure
plan for the facility in August 1994. Moreover, the GDNR issued a Hazardous
Waste Facility Permit effective September 27, 1995, to document these
post-closure care requirements. The Company has provided financial assurance in
the form of a letter of credit in the amount of approximately $1,100,000 to
secure its post-closure obligations.
During 1994, approximately $775,000 was charged to expense in connection
with the remediation of the environmental issues at this facility. No amounts
were charged to expense in 1996 or 1995.
At December 31, 1996, the Company had a reserve of approximately $1,500,000
for the estimated future costs to complete the implementation of the revised
plan. The reserve is based on management's best estimate of the closure costs to
be incurred, which was developed predicated on the information available to date
and the advice of an independent environmental consultant. It is possible that
the remediation costs could be different than the reserve due to unforeseen
factors that arise as the closure occurs and due to the length of time during
which monitoring activities will be conducted. Accordingly, the reserve will be
adjusted as information becomes available indicating that higher or lower
remediation costs will be incurred.
F-14
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LETTER OF CREDIT
The Company has a letter of credit outstanding in the amount of $1,214,000
related to its worker's compensation insurance arrangements, which expires
October 31, 1997. As of December 31, 1996, no amounts have been drawn against
this facility.
OTHER MATTERS
The Company is a party to various claims and legal proceedings generally
incidental to its business. Although the ultimate disposition of these
proceedings is not presently determinable, management does not believe that
ultimate settlement of any or all of such proceedings will have a material
adverse effect upon the financial condition and results of operations of the
Company.
10. STOCKHOLDERS' EQUITY:
Warrants to purchase 760,000 shares of common stock were issued to the
Company's original stockholders in connection with their initial equity
investment in the Company. Each warrant had an exercise price of $2.50 per share
and was exercisable at any time prior to its expiration date of October 2, 1995.
In 1995, 758,400 warrants were exercised.
STOCK OPTIONS
The 1990 Stock Incentive Plan (the "1990 Plan") and the 1991 Stock
Incentive Plan (the "1991 Plan") permitted the grant of options to purchase
shares and also the award of shares. The 1990 and 1991 Plans were designed as an
incentive for key employees and directors. Exercise prices of options were
determined by the Board of Directors within the provisions of the 1990 and 1991
Plans. Options generally vest over a three to five year period and may be
exercised from three to ten years from the date of grant.
In 1996, the stockholders approved the adoption of two new stock option
plans, the 1996 Employee Stock Option Plan (the "1996 Employee Plan") and the
1996 Independent Director Stock Option Plan (the "1996 Director Plan"), which
replaced the 1990 and 1991 Plans. With the approval of the 1996 plans, no
additional shares may be granted under the 1990 or 1991 Plans.
The 1996 Employee Plan is designed as an incentive for key employees. The
plan permits the grant of options to purchase shares. The maximum number of
shares of common stock for which options may be issued is 500,000 shares through
January 24, 2006, the plan termination date. Exercise prices and vesting periods
of options are determined by the Board of Directors within the provisions of the
plan. The Board of Directors established the exercise price of the options
granted to be equal to the fair market value of the stock at the date of grant.
Options may be exercised up to 10 years from the date of grant.
The 1996 Director Plan is designed as incentive for independent members of
the Board of Directors. The Plan permits the grant of options to purchase
shares. The maximum number of shares of common stock for which options may be
issued is 50,000 shares through January 24, 2006, the plan termination date.
Exercise prices of options granted were equal to the fair market value of the
stock at the date of grant. The sale of shares issued upon exercise of options
shall not be allowed until at least six months after the date the option is
granted.
There are no stock awards or stock appreciation rights outstanding under
the 1990, 1991, 1996 Employee or 1996 Director Plans as of December 31, 1996.
The Company accounts for these stock option plans in accordance with
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" and, accordingly, no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" (SFAS No. 123),
F-15
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company's net income and earnings per share would have been reduced to the
following pro forma amounts:
1996
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net income:
As reported..................... $10,316
Pro forma....................... 9,964
Primary EPS:
As reported..................... 1.39
Pro forma....................... 1.34
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. In
addition, since no options were granted during 1995, pro forma results have not
been presented for 1995.
A summary of the status of the Company's four stock option plans at
December 31, 1996, 1995 and 1994 and changes during the years then ended is
presented in the tables and narrative below:
THE 1990 PLAN
<TABLE>
<CAPTION>
1994 1995 1996
-------------------------- --------------------------- ---------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year..... 457,200 $ 2.85 410,000 $ 2.99 236,000 $ 3.35
Granted.............................. 10,000 6.50 -- -- 25,000 13.00
Exercised............................ (41,200) 2.50 (174,000) 2.50 (176,000) 2.50
Expired/Canceled..................... (16,000) 2.50 -- -- (10,000) 2.50
-------- --------- ---------
Outstanding at
end of year........................ 410,000 2.99 236,000 3.35 75,000 8.67
======== ========= =========
Options exercisable at year end...... 328,000 214,000 63,000
Weighted-average fair value of
options granted during the year.... $ -- $ -- $ 3.83
THE 1991 PLAN*
1996
--------------------------
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
-------- --------------
Outstanding at beginning of year..... -- $ --
Granted.............................. 176,500 13.00
Expired/Canceled..................... (5,000) 13.00
-------
Outstanding at end of year........... 171,500 $13.00
=======
Options exercisable at year end...... 8,333
Weighted-average fair value of
options granted during the year.... $ 3.83
</TABLE>
* There was no activity, nor were any options outstanding related to the 1991
Plan in 1994 and 1995.
F-16
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THE 1996 PLANS
<TABLE>
<CAPTION>
1996 EMPLOYEE PLAN 1996 DIRECTOR PLAN
--------------------------- --------------------------
1996 1996
--------------------------- --------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- --------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year.... -- $ -- -- $ --
Granted.............................. 250,000 13.00 10,000 15.69
--------- ---------
Outstanding at end of year........... 250,000 13.00 10,000 15.69
========= =========
Options exercisable at year end...... -- 10,000
========= =========
Weighted-average fair value of
options granted during the year.... $ 3.83 $ 4.74
</TABLE>
During 1994, stock options for 5,200 shares were exercised through the
exchange feature of the 1990 Plan. This resulted in the net issuance of 3,200
additional shares of common stock in 1994.
50,000 of the 506,500 options outstanding at December 31, 1996 have an
exercise price equal to their weighted-average exercise price of $6.50 and a
weighted-average remaining contractual life of 1.8 years; 38,000 of those shares
are exercisable. The remaining 456,500 options have exercise prices of $13.00
and $18.375, with a weighted-average exercise price of $13.06 and a remaining
contractual life of 9.2 years; 43,333 of these are exercisable with a
weighted-average exercise price of $13.62.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996: risk-free interest rate of 6.2%; expected
annual dividend yield of $.16 per share; expected life of five years; and
expected volatility of 23.7%.
11. RELATED PARTY TRANSACTIONS:
TRADE TRANSACTIONS WITH STOCKHOLDERS
During the years ended December 31, 1996, 1995, and 1994, the Company
purchased goods and services from certain stockholders amounting to $3,011,000,
$2,702,000 and $1,884,000, respectively. At December 31, 1996 and 1995, the
Company had trade liabilities to stockholders of $168,000 and $87,000,
respectively.
The Company has a management agreement with a stockholder to operate both a
textile warehouse and delivery service and a plastic injection molding
operation. The stockholder provides manufacturing/warehouse space, utilities,
direct and supervisory labor, consultation and marketing services. The Company
is charged fees based on certain sales volumes. During 1996, 1995 and 1994, the
Company paid the stockholder $426,000, $439,000 and $321,000, respectively,
under this agreement.
OTHER TRANSACTIONS
The Company has a $750,000 note receivable from Yorktowne Caskets, Inc.
("Yorktowne"), a stockholder, which bears interest at prime plus 1.5%, calls for
monthly principal payments of $12,500 plus accrued interest, with the remaining
principal and any accrued interest thereon due February 1, 1999. The promissory
note is subordinate to Yorktowne's senior bank debt. The balance outstanding on
the note as of December 31, 1996 and 1995 was $325,000 and $475,000,
respectively. Interest income from the note was $39,000, $56,000 and $75,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. The Company's
Executive Vice President is a significant stockholder of Yorktowne.
The Company had a note receivable from Hamilton. The note, which bore
interest at prime plus 2%, called for monthly principal payments of $3,373 plus
accrued interest. The remaining principal balance of
F-17
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$588,000 was forgiven in 1996 as a portion of the consideration for the
Company's acquisition of Hamilton (see Note 2). The balance of the note at
December 31, 1995 was $619,000. Interest income from the note was $46,000,
$69,000 and $62,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company's Vice President -- Sales and Marketing is a majority
stockholder of Hamilton.
The Company had a note receivable from Houston Casket Company ("Houston
Casket"). The note, which bore interest at prime, called for monthly principal
payments of $4,584 plus accrued interest and was paid off on July 27, 1996. The
balance of the note at December 31, 1995 was $41,176. Interest income from the
note was $1,000, $5,839 and $8,425 for the years ended December 31, 1996, 1995
and 1994, respectively. One of the Company's Directors is a significant
stockholder of Houston Casket Company. See Note 15.
In connection with the 1993 acquisition of Kenco Manufacturing, Inc., the
Company entered into a non-competition agreement with the former owner, the
Company's Vice President -- Manufacturing / Stamping, which calls for ten annual
payments of $138,000, which began in December 1993.
12. SCI SUPPLY AGREEMENT:
The Company is involved in a supply agreement (the "Supply Agreement") with
an affiliate of SCI. The Supply Agreement requires the purchase of specific
annual dollar volumes of the Company's caskets and expires at the end of 1998.
Sales under the Supply Agreement are made through the Company's distributors at
a discount to list price, and accounted for approximately 23% of the Company's
net sales in each of 1996, 1995 and 1994.
13. EXTRAORDINARY ITEM:
In 1996, the Company repaid its $11,000,000 Series A Note, which was
originally issued at a discount. The early extinguishment of this debt resulted
in an extraordinary charge of $736,000, net of tax, or $.09 per share related to
the write-off of the unamortized discount.
In 1994, the Company retired its outstanding term loan and revolving line
of credit. The related deferred financing costs of $436,000, net of tax, or $.08
per share, were charged against earnings and reported as an extraordinary item.
F-18
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
Net sales....................... $35,697 $ 33,044 $29,154 $ 31,505
Gross profit.................... 8,195 7,097 5,617 6,165
Operating income................ 5,665 4,544 3,187 3,746
Net income...................... 3,005 2,360 1,546 1,793
Earnings per common share....... .54 .42 .27 .31
1996 (2)
Net sales....................... $38,666 $ 35,197 $28,973 $ 35,334
Gross profit.................... 8,813 7,699 5,976 7,751
Operating income................ 6,001 4,706 3,284 4,474
Income before extraordinary
item.......................... 3,323 2,906 2,081 2,742
Net income...................... 3,323 2,170 2,081 2,742
Earnings per common share....... .58 .27(1) .26 .34
</TABLE>
- ------------
(1) The second quarter of 1996 includes an extraordinary charge of $.10 per
share, net of tax, for the write-off of unamortized debt discount.
(2) Earnings per share are computed independently for each of the quarters
presented. The sum of the quarterly earnings per share in 1996 does not
equal the total computed for the year due to stock transactions which
occurred during 1996.
15. SUBSEQUENT EVENT:
On January 17, 1997, the Company acquired substantially all the business
assets and assumed the associated debts and liabilities of Houston Casket, a
casket distributor with several locations in Texas and New Mexico for
approximately $9,100,000. The acquisition will be accounted for using the
purchase method of accounting. The Company's Vice President -- National Accounts
and International Markets has served as President and Chief Executive Officer of
Houston Casket since December 1983.
F-19
<PAGE>
THE YORK GROUP, INC. -- SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT AMOUNTS BALANCE AT
JANUARY 1, CHARGED TO DECEMBER 31,
DESCRIPTION 1996 EXPENSE OTHER DEDUCTIONS 1996
- ------------------------------------- ---------- ---------- ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts and
returns and allowances............. $1,586 $ 6 $ 219 $ (56) $1,755
Allowance for notes receivable....... 100 -- -- -- 100
Environmental reserve................ 1,662 -- 231 (361) 1,532
</TABLE>
S-1
EXHIBIT-10.6
SECOND AMENDMENT
TO
CREDIT AGREEMENT
THE YORK GROUP, INC.,
as the Borrower,
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as the Lender
Effective as of January 31, 1997
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "SECOND AMENDMENT")
executed effective as of the 31st of January, 1997 (the "EFFECTIVE DATE"), is
among THE YORK GROUP, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "BORROWER"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION (the "LENDER").
R E C I T A L S
WHEREAS, the Borrower (formerly a corporation organized under the laws
of the Commonwealth of Pennsylvania) and the Lender are parties to that certain
Credit Agreement dated as of June 30, 1994, as amended by that certain First
Amendment to Credit Agreement dated as of December 31, 1995 (as the same may
further be amended, restated, modified or otherwise supplemented from time to
time and in effect, the "CREDIT AGREEMENT"), pursuant to which the Lender has
made certain credit available to the Borrower; and
WHEREAS, the Borrower has requested, and the Lender has agreed, to amend
certain provisions of the Credit Agreement and to extend the maturity of the
credit facility evidenced by the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and to induce the Lender to enter
into this Second Amendment, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms which are defined in the Credit
Agreement, but which are not defined in this Second Amendment, shall have the
same meanings as defined in the Credit Agreement. Unless otherwise indicated,
all section references in this Second Amendment refer to the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 AMENDMENTS TO SECTION 1.02.
(a) The definition of "GUARANTOR" is hereby amended in its entirety
to read as follows:
"GUARANTOR" shall mean any Subsidiary of the Borrower which now
or hereafter executes and delivers a Guaranty Agreement or Joinder
Agreement pursuant to the Section 9.18 hereof.
1
<PAGE>
(b) The definition of "JOINDER AGREEMENT" is hereby inserted after the
definition "INTEREST REDETERMINATION DATE" and before the definition of "LC
COMMITMENT", which definition reads in its entirety as follows:
"JOINDER AGREEMENT" has the meaning assigned to such term in the
Guaranty Agreement dated as of January 31, 1997 from York Agency, Inc.,
et al in favor of the Lender.
(c) The definition "MAXIMUM CREDIT AMOUNT" is hereby deleted and the
following definition is inserted in lieu thereof, which definition reads in its
entirety as follows:
"MAXIMUM CREDIT AMOUNT" at any time shall equal $6,000,000 as the
same may be reduced pursuant to Section 2.03(b)."
(d) The definition of "NET WORTH" is hereby inserted after the
definition of "NOTE" and before the definition of "PBGC", which definition reads
in its entirety as follows:
"NET WORTH" shall mean, as at any date, the sum of the following
for the Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(a) the amount of share capital liability of the Borrower, PLUS
(b) the amount of surplus and retained earnings (or, in the case
of a surplus or retained earnings deficit, MINUS the amount of such
deficit), MINUS
(c) the sum of the following: cost of treasury shares and any
writeup in the book value of assets resulting from a revaluation thereof
or resulting from any changes in GAAP subsequent to December 31, 1993."
(e) The definition "REVOLVING CREDIT TERMINATION DATE" is hereby deleted
and the following definition is inserted in lieu thereof, which definition reads
in its entirety as follows:
"REVOLVING CREDIT TERMINATION DATE" shall mean, unless the
Commitment is sooner terminated pursuant to Sections 2.03(b) or 10.02
hereof, January 31, 1998."
(f) The definitions of "SECOND AMENDMENT" and "SECOND AMENDMENT
EFFECTIVE DATE" are hereby inserted after the definition of "SEC" and before the
definition of "SUBORDINATED DEBT", which definitions read in their entirety as
follows:
"SECOND AMENDMENT" shall mean that certain Second Amendment to
Credit Agreement dated as of January 31, 1997 between the Borrower and
the Lender."
2
<PAGE>
"SECOND AMENDMENT EFFECTIVE DATE" shall mean the "Effective Date"
as such term is defined in the Second Amendment."
(g) The definition of "TANGIBLE NET WORTH" is hereby deleted in its
entirety.
2.2 LIMITATION ON LEASES. Section 9.07 of the Credit Agreement is hereby
amended by replacing the amount "$1,500,000" in the fifth line thereof with the
amount "$3,000,000".
2.3 CAPITAL EXPENDITURES. Section 9.12 is hereby amended by deleting the
number "$8,000,000" as it appears in the third line, and inserting, in lieu
thereof, the number "$13,000,000".
2.4 TANGIBLE NET WORTH. Section 9.13 is hereby deleted in its entirety
and the following new Section 9.13 is inserted in lieu thereof, which reads in
its entirety as follows:
"Section 9.13 NET WORTH. The Borrower will not permit its Net
Worth to be less than the sum of (i) $48,000,000, and (ii) 100% of the
net cash proceeds of any offering of equity securities made subsequent
to December 31, 1996."
2.5 SUBSIDIARIES AND PARTNERSHIPS. Section 9.18 of the Credit Agreement
is hereby amended in its entirety to read as follows:
"Section 9.18 SUBSIDIARIES AND PARTNERSHIPS. Neither the Borrower
nor any Subsidiary shall create, acquire or permit to exist any new
Subsidiary if a Default has occurred and is continuing or would result
therefrom. Within 30 days after the creation or acquisition of any
Subsidiary permitted by the preceding sentence, , unless such Subsidiary
is in compliance with Section 9.21, the Borrower shall (i) cause such
Subsidiary to execute and deliver to the Lender a Joinder Agreement
making such Subsidiary an additional Guarantor and (ii) deliver to the
Lender an opinion of counsel addressed to the Lender in form, scope and
substance satisfactory to the Lender regarding such Joinder Agreement."
2.6 ASSETS OF SUBSIDIARIES. Section 9.21 is hereby deleted in its
entirety and the following new Section 9.21 is inserted in lieu thereof, which
reads in its entirety as follows:
"Section 9.21 ASSETS OF SUBSIDIARIES. The Borrower will not
permit any Subsidiary which has not executed and delivered a Guaranty
Agreement to own any tangible assets, other than (i) cash or cash
equivalents in an aggregate amount (taking into account all of the
non-guaranteeing Subsidiaries of the Borrower) not to exceed $2,500,000
(ii) promissory notes payable to such Subsidiary by the Borrower and
receivables relating thereto, provided that such promissory notes are
subordinated to payment of the Indebtedness on terms and conditions
satisfactory to the Lender, and (iii) other Property incidental to the
ordinary business of the non-guaranteeing Subsidiaries having a value no
greater than $10,000. To the extent any non-guaranteeing Subsidiary
shall own any tangible asset other than as
3
<PAGE>
provided in the preceding sentence, such asset shall be conveyed to the
Borrower, either in the form of a dividend, loan or in such other manner
as may be approved by the Lender and as may conform to the terms and
provisions of this Agreement."
3. CONDITIONS. The enforceability of this Second Amendment against the
Lender is subject to the receipt by the Lender of the documents specified in
Section 3.1 and the satisfaction of the other conditions provided in Sections
3.1 through 3.4, each of which shall be satisfactory to the Lender in form and
substance.
3.1 LOAN DOCUMENTS. The Lender shall have received multiple
counterparts, as requested, of
(i) this Second Amendment, executed and delivered by a duly authorized
officer of the Borrower;
(ii) the Guaranty Agreement, executed and delivered by a duly authorized
officer of York Agency, Inc., The Doody Group, Inc., York Acquisition Corp.,
York Acquisition Corp. II, and The York Children's Foundation; and
(iii) Subordination Agreements, executed and delivered by a duly
authorized officer of each of T.Y.G. Company, Inc. and T.Y.G. Trade Company,
Inc.
3.2 REPRESENTATIONS AND WARRANTIES. Except as affected by the
transactions contemplated in this Second Amendment, each of the representations
and warranties made by the Borrower in or pursuant to the Credit Agreement and
each Loan Document to which the Borrower is a party shall be true and correct in
all material respects as of the Effective Date, as if made on and as of such
date.
3.3 NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing as of the Effective Date.
3.4 NO CHANGE. No event shall have occurred since December 31, 1993,
which could have a Material Adverse Effect.
4. WAIVERS.
4.1 LIMITATIONS ON WAIVERS. The waivers set forth in Section 4.2 of this
Second Amendment shall not be deemed to be a waiver by the Lender of any other
covenant, condition or obligation on the part of the Borrower under the Credit
Agreement or any other Loan Document, except as set forth in Section 4.2 of this
Second Amendment. In addition, such waivers shall in no respect evidence any
commitment by the Lender to grant any future consents or waivers of any
covenant, condition or obligation on the part of the Borrower under the Credit
Agreement or any other Loan Document. Any further waivers or consents must be
specifically agreed to in writing in accordance with Section 11.04 of the Credit
Agreement.
4
<PAGE>
4.2 SUBORDINATED INTERCOMPANY DEBT. The Borrower has informed the Lender
that it has (i) capitalized one of its Affiliates, T.Y.G. Company, Inc., a
Delaware corporation ("TYG COMPANY") and acquired from T.Y.G. Trade Company,
Inc., a Delaware corporation ("TYG TRADE"), the right to use certain trade names
(TYG Company and TYG Trade collectively, the "SUBORDINATED CREDITORS"), and (ii)
received loans from the Subordinated Creditors, as evidenced by promissory notes
in the aggregate original principal amount of $57,980,000 (the "SUBORDINATED
INTERCOMPANY DEBT"); and that by such transactions, it may have violated the
terms of Sections 9.01 and 9.21 of the Credit Agreement. The Lender hereby
waives any such Default or Event of Default resulting from such transactions,
including the borrowings of the Subordinated Intercompany Debt from the
Subordinated Creditors; provided that the Subordinated Creditors execute and
deliver to the Lender, on or before April 7, 1997, a subordination agreement or
agreements, in form and substance satisfactory to the Lender, pursuant to which
the Subordinated Intercompany Debt is subordinated to the obligations of the
Borrower to the Lender under the Credit Agreement and the other Loan Documents
to which the Borrower is a party. If such subordination agreement (or
agreements) has not been executed and delivered to the Lender on or before April
7, 1997, then such failure shall constitute an Event of Default under the Credit
Agreement.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby affirms that as
of the date of execution and delivery of this Second Amendment, all of the
representations and warranties contained in the Credit Agreement, as amended
hereby, and the other Loan Documents to which the Borrower is a party are true
and correct in all material respects as though made on and as of the Effective
Date and after giving effect to this Second Amendment and to the transactions
contemplated hereby; and that no Defaults exist under the Credit Agreement or
will exist under the Credit Agreement after giving effect to the aforesaid
transactions.
6. MISCELLANEOUS.
6.1 CONFIRMATION. The provisions of the Credit Agreement (as amended by
this Second Amendment) and the other Loan Documents to which the Borrower is a
party shall remain in full force and effect in accordance with its terms
following the effectiveness of this Second Amendment.
6.2 COUNTERPARTS. This Second Amendment may be executed by one or more
of the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
6.3 NO ORAL AGREEMENT. THIS WRITTEN SECOND AMENDMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6.4 GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed effective as of the date written above.
BORROWER:
THE YORK GROUP, INC.
By:
Name: David F. Beck
Title: Vice President
LENDER:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
Name:
Title:
S-1
<PAGE>
GUARANTY AGREEMENT
BY
YORK AGENCY, INC.,
THE DOODY GROUP, INC.,
BRENNER CASKET COMPANY, INC.
YORK ACQUISITION CORP. II,
THE YORK CHILDREN'S FOUNDATION
IN FAVOR OF
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
JANUARY 31, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
GUARANTY
ARTICLE 1
GENERAL TERMS
Section 1.1 TERMS DEFINED ABOVE........................................1
Section 1.2 CERTAIN DEFINITIONS........................................1
Section 1.3 CREDIT AGREEMENT DEFINITIONS...............................3
ARTICLE 2
THE GUARANTY
Section 2.1 LIABILITIES GUARANTEED.....................................3
Section 2.2 NATURE OF GUARANTY.........................................3
Section 2.3 LENDER'S RIGHTS............................................4
Section 2.4 GUARANTOR'S WAIVERS........................................4
Section 2.5 MATURITY OF LIABILITIES; PAYMENT...........................5
Section 2.6 LENDER'S EXPENSES..........................................5
Section 2.7 LIABILITY..................................................5
Section 2.8 EVENTS AND CIRCUMSTANCES NOT REDUCING OR
DISCHARGING GUARANTOR'S OBLIGATIONS........................5
Section 2.9 RIGHT OF SUBROGATION AND CONTRIBUTION......................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 BY GUARANTOR...............................................8
Section 3.2 NO REPRESENTATION BY LENDERS...............................9
-i-
<PAGE>
ARTICLE 4
SUBORDINATION OF INDEBTEDNESS
Section 4.1 SUBORDINATION OF ALL GUARANTOR CLAIMS......................9
Section 4.2 CLAIMS IN BANKRUPTCY......................................10
Section 4.3 PAYMENTS HELD IN TRUST....................................10
Section 4.4 LIENS SUBORDINATE.........................................10
Section 4.5 NOTATION OF RECORDS.......................................10
ARTICLE 5
MISCELLANEOUS
Section 5.1 SUCCESSORS AND ASSIGNS....................................11
Section 5.2 NOTICES...................................................11
Section 5.3 BUSINESS AND FINANCIAL INFORMATION........................11
Section 5.4 CONSTRUCTION..............................................11
Section 5.5 INVALIDITY................................................11
Section 5.7 ENTIRE AGREEMENT..........................................11
Exhibit A - Form of Joinder Agreement
-ii-
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of January 31, 1997, by YORK AGENCY,
INC., a Delaware corporation, THE DOODY GROUP, INC., a Delaware corporation,
BRENNER CASKET COMPANY, INC., a Delaware corporation, YORK ACQUISITION CORP. II,
a Delaware corporation, and THE YORK CHILDREN'S FOUNDATION, a Texas corporation
(collectively with any Person which may become a party hereto, the "GUARANTORS"
and each, individually, a "GUARANTOR"), is in favor of TEXAS COMMERCE BANK
NATIONAL ASSOCIATION ("LENDER").
W I T N E S S E T H:
WHEREAS, The York Group, Inc., a Delaware Corporation ("BORROWER") and the
Lender are parties to that certain Credit Agreement dated as of June 30, 1994,
as amended by that certain First Amendment to Credit Agreement dated as of
December 31, 1995 and Second Amendment to Credit Agreement ("SECOND AMENDMENT")
dated as of even date herewith (as the same may be further amended, restated,
modified or otherwise supplemented from time to time and in effect, the "CREDIT
AGREEMENT"); and
WHEREAS, one of the terms and conditions stated in the Second Amendment
for the effectiveness thereof and making of Loans under the Credit Agreement is
the execution and delivery to the Lender of this Guaranty Agreement;
NOW, THEREFORE, (i) in order to comply with the terms and conditions of
the Second Amendment and the Credit Agreement, (ii) to induce the Lender, at any
time or from time to time, to loan monies, with or without security to or for
the account of Borrower in accordance with the terms of the Credit Agreement,
(iii) at the special insistence and request of the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Guarantor hereby agrees as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 TERMS DEFINED ABOVE. As used in this Guaranty Agreement, the
terms "BORROWER", "GUARANTOR", "CREDIT AGREEMENT", "LENDERS" and "SECOND
AMENDMENT" shall have the meanings indicated above.
Section 1.2 CERTAIN DEFINITIONS. As used in this Guaranty Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"CONTRIBUTION OBLIGATION" shall mean an amount equal, at any time and from
time to time and for each respective Guarantor, to the product of (i) its
Contribution Percentage times (ii) the sum of all payments made previous
to or at the time of
-1-
<PAGE>
calculation by all Guarantors in respect of the Liabilities, as a
Guarantor (less the amount of any such payments previously returned to any
Guarantor by operation of law or otherwise, but not including payments
received by any Guarantor by way of its rights of subrogation and
contribution under Section 2.9), provided, however, such Contribution
Obligation for any Guarantor shall in no event exceed such Guarantor's
Maximum Guaranteed Amount.
"CONTRIBUTION PERCENTAGE" shall mean for any Guarantor for any applicable
date as of which such percentage is being determined, an amount equal to
the quotient of (i) the Net Worth of such Guarantor as of such date,
divided by (ii) the sum of the Net Worth of all the Guarantors as of such
date.
"GUARANTOR CLAIMS" shall have the meaning indicated in Section 4.1 hereof.
"GUARANTY AGREEMENT" shall mean this Guaranty Agreement, as the same may
from time to time be amended or supplemented.
"JOINDER AGREEMENT" means each Joinder Agreement, substantially in the
form of EXHIBIT A attached hereto, from time to time executed and
delivered to Lender by a Subsidiary of the Borrower pursuant to the terms
of the Credit Agreement, for the purpose, among others, of becoming an
additional Guarantor hereunder.
"LIABILITIES" shall mean (a) any and all indebtedness, obligations and
liabilities of the Borrower pursuant to the Credit Agreement, including
without limitation, the unpaid principal of and interest on the Notes,
including without limitation, interest accruing subsequent to the filing
of a petition or other action concerning bankruptcy or other similar
proceeding; (b) any additional loans made by the Lenders to the Borrower;
(c) any and all other indebtedness, obligations and liabilities of any
kind of the Borrower to the Lenders, now or hereafter existing, arising
directly between the Borrower and the Lenders or acquired outright, as a
participation, conditionally or as collateral security from another by the
Lenders, absolute or contingent, joint and/or several, secured or
unsecured, due or not due, arising by operation of law or otherwise, or
direct or indirect, including indebtedness, obligations and liabilities to
the Lenders of the Borrower as a member of any partnership, syndicate,
association or other group, and whether incurred by the Borrower as
principal, surety, endorser, guarantor, accommodation party or otherwise
and (d) all renewals, rearrangements, increases, extensions for any
period, amendments or supplement in whole or in part of the Notes or any
documents evidencing the above.
"MAXIMUM GUARANTEED AMOUNT" shall mean, for any Guarantor, the greater of
(i) the "reasonably equivalent value" or "fair consideration" (or
equivalent concept) received by such Guarantor in exchange for the
obligation incurred hereunder,
-2-
<PAGE>
within the meaning of any applicable state or federal fraudulent
conveyance or transfer laws; or (ii) the lesser of (A) the maximum amount
that will not render such Guarantor insolvent, or (B) the maximum amount
that will not leave such Guarantor with any property deemed an
unreasonably small capital. Clauses (A) and (B) are and shall be
determined pursuant to and as of the appropriate date mandated by such
applicable state or federal fraudulent conveyance or transfer laws and to
the extent allowed by law take into account the rights to contribution and
subrogation under Section 2.9 so as to provide for the largest Maximum
Guaranteed Amount possible.
"NET PAYMENTS" shall mean an amount equal, at any time and from time to
time and for each respective Guarantor, to the difference of (i) the sum
of all payments made previous to or at the time of calculation by such
Guarantor in respect to the Liabilities, as a Guarantor, and in respect of
its obligations contained in this Guaranty Agreement, less (ii) the sum of
all such payments previously returned to such Guarantor by operation of
law or otherwise and including payments received by such Guarantor by way
of its rights of subrogation and contribution under Section 2.9.
"NET WORTH" shall mean for any Guarantor, calculated on and as of any
applicable date on which such amount is being determined, the difference
between (i) the sum of all such Guarantor's property, at a fair valuation
and as of such date, minus (ii) the sum of all such Guarantor's debts, at
a fair valuation and as of such date, excluding the Liabilities.
Section 1.3 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined herein,
all terms beginning with a capital letter which are defined in the Credit
Agreement shall have the same meanings herein as therein.
ARTICLE 2
THE GUARANTY
Section 2.1 LIABILITIES GUARANTEED. Each Guarantor hereby irrevocably and
unconditionally guarantees the prompt payment of the Liabilities when due,
whether at maturity or otherwise, provided, however, that, notwithstanding
anything herein or in any other Loan Document to the contrary, the maximum
liability of each Guarantor hereunder shall in no event exceed its Maximum
Guaranteed Amount.
Section 2.2 NATURE OF GUARANTY. This Guaranty Agreement is an absolute,
irrevocable, completed and continuing guaranty of payment and not a guaranty of
collection, and no notice of the Liabilities or any extension of credit already
or hereafter contracted by or extended to Borrower need be given to Guarantors.
This Guaranty Agreement may not be revoked by
-3-
<PAGE>
Guarantors and shall continue to be effective with respect to debt under the
Liabilities arising or created after any attempted revocation by Guarantors and
shall remain in full force and effect until the Liabilities are paid in full and
the Commitment is terminated, notwithstanding that from time to time prior
thereto no Liabilities may be outstanding. Borrower and the Lender may modify,
alter, rearrange, extend for any period and/or renew from time to time, the
Liabilities, and the Lender may waive any Default or Events of Default without
notice to the Guarantors and in such event Guarantors will remain fully bound
hereunder on the Liabilities. This Guaranty Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
the Liabilities is rescinded or must otherwise be returned by the Lender upon
the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as
though such payment had not been made. This Guaranty Agreement may be enforced
by the Lender and any subsequent holder of any of the Liabilities and shall not
be discharged by the assignment or negotiation of all or part of the
Liabilities. Each Guarantor hereby expressly waives present ment, demand, notice
of non-payment, protest and notice of protest and dishonor, notice of Default or
Event of Default, notice of intent to accelerate the maturity and notice of
acceleration of the maturity and any other notice in connection with the
Liabilities, and also notice of acceptance of this Guaranty Agreement,
acceptance on the part of the Lender being conclusively presumed by the Lender's
request for this Guaranty Agreement and delivery of the same to the Lender.
Section 2.3 LENDER'S RIGHTS. Each Guarantor authorizes the Lender, without
notice or demand and without affecting its liability hereunder, to take and hold
security for the payment of this Guaranty Agreement and/or the Liabilities, and
exchange, enforce, waive and release any such security; and to apply such
security and direct the order or manner of sale thereof as the Lender in its
discretion may determine; and to obtain a guaranty of the Liabilities from any
one or more Persons and at any time or times to enforce, waive, rearrange,
modify, limit or release any of such other Persons from their obligations under
such guaranties.
Section 2.4 GUARANTOR'S WAIVERS.
(a) GENERAL. Each Guarantor waives any right to require the Lender
to (i) proceed against Borrower or any other person liable on the
Liabilities, (ii) enforce any of its rights against any other guarantor of
the Liabilities (iii) proceed or enforce any of its rights against or
exhaust any security given to secure the Liabilities (iv) have Borrower
joined with Guarantors in any suit arising out of this Guaranty Agreement
and/or the Liabilities, or (v) pursue any other remedy in the Lender's
powers whatsoever. The Lender shall not be required to mitigate damages or
take any action to reduce, collect or enforce the Liabilities. Each
Guarantor waives any defense arising by reason of any disability, lack of
corporate authority or power, or other defense of Borrower or any other
guarantor of the Liabilities, and shall remain liable hereon regardless of
whether Borrower or any other guarantor be found not liable thereon for
any reason. Whether and when to exercise any of the remedies of the Lender
under any of the Loan Documents shall be in the sole and absolute
discretion of the Lender, and no delay by the Lender in
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enforcing any remedy, including delay in conducting a foreclosure sale,
shall be a defense to such Guarantor's liability under this Guaranty
Agreement. To the extent allowed by applicable law, each Guarantor hereby
waives any good faith duty on the part of the Lender in exercising any
remedies provided in the Loan Documents.
(b) SUBROGATION. Until the Liabilities have been paid in full, each
Guarantor waives all rights of subrogation or reimbursement against the
Borrower, whether arising by contract or operation of law (including,
without limitation, any such right arising under any federal or state
bankruptcy or insolvency laws) and waives any right to enforce any remedy
which the Lender now has or may hereafter have against the Borrower, and
waives any benefit or any right to participate in any security now or
hereafter held by the Lender.
Section 2.5 MATURITY OF LIABILITIES; PAYMENT. Guarantors agree that if the
maturity of any of the Liabilities is accelerated by bankruptcy or otherwise,
such maturity shall also be deemed accelerated for the purpose of this Guaranty
Agreement without demand or notice to Guarantors. Guarantors will, forthwith
upon notice from the Lender, pay to the Lender the amount due and unpaid by
Borrower and guaranteed hereby. The failure of the Lender to give this notice
shall not in any way release Guarantors hereunder.
Section 2.6 LENDER'S EXPENSES. If Guarantors fails to pay the Liabilities
after notice from the Lender of Borrower's failure to pay any Liabilities at
maturity, and if the Lender obtains the services of an attorney for collection
of amounts owing by Guarantors hereunder, or obtaining advice of counsel in
respect of any of its rights under this Guaranty Agreement, or if suit is filed
to enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy,
probate, receivership or other judicial proceedings for the establishment or
collection of any amount owing by Guarantors hereunder, or if any amount owing
by Guarantors hereunder is collected through such proceedings, Guarantors agree
to pay to the Lender the Lender's reasonable attorneys' fees.
Section 2.7 LIABILITY. It is expressly agreed that the liability of the
Guarantors for the payment of the Liabilities guaranteed hereby shall be primary
and not secondary.
Section 2.8 EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING
GUARANTOR'S OBLIGATIONS. Each Guarantor hereby consents and agrees to each of
the following to the fullest extent permitted by law, and agrees that its
obligations under this Guaranty Agreement shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
rights (including without limitation rights to notice) which such Guarantor
might otherwise have as a result of or in connection with any of the following:
(a) MODIFICATIONS, ETC. Any renewal, extension, modification,
increase, decrease, alteration or rearrangement of all or any part of the
Liabilities, or of the Notes, or the Credit Agreement or any instrument
executed in connection
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therewith, or any contract or understanding between Borrower and the
Lender or any other Person, pertaining to the Liabilities;
(b) ADJUSTMENT, ETC. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Lender to Borrower or any
Guarantor or any Person liable on the Liabilities;
(c) CONDITION OF BORROWER OR GUARANTOR. The insolvency, bankruptcy
arrangement, adjustment, composition, liquidation, disability,
dissolution, death or lack of power of Borrower, any Guarantor or any
other Person at any time liable for the payment of all or part of the
Liabilities; or any dissolution of Borrower or any Guarantor, or any sale,
lease or transfer of any or all of the assets of Borrower or any
Guarantor, or any changes in the shareholders, partners, or members of
Borrower or any Guarantor; or any reorganization of Borrower or any
Guarantor;
(d) INVALIDITY OF LIABILITIES. The invalidity, illegality or
unenforceability of all or any part of the Liabilities, or any document or
agreement executed in connection with the Liabilities, for any reason
whatsoever, including without limitation the fact that the Liabilities, or
any part thereof, exceed the amount permitted by law, the act of creating
the Liabilities or any part thereof is ULTRA VIRES, the officers or
representatives executing the documents or otherwise creating the
Liabilities acted in excess of their authority, the Liabilities violate
applicable usury laws, the Borrower has valid defenses, claims or offsets
(whether at law, in equity or by agreement) which render the Liabilities
wholly or partially uncollectible from Borrower, the creation, performance
or repayment of the Liabilities (or the execution, delivery and
performance of any document or instrument representing part of the
Liabilities or executed in connection with the Liabilities, or given to
secure the repayment of the Liabilities) is illegal, uncollectible,
legally impossible or unenforceable, or the Credit Agreement or other
documents or instruments pertaining to the Liabilities have been forged or
otherwise are irregular or not genuine or authentic;
(e) RELEASE OF OBLIGORS. Any full or partial release of the
liability of Borrower on the Liabilities or any part thereof, of any
co-guarantors, or any other Person now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally, to
pay, perform, guarantee or assure the payment of the Liabilities or any
part thereof, it being recognized, acknowledged and agreed by each
Guarantor that it may be required to pay the Liabilities in full without
assistance or support of any other Person, and Guarantor has not been
induced to enter into this Guaranty Agreement on the basis of a
contemplation, belief, understanding or agreement that other parties other
than the Borrower will be
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liable to perform the Liabilities, or the Lender will look to other
parties to perform the Liabilities.
(f) OTHER SECURITY. The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part
of the Liabilities;
(g) RELEASE OF COLLATERAL, ETC. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including without
limitation negligent, willful, unreasonable or unjustifiable impairment)
of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of
the Liabilities;
(h) CARE AND DILIGENCE. The failure of the Lender or any other
Person to exercise diligence or reasonable care in the preservation,
protection, enforcement, sale or other handling or treatment of all or any
part of such collateral, property or security;
(i) STATUS OF LIENS. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Liabilities shall not be
properly perfected or created, or shall prove to be unenforceable or
subordinate to any other security interest or lien, it being recognized
and agreed by each Guarantor that it is not entering into this Guaranty
Agreement in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the collateral
for the Liabilities;
(j) PAYMENTS RESCINDED. Any payment by Borrower to the Lender is
held to constitute a preference under the bankruptcy laws, or for any
reason the Lender is required to refund such payment or pay such amount to
Borrower or someone else; or
(k) OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or
omitted to be taken with respect to the Credit Agreement, the Liabilities,
or the security and collateral therefor, whether or not such action or
omission prejudices such Guarantor or increases the likelihood that such
Guarantor will be required to pay the Liabilities pursuant to the terms
hereof; it being the unambiguous and unequivocal intention of each
Guarantor that it shall be obligated to pay the Liabilities when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Liabilities.
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Section 2.9 RIGHT OF SUBROGATION AND CONTRIBUTION. If any Guarantor makes
a payment in respect of the Liabilities, it shall be subrogated to the rights of
the Lender against the Borrower with respect to such payment and shall have the
rights of contribution against the other Guarantors as set forth in this Section
2.9; provided that such Guarantor shall not enforce its rights to any payment by
way of subrogation or by exercising its rights of contribution or reimbursement
or the right to participate in any security now or hereafter held by or for the
benefit of the Lender until the Liabilities have been paid in full. Each
Guarantor agrees that after all the Liabilities have been paid in full that if
its then current Net Payments are less than the amount of its then current
Contribution Obligation, such Guarantor shall pay to the other Guarantors an
amount (together with any payments required of the other Guarantors by this
Section 2.9) such that the Net Payments made by all Guarantors in respect of the
Liabilities shall be shared among all of the Guarantors in proportion to their
respective Contribution Percentages.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 BY GUARANTOR. In order to induce the Lender to accept this
Guaranty Agreement, each Guarantor represents and warrants to the Lender (which
representations and warranties will survive the creation of the Liabilities and
any extension of credit thereunder) that:
(a) BENEFIT TO GUARANTOR. Such Guarantor's guaranty pursuant to this
Guaranty Agreement reasonably may be expected to benefit, directly or
indirectly, such Guarantor.
(b) EXISTENCE. Such Guarantor is a corporation or partnership duly
organized, legally existing and in good standing under the laws of the
state of its incorporation or creation and is duly qualified to conduct
business in all jurisdictions wherein the property owned or the business
transacted by it makes such qualification necessary.
(c) POWER AND AUTHORIZATION. Such Guarantor is duly authorized and
empowered to execute, deliver and perform this Guaranty Agreement and all
action on such Guarantor's part requisite for the due execution, delivery
and performance of this Guaranty Agreement has been duly and effectively
taken.
(d) BINDING OBLIGATIONS. This Guaranty Agreement constitutes valid
and binding obligations of such Guarantor, enforceable in accordance with
its terms (except that enforcement may be subject to any applicable
bankruptcy, insolvency or similar laws generally affecting the enforcement
of creditors' rights).
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(e) NO LEGAL BAR OR RESULTANT LIEN. This Guaranty Agreement will not
violate any provisions of such Guarantor's articles or certificate of
incorporation, bylaws, partnership agreement, member agreement or any
other contract, agreement, law, regulation, order, injunction, judgment,
decree or writ to which such Guarantor is subject, or result in the
creation or imposition of any Lien upon any Properties of such Guarantor.
(f) NO CONSENT. Such Guarantor's execution, delivery and performance
of this Guaranty Agreement does not require the consent or approval of any
other Person, including without limitation any regulatory authority or
governmental body of the United States or any state thereof or any
political subdivision of the United States or any state thereof.
(g) SOLVENCY. Each The Guarantor hereby represents that (i) it is
not insolvent as of the date hereof and will not be rendered insolvent as
a result of this Guaranty Agreement, (ii) it is not engaged in business or
a transaction, or about to engage in a business or a transaction, for
which any property or assets remaining with such Guarantor is unreasonably
small capital, and (iii) it does not intend to incur, or believe it will
incur, debts that will be beyond its ability to pay as such debts mature.
Section 3.2 NO REPRESENTATION BY LENDERS. Neither the Lender nor any other
Person has made any representation, warranty or statement to any Guarantor in
order to induce such Guarantor to execute this Guaranty Agreement.
ARTICLE 4
SUBORDINATION OF INDEBTEDNESS
Section 4.1 SUBORDINATION OF ALL GUARANTOR CLAIMS. As used herein, the
term "GUARANTOR CLAIMS" shall mean all debts and liabilities of Borrower to
Guarantors, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligation of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor. The Guarantor Claims shall include without
limitation all rights and claims of any Guarantor against Borrower arising as a
result of subrogation or otherwise as a result of Guarantor's payment of all or
a portion of the Liabilities. Until the Liabilities shall be paid and satisfied
in full and Guarantors shall have performed all of their obligations hereunder,
Guarantors shall not receive or collect, directly or indirectly, from Borrower
or any other party any amount upon the Guarantor Claims.
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Section 4.2 CLAIMS IN BANKRUPTCY. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving Borrower as debtor, the Lender shall have the right to
prove their claim in any proceeding, so as to establish its rights hereunder and
receive directly from the receiver, trustee or other court custodian, dividends
and payments which would otherwise be payable upon Guarantor Claims. Guarantors
hereby assign such dividends and payments to the Lender. Should the Lender
receive, for application upon the Liabilities, any such dividend or payment
which is otherwise payable to any Guarantor, and which, as between Borrower and
such Guarantor, shall constitute a credit upon the Guarantor Claims, then upon
payment in full of the Liabilities, such Guarantor shall become subrogated to
the rights of the Lender to the extent that such payments to the Lender on the
Guarantor Claims have contributed toward the liquidation of the Liabilities, and
such subrogation shall be with respect to that proportion of the Liabilities
which would have been unpaid if the Lender had not received dividends or
payments upon the Guarantor Claims.
Section 4.3 PAYMENTS HELD IN TRUST. In the event that notwithstanding
Sections 4.1 and 4.2 above, any Guarantor should receive any funds, payments,
claims or distributions which is prohibited by such Sections, such Guarantor
agrees to hold in trust for the Lender an amount equal to the amount of all
funds, payments, claims or distributions so received, and agrees that it shall
have absolutely no dominion over the amount of such funds, payments, claims or
distributions except to pay them promptly to the Lender, and such Guarantor
covenants promptly to pay the same to the Lender.
Section 4.4 LIENS SUBORDINATE. Guarantors agree that any liens, security
interests, judgment liens, charges or other encumbrances upon Borrower's assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges or other
encumbrances upon Borrower's assets securing payment of the Liabilities,
regardless of whether such encumbrances in favor of Guarantors, the Lender or
the Lender presently exist or are hereafter created or attach. Without the prior
written consent of the Lender, no Guarantor shall (a) exercise or enforce any
creditor's right it may have against the Borrower, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceeding
(judicial or otherwise, including without limitation the commencement of or
joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any lien, mortgages, deeds of trust, security
interest, collateral rights, judgments or other encumbrances on assets of
Borrower held by such Guarantor.
Section 4.5 NOTATION OF RECORDS. All promissory notes, accounts receivable
ledgers or other evidence of the Guarantor Claims accepted by or held by any
Guarantor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under the terms of this Guaranty Agreement.
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ARTICLE 5
MISCELLANEOUS
Section 5.1 SUCCESSORS AND ASSIGNS. This Guaranty Agreement is and shall
be in every particular available to the successors and assigns of the Lender and
is and shall always be fully binding upon the legal representatives, heirs,
successors and assigns of Guarantors, notwithstanding that some or all of the
monies, the repayment of which this Guaranty Agreement applies, may be actually
advanced after any bankruptcy, receivership, reorganization, death, disability
or other event affecting Guarantors.
Section 5.2 NOTICES. Any notice or demand to Guarantors under or in
connection with this Guaranty Agreement may be given and shall conclusively be
deemed and considered to have been given and received in accordance with Section
11.02 of the Credit Agreement, addressed to Guarantors at the address on the
signature page hereof or at such other address provided to the Lender in
writing.
Section 5.3 BUSINESS AND FINANCIAL INFORMATION. The Guarantors will
promptly furnish to the Lender from time to time upon request such information
regarding the business and affairs and financial condition of the Guarantor as
the Lender may reasonably request.
Section 5.4 CONSTRUCTION. This Guaranty Agreement is a contract made under
and shall be construed in accordance with and governed by the laws of the State
of Texas.
Section 5.5 INVALIDITY. In the event that any one or more of the
provisions contained in this Guaranty Agreement shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Guaranty
Agreement.
Section 5.6 JOINDER. It is contemplated by each Guarantor that additional
Subsidiaries of Borrower may from time to time become a Guarantor hereunder (as
required by the terms of the Credit Agreement) by their execution and delivery
to Lender of a Joinder Agreement. Each Guarantor agrees, consents and
acknowledges that upon the execution and delivery to Lender by any such
Subsidiary of a Joinder Agreement, such Subsidiary shall become a Guarantor
hereunder for all purposes, jointly and severally liable hereunder as if such
Subsidiary had originally been a party hereto, without notice to any Guarantor
or any other Person. Delivery of a Joinder Agreement to any Guarantor or any
other Person is not required for the Subsidiary of the Borrower executing and
delivering such Joinder Agreement to become a Guarantor hereunder.
Section 5.7 ENTIRE AGREEMENT. THIS WRITTEN GUARANTY AGREEMENT EMBODIES THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDER AND THE GUARANTORS AND
SUPERSEDES ALL
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OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THIS WRITTEN GUARANTY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGE FOLLOWS]
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WITNESS THE EXECUTION HEREOF, as of the date first written above.
YORK AGENCY, INC.,
THE DOODY GROUP, INC.,
BRENNER CASKET COMPANY, INC.,
YORK ACQUISITION CORP. II,
THE YORK CHILDREN'S FOUNDATION
By:
Name: David F. Beck
Title: Vice President
Address: 9430 Old Katy Road
Houston, Texas 77055
Telecopier: (713) 984-5517
Telephone: (713) 984-5510
Attention: David F. Beck
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EXHIBIT A
FORM OF
JOINDER AGREEMENT
This JOINDER AGREEMENT (this "JOINDER AGREEMENT") is dated effective as of
__________, 199_, and is executed and delivered by __________________ ("JOINING
GUARANTOR"), a _________ corporation, to TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association, ("LENDER").
RECITALS
1. The York Group, Inc., a Delaware Corporation (the "BORROWER") and
Lender are parties to that certain Credit Agreement dated as of June 30, 1994,
as amended by that certain First Amendment to Credit Agreement dated as of
December 31, 1995 and Second Amendment to Credit Agreement dated as of January
31, 1997 (as the same may be further amended, restated, modified or otherwise
supplemented from time to time and in effect, the "CREDIT AGREEMENT"); and
2. Pursuant to the terms of the Credit Agreement, and as a condition
(among others) for making the Loans thereunder and issuing the Letters of Credit
pursuant thereto, Subsidiaries of the Borrower executed and delivered to Lender
a Guaranty Agreement dated as of January 31, 1997, pursuant to which, among
other things, each of such Subsidiaries jointly and severally unconditionally
guaranteed the payment and performance of all of the Liabilities. The Guaranty
Agreement as heretofore or hereafter amended, modified, supplemented, joined in
and restated from time to time, is herein called the "GUARANTY." All Persons
from time to time a party to the Guaranty (whether originally or by joinder) are
herein collectively called the "GUARANTORS" and are each a "GUARANTOR" herein.
3. Joining Guarantor is now required, among other things and subject to
certain terms and conditions, to join in the execution and delivery to Lender of
the Guaranty by its execution and delivery of this Joinder Agreement and
otherwise by such action as Lender may reasonably require.
In order to comply with such requirement, Joining Guarantor executes and
delivers this Joinder Agreement.
Now, in consideration of the credit and financial accommodations extended
and to be extended to Borrower pursuant to the Credit Agreement and the other
Loan Documents or otherwise, which Joining Guarantor hereby agrees have and
shall continue to benefit Joining Guarantor and its shareholders, directly or
indirectly, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Joining Guarantor hereby agrees,
assumes, ratifies, joins and acknowledges as follows:
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AGREEMENTS
1. ASSUMPTION. Joining Guarantor hereby unconditionally, jointly and
severally, assumes liability for all covenants, warranties, representations,
indemnifications, obligations and liabilities of Guarantors now existing or
which may hereafter arise under the Guaranty and shall be liable therefor as
though Joining Guarantor had originally been a party to the Guaranty. Without
limitation of the foregoing, Joining Guarantor, as a primary obligor and not as
a surety, unconditionally, jointly and severally, guarantees unto Lender (i) the
payment of the Liabilities when due (whether at the stated maturity, by
acceleration or otherwise) in accordance with the terms of the Loan Documents,
and (ii) that Borrower will perform and observe each agreement, covenant, term
and condition in the Loan Documents to be performed or observed by Borrower and,
upon Borrower's failure to do so, will promptly perform and observe, or will
cause to be promptly performed and observed, each such agreement, covenant, term
or condition.
2. TERMS RATIFIED. Joining Guarantor hereby expressly ratifies all
guarantees, terms, covenants, representations, indemnifications, warranties,
agreements, provisions, WAIVERS, RELEASES, restrictions, duties and
responsibilities of the Guarantors under the Guaranty and all other Loan
Documents and agrees that they shall apply to Joining Guarantor as if Joining
Guarantor had executed the Guaranty as an original party thereto, and that any
reference to "Guarantors" or a "Guarantor" contained in the Guaranty, the Credit
Agreement or any other Loan Documents shall include, without limitation, Joining
Guarantor.
3. REPRESENTATIONS. Joining Guarantor (a) confirms that it has received a
copy of the Loan Documents, together with such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Joinder Agreement; (b) agrees that it will, independently and
without reliance upon Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, and (c) represents that
the value of the consideration received and to be received by Joining Guarantor
is reasonably worth at least as much as the liability and obligation of such
Joining Guarantor hereunder, and that such liability and obligation may
reasonably be expected to benefit Joining Guarantor directly or indirectly. The
Board of Directors of Joining Guarantor has duly adopted resolutions certifying
that the execution, delivery and performance of this Joinder Agreement (and the
effect thereof) will benefit Joining Guarantor.
4. NO IMPAIRMENT. Nothing herein shall in any manner impair or extinguish
the Guaranty, any of the other Loan Documents or any lien or security interest
now or hereafter securing the payment of any of the Indebtedness arising
pursuant to the Loan Documents.
5. CONDITIONS. This Joinder Agreement shall not become effective until
Joining Guarantor shall have delivered to Lender each of the following:
(a) a certificate of the Secretary or any Assistant Secretary of
Joining Guarantor (or other officer or director of Joining Guarantor which
is duly authorized to keep the minute book or similar record of Joining
Guarantor), in form and substance satisfactory to Lender, dated as of the
date hereof, as to (i) the resolutions of the Board of Directors (or
similar governing body) of Joining Guarantor authorizing the execution,
delivery and performance
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of this Joinder Agreement and of all instruments contemplated herein to be
executed and delivered by Joining Guarantor in connection herewith (a copy
of such resolutions to be incorporated into or attached as an exhibit to
such certificate), such certificate to state that said copy is a true and
correct copy of such resolutions and that such resolutions were duly
adopted and have not been amended, superseded, revoked or modified in any
respect and remain in full force and effect as of the date of such
certificate; (ii) the election, incumbency and signatures of the officer
or officers (or other official) of Joining Guarantor executing and
delivering this Joinder Agreement and each other instrument or document
furnished in connection herewith; (iii) Joining Guarantor's certificate or
articles of incorporation and bylaws (a copy of such documents to be
attached to the certificate), and (iv) such other documents and
information as Lender shall reasonably request; and
(b) a legal opinion from the legal counsel for Joining Guarantor in
form and substance satisfactory to Lender.
6. GOVERNING LAW. This Joinder Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the United
States of America. Joining Guarantor hereby irrevocably agrees that any legal
proceeding against Lender arising out of or in connection with this Joinder
Agreement, the Guaranty or the other Loan Documents shall be brought in the
district courts of Harris County, Texas, or in the United States District Court
for the Southern District of Texas, Houston Division.
7. SURVIVAL: PARTIES BOUND. All representations, warranties, covenants and
agreements made by or on behalf of Joining Guarantor in connection herewith
shall survive the execution and delivery of this Joinder Agreement and the other
Loan Documents, shall not be affected by any investigation made by any Person,
and shall bind Joining Guarantor and its successors, trustees, receivers and
assigns and inure to the benefit of the successors and assigns of Lender. The
term of this Joinder Agreement shall be until the termination of the Guaranty as
to all parties thereto.
8 CAPTIONS. The headings and captions appearing in this Joinder Agreement
have been included solely for convenience and shall not be considered in
construing this Joinder Agreement.
9. DEFINITIONS. Terms used herein and not defined herein, but which are
defined in the Credit Agreement or the Guaranty, shall have the meanings herein
assigned to them in the Credit Agreement or the Guaranty, respectively.
10. PARTIES BOUND. This Joinder Agreement shall bind and benefit the
parties hereto and the respective successors and assigns, except that Joining
Guarantor and Borrower may not assign their rights or obligations hereunder
without the prior written consent of Lender.
11. AMENDMENTS. ETC. No amendment or waiver of any provision of this
Joinder Agreement or any other Loan Document, nor any consent to any departure
by Joining Guarantor therefrom, shall in any event be effective unless the same
shall be agreed or consented to by Lender and Joining Guarantor, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, unless otherwise specifically provided in the
Credit Agreement.
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12. DTPA WAIVER.
WAIVER OF CONSUMER RIGHTS
JOINING GUARANTOR HEREBY WAIVES ALL RIGHTS, REMEDIES, CLAIMS, DEMANDS AND
CAUSES OF ACTION UNDER, BASED UPON OR RELATED TO THE TEXAS DECEPTIVE TRADE
PRACTICES CONSUMER PROTECTION ACT AS DESCRIBED IN SECTIONS 17.41 ET SEQ. OF THE
TEXAS BUSINESS AND COMMERCE CODE (A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS), OTHER THAN SECTION 17.555, AS THE SAME PERTAINS OR MAY PERTAIN TO
THIS JOINDER AGREEMENT, THE CREDIT AGREEMENT, THE GUARANTY, ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. IN
FURTHERANCE OF SAID WAIVER, JOINING GUARANTOR HEREBY REPRESENTS AND WARRANTS TO
LENDER THAT (A) JOINING GUARANTOR HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF SUCH
TRANSACTIONS, (B) JOINING GUARANTOR IS REPRESENTED BY LEGAL COUNSEL OF ITS OWN
SELECTION IN CONNECTION WITH THE NEGOTIATIONS, EXECUTION AND DELIVERY OF THIS
JOINDER AGREEMENT AND THE OTHER LOAN DOCUMENTS; (C) JOINING GUARANTOR HAS A
CHOICE OTHER THAN TO ENTER INTO SAID WAIVER IN THAT THE BORROWER CAN OBTAIN THE
LOANS FROM ANOTHER INSTITUTION; (D) JOINING GUARANTOR DOES NOT CONSIDER ITSELF
TO BE IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER WITH
RESPECT TO THIS JOINDER AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND (E) JOINING
GUARANTOR VOLUNTARILY CONSENTS TO THIS WAIVER.
13. WAIVER OF CLAIMS. Joining Guarantor hereby waives and releases Lender
from any and all claims or causes of action which Joining Guarantor may own,
hold or claim in respect of any of them as of the date hereof.
A-4
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IN WITNESS WHEREOF, Joining Guarantor has executed this Agreement as of
the date set forth above.
______________________________________
a ________________________ corporation
By:
Name:
Title:
ATTEST:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
Name:
Title:
A-5
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT is made as of January 31, 1997 between T.Y.G.
TRADE COMPANY, INC., a Delaware corporation (the "SUBORDINATED CREDITOR"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "LENDER").
RECITALS
A. THE YORK GROUP, INC., a corporation duly organized and validly existing
under the laws of the Commonwealth of Pennsylvania (the "BORROWER"), and the
Lender are parties to that certain Credit Agreement dated as of June 30, 1994,
as amended by that certain First Amendment to Credit Agreement dated as of
December 31, 1995, and as amended by that certain Second Amendment to Credit
Agreement (the "SECOND AMENDMENT") dated as of January 31, 1997 (as the same may
further be amended, restated, modified or otherwise supplemented from time to
time and in effect, the "CREDIT AGREEMENT"), pursuant to which the Lender has
made certain credit available to the Borrower.
B. Pursuant to the terms of the Second Amendment, the Borrower has agreed
to cause Subordinated Creditor to execute and deliver this Subordination
Agreement, and Subordinated Creditor has agreed to enter into this Subordination
Agreement.
C. Therefore, (i) in order to comply with the terms and conditions of the
Credit Agreement, (ii) to induce the Lender at any time or from time to time to
loan monies to or for the account of the Borrower in accordance with the terms
of the Credit Agreement, (iii) at the special insistence and request of the
Lender, and (iv) for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Subordinated Creditor hereby
agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.01TERMS DEFINED ABOVE AND IN CREDIT AGREEMENT. As used in this
Subordination Agreement, the terms defined above shall have the meanings
respectively assigned to them. Unless otherwise defined herein, all terms
beginning with a capital letter which are defined in the Credit Agreement shall
have the meanings herein as assigned therein, unless the context hereof requires
otherwise.
Section 1.02CERTAIN DEFINITIONS. As used in this Subordination Agreement
the following terms shall have the following meanings, unless the context
otherwise requires:
"SUBORDINATED DEBT" shall mean any and all indebtedness, liabilities and
obligations of the Borrower, whether owed individually or jointly, to the
Subordinated Creditor, absolute or contingent, direct or indirect, joint,
several or independent, now outstanding or owing or which may hereafter be
existing or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Subordinated Creditor, whether created
directly or acquired by assignment, as a participation, conditionally, as
collateral security from another or otherwise,
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including indebtedness, obligations and liabilities of the Borrower to the
Subordinated Creditor as member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise, including, without
limiting the generality of the foregoing, all indebtedness, liabilities and
obligations of the Borrower to the Subordinated Creditor arising out of that
certain promissory note in the principal amount of $20,000,000, dated January
13, 1994 (modified as of October 7, 1995), executed by the Borrower and payable
to the order of the Subordinated Creditor ("NOTE").
"SUPERIOR INDEBTEDNESS" shall mean any and all indebtedness, liabilities
and obligations of the Borrower, whether owed individually or jointly, to the
Lender absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing or
incurred, arising by operation of law or otherwise, due or to become due, or
held or to be held by the Lender whether created directly or acquired by
assignment, as a participation, conditionally, as collateral security from
another or otherwise, including indebtedness, obligations and liabilities of the
Borrower to the Lender as a member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise.
ARTICLE II
SUBORDINATION
Section 2.01 AGREEMENT TO SUBORDINATE. The payment of any and all
Subordinated Debt is expressly subordinated to the extent and in the manner set
forth in Sections 2.02 through 2.06 hereof to Superior Indebtedness.
Section 2.02 PAYMENT SUBORDINATION UPON DEFAULT. If for any reason any of
the Superior Indebtedness is not paid when due or is not paid on or before the
maturity thereof, or if there shall occur and be continuing any event which with
the giving of notice or lapse of time or both would constitute a Default or
Event of Default under the Credit Agreement or any Loan Document, then, unless
and until such Default or Event of Default shall have been cured to the
satisfaction of the Lender, in its sole discretion, or unless and until the
Superior Indebtedness shall be paid in full, the Subordinated creditor will not
ask for, sue for, take, demand, receive or accept from the Borrower, by set-off
or in any other manner, any payment or distribution on account of the
Subordinated Debt nor present any instrument evidencing the Subordinated Debt
for payment (other than such presentment as may be necessary to prevent
discharge of other liable parties on such instrument); provided that, so long as
no Default or Event of Default has occurred and is continuing or so long as such
payment would not result in a Default or Event of Default, the Borrower may (i)
pay interest on the Note on the dates specified therein.
Section 2.03 NO PAYMENTS WHICH CAUSE DEFAULTS. The Subordinated Creditor
will not ask for, demand, sue for, take, receive or accept from the Borrower by
set-off or in any other manner, any payment or distribution on account of the
Subordinated Debt, if the making of such payment would constitute, or would
result in the occurrence of, a Default or Event of Default under the Credit
Agreement or any Loan Document.
Section 2.04 PAYMENTS RECEIVED IN VIOLATION OF SUBORDINATION AGREEMENT. In
the event the Subordinated Creditor shall receive any payment or distribution on
account of the Subordinated
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Debt which Subordinated Creditor is not entitled to receive under the provisions
of the foregoing Section 2.02 or Section 2.03, Subordinated Creditor will hold
any amount so received in trust for the Lender and will forthwith turn over such
payment to the Lender in the form received by Subordinated Creditor (together
with any necessary endorsement) to be applied on the Superior Indebtedness.
Section 2.05 LIENS SUBORDINATE. The Subordinated Creditor agrees that any
Liens, upon the Borrower's assets securing payment of the Subordinated Debt
shall be and remain inferior and subordinate to any Liens securing payment of
the Superior Indebtedness regardless of whether such encumbrances in favor of
Subordinated creditor or the Lender presently exist or are hereafter created or
attach. Without the prior written consent of the Lender, the Subordinated
Creditor shall not foreclose, repossess, sequester or otherwise take steps or
institute any action or proceeding (judicial or otherwise, including without
limitation the commencement of or joinder in any liquidation, bankruptcy,
rearrangement, debtor's relief or insolvency proceeding) to enforce any Lien,
collateral right, judgment or other encumbrance on the Borrower's assets held by
the Subordinated Creditor.
Section 2.06 AGREEMENT NOT TO PURSUE ACTIONS.
(a) The Subordinated Creditor will not commence any action or proceeding
against the Borrower to recover all or any part of the Subordinated Debt or join
with any other creditor, unless the Lender shall also join, in bringing any
proceedings against the Borrower under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt, receivership, liquidation or
insolvency law or statute of the Federal or any state government unless and
until all Superior Indebtedness shall have been paid in full.
(b) In the event of any receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization or arrangement with creditors,
adjustment of debt, whether or not pursuant to the Federal Bankruptcy Code, the
sale of all or substantially all of the assets, dissolution, liquidation, or any
other marshaling of the assets and liabilities of the Borrower, the Subordinated
Creditor will at the Lender's request file any claim, proof of claim, proof of
interest or other instrument of similar character necessary to enforce the
obligations of the Borrower in respect of the Subordinated Debt and will hold in
trust for the Lender and pay over to the Lender, in the form received (together
with any necessary endorsement), to be applied on the Superior Indebtedness, any
and all monies, dividends, distributions or other assets received in any such
proceedings on account of the Subordinated Debt unless and until the Superior
Indebtedness shall be paid in full. In the event that the Subordinated Creditor
shall fail to take any such action requested by the Lender, the Lender, may, as
attorney-in-fact for the Subordinated Creditor take such action on behalf of the
Subordinated Creditor, and the Subordinated Creditor hereby appoints the Lender
as attorney-in-fact for the Subordinated Creditor to demand, sue for, collect
and receive any and all such monies, dividends, distributions or other assets
and give acquittance therefor, and to file any claim, proof of claim, proof of
interest or other instrument of similar character and to take such other
proceedings in the Lender's own name or in the name of the Subordinated Creditor
as the Lender may deem necessary or advisable for the enforcement of this
Subordination Agreement; and the Subordinated Creditor will execute and deliver
to the Lender such other and further powers of attorney or other instruments as
the Lender may request in order to accomplish the foregoing.
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Section 2.07 RIGHTS OF LENDER. The Lender may, at any time, and from time
to time, without the consent of or notice to the Subordinated Creditor, without
incurring responsibility to the Subordinated Creditor, without impairing or
releasing any of the Lender's rights or any of the obligations of the
Subordinated Creditor under this Subordination Agreement:
(a) Change the amount, manner, place or terms of payment, or change or
extend for any period the time of payment of, or renew or otherwise alter the
Superior Indebtedness or any instrument or agreement now or hereafter executed
evidencing, in connection with, as security for or providing for the issuance of
any of the Superior Indebtedness in any manner, or enter into or amend in any
manner any other agreement relating to the Superior Indebtedness (including
provisions restricting or further restricting payments of the Subordinated
Debt);
(b) Sell, exchange, release or otherwise deal with all or any part of the
Property, if any, by whomsoever at any time pledged or mortgaged to secure the
Superior Indebtedness;
(c) Release any Person liable in any manner for payment or collection of
the Superior Indebtedness;
(d) Exercise or refrain from exercising any rights against the Borrower or
others, including the Subordinated Creditor; and
(e) Apply any sums received by the Lender, paid by any Person and however
realized, to payment of the Superior Indebtedness in such a manner as the
Lender, in its sole discretion, may deem appropriate.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 REPRESENTATIONS OF SUBORDINATED CREDITOR. The Subordinated
Creditor represents and warrants that: (a) neither the execution nor delivery of
this Subordination Agree ment nor fulfillment of or compliance with the terms
and provisions hereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any agreement or
instrument to which it is now subject; (b) it has all requisite authority to
execute, deliver and perform its obligations under this Subordination Agreement;
and (c) the outstanding principal amount of the Subordinated Debt, as of the
date hereof, is $20,000,000.
Section 3.02 COVENANTS. The Subordinated Creditor covenants that so long
as any of the Superior Indebtedness remains outstanding and until the
termination of the Commitment, the Subordinated Creditor shall: (a) cause all
Subordinated Debt to be evidenced by a note, debenture or other instrument
evidencing the Subordinated Debt; (b) at the Lender's request promptly surrender
or cause to be surrendered any such note, debenture, or instrument evidencing
the Subordinated Debt so that a statement or legend may be entered thereon to
the effect that such note, debenture, or other instrument is subordinated to the
Superior Indebtedness in favor of the Lender in the manner and to the extent set
forth in this Subordination Agreement; (c) mark the books of Subordinated
Creditor to show that the Subordinated Debt is subordinated to the Superior
Indebtedness in the manner and to the extent set forth in this Subordination
Agreement; (d) execute any and all other instruments necessary as required by
the Lender to subordinate the Subordinated
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Debt to the Superior Indebtedness as herein provided; (e) not assign or transfer
to others any claim the Subordinated Creditor has or may have against the
Borrower as long as any of the Superior Indebtedness remains outstanding, unless
such assignment or transfer is expressly made subject to this Subordination
Agreement; (f) not ask for, sue for, take, demand, receive or accept any
principal or interest on any of the Subordinated Debt, except as set forth in
Section 2.02 hereof; (g) not amend, supplement or otherwise modify the terms of
the Subordinated Debt without the express written consent of the Lender, which
consent will not be unreasonably withheld, other than to decrease the rate of
interest therefor, decrease the amount of any installment or to extend the
maturity dates therefor; (h) not ask for, take, demand, receive or accept any
Property as collateral security for the Subordinated Debt; and (i) promptly upon
either receipt or delivery, forward to the Lender a true and complete copy of
any material notices or communications either received or delivered with respect
to the Subordinated Debt.
ARTICLE IV
MISCELLANEOUS
Section 4.01 ASSIGNMENT BY LENDER. This Subordination Agreement may be
assigned by the Lender in connection with any assignment or transfer of the
Superior Indebtedness.
Section 4.02 NOTICES. Any notice required or permitted to be given under
or in connection with this Subordination Agreement shall be given as specified
in the Credit Agreement.
Section 4.03 AMENDMENTS AND WAIVERS. The Lender's acceptance of partial or
delinquent payments or any forbearance, failure or delay by the Lender in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any obligation of the Borrower or the Subordinated Creditor, or of any right,
power or remedy of the Lender; and no partial exercise of any right, power or
remedy shall preclude any other or further exercise thereof. The Lender may
remedy any Event of Default hereunder or in connection with the Superior
Indebtedness without waiving the Event of Default so remedied. The Subordinated
Creditor hereby agrees that if the Lender agrees to a waiver of any provision
hereunder, or an exchange of or release of the Collateral, or the addition or
release of any Person, any such action shall not constitute a waiver of any of
the Lender's other rights or of the Subordinated Creditor's obligations
hereunder. This Subordination Agreement may be amended only by an instrument in
writing executed jointly by Subordinated Creditor and the Lender and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
Section 4.04 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SUBORDINATION
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS SUBORDINATION AGREEMENT, THE SUBORDINATED CREDITOR HEREBY
ACCEPTS AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF THE PROPERTY OF THE
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SUBORDINATED CREDITOR, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH MAY NOW OR HEREAFTER BE
HAD TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT
PRECLUDE THE LENDER FROM OBTAINING JURISDICTION OVER THE SUBORDINATED CREDITOR
IN ANY COURT OTHERWISE HAVING JURISDICTION. THE SUBORDINATED CREDITOR AND THE
LENDER HEREBY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS SUBORDINATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(c) Nothing herein shall affect the right of the Lender or any holder of a
Note to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Subordinated creditor in any other
jurisdiction.
Section 4.05 ENTIRE AGREEMENT. THIS WRITTEN SUBORDINATION AGREEMENT
EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDER AND THE
SUBORDINATED CREDITOR AND SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS
WRITTEN SUBORDINATION AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN NEXT PAGE]
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WITNESS THE EXECUTION HEREOF, as of the date first above written.
SUBORDINATED CREDITOR:
T.Y.G. TRADE COMPANY, INC.
By:
Name:
Title:
Address
SENIOR LENDER:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
Name:
Title:
Address:
712 Main Street, 5-TCBE-78
Houston, Texas 77002
Attention: Senior Vice President, Houston
Corporate Banking
Telephone: (713) 216-5341
Facsimile: (713) 216-6004
S-1
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT is made as of January 31, 1997 between T.Y.G.
COMPANY, INC., a Delaware corporation (the "SUBORDINATED CREDITOR"), and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION (the "LENDER").
RECITALS
A. THE YORK GROUP, INC., a corporation duly organized and validly existing
under the laws of the Commonwealth of Pennsylvania (the "BORROWER"), and the
Lender are parties to that certain Credit Agreement dated as of June 30, 1994,
as amended by that certain First Amendment to Credit Agreement dated as of
December 31, 1995, and as amended by that certain Second Amendment to Credit
Agreement (the "SECOND AMENDMENT") dated as of January 31, 1997 (as the same may
further be amended, restated, modified or otherwise supplemented from time to
time and in effect, the "CREDIT AGREEMENT"), pursuant to which the Lender has
made certain credit available to the Borrower.
B. Pursuant to the terms of the Second Amendment, the Borrower has agreed
to cause Subordinated Creditor to execute and deliver this Subordination
Agreement, and Subordinated Creditor has agreed to enter into this Subordination
Agreement.
C. Therefore, (i) in order to comply with the terms and conditions of the
Credit Agreement, (ii) to induce the Lender at any time or from time to time to
loan monies to or for the account of the Borrower in accordance with the terms
of the Credit Agreement, (iii) at the special insistence and request of the
Lender, and (iv) for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Subordinated Creditor hereby
agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.01 TERMS DEFINED ABOVE AND IN CREDIT AGREEMENT. As used in this
Subordination Agreement, the terms defined above shall have the meanings
respectively assigned to them. Unless otherwise defined herein, all terms
beginning with a capital letter which are defined in the Credit Agreement shall
have the meanings herein as assigned therein, unless the context hereof requires
otherwise.
Section 1.02 CERTAIN DEFINITIONS. As used in this Subordination Agreement
the following terms shall have the following meanings, unless the context
otherwise requires:
"SUBORDINATED DEBT" shall mean any and all indebtedness, liabilities and
obligations of the Borrower, whether owed individually or jointly, to the
Subordinated Creditor, absolute or contingent, direct or indirect, joint,
several or independent, now outstanding or owing or which may hereafter be
existing or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Subordinated Creditor, whether created
directly or acquired by assignment, as a participation, conditionally, as
collateral security from another or otherwise,
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including indebtedness, obligations and liabilities of the Borrower to the
Subordinated Creditor as member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise, including, without
limiting the generality of the foregoing, all indebtedness, liabilities and
obligations of the Borrower to the Subordinated Creditor arising out of the
following described promissory notes (i) that certain promissory note in the
principal amount of $6,980,000, dated December 23, 1992, executed by the
Borrower and payable to the order of the Subordinated Creditor and (ii) that
certain promissory note in the principal amount of $31,000,000, dated January
13, 1994 (modified as of July 9, 1996), executed by the Borrower and payable to
the order of the Subordinated Creditor ("NOTES").
"SUPERIOR INDEBTEDNESS" shall mean any and all indebtedness, liabilities
and obligations of the Borrower, whether owed individually or jointly, to the
Lender absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing or
incurred, arising by operation of law or otherwise, due or to become due, or
held or to be held by the Lender whether created directly or acquired by
assignment, as a participation, conditionally, as collateral security from
another or otherwise, including indebtedness, obligations and liabilities of the
Borrower to the Lender as a member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise.
ARTICLE II
SUBORDINATION
Section 2.01 AGREEMENT TO SUBORDINATE. The payment of any and all
Subordinated Debt is expressly subordinated to the extent and in the manner set
forth in Sections 2.02 through 2.06 hereof to Superior Indebtedness.
Section 2.02 PAYMENT SUBORDINATION UPON DEFAULT. If for any reason any of
the Superior Indebtedness is not paid when due or is not paid on or before the
maturity thereof, or if there shall occur and be continuing any event which with
the giving of notice or lapse of time or both would constitute a Default or
Event of Default under the Credit Agreement or any Loan Document, then, unless
and until such Default or Event of Default shall have been cured to the
satisfaction of the Lender, in its sole discretion, or unless and until the
Superior Indebtedness shall be paid in full, the Subordinated creditor will not
ask for, sue for, take, demand, receive or accept from the Bor rower, by set-off
or in any other manner, any payment or distribution on account of the
Subordinated Debt nor present any instrument evidencing the Subordinated Debt
for payment (other than such presentment as may be necessary to prevent
discharge of other liable parties on such instrument); provided that, so long as
no Default or Event of Default has occurred and is continuing or so long as such
payment would not result in a Default or Event of Default, the Borrower may (i)
pay interest on the Notes on the dates specified therein and (ii) repay the
outstanding principal amount of the Subordinated Debt so long the aggregate
amount of all such repayments do not result in the aggregate principal amount of
the Subordinated Debt being less than $35,480,000.
Section 2.03 NO PAYMENTS WHICH CAUSE DEFAULTS. The Subordinated Creditor
will not ask for, demand, sue for, take, receive or accept from the Borrower by
set-off or in any other
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manner, any payment or distribution on account of the Subordinated Debt, if the
making of such payment would constitute, or would result in the occurrence of, a
Default or Event of Default under the Credit Agreement or any Loan Document.
Section 2.04 PAYMENTS RECEIVED IN VIOLATION OF SUBORDINATION AGREEMENT. In
the event the Subordinated Creditor shall receive any payment or distribution on
account of the Subordinated Debt which Subordinated Creditor is not entitled to
receive under the provisions of the foregoing Section 2.02 or Section 2.03,
Subordinated Creditor will hold any amount so received in trust for the Lender
and will forthwith turn over such payment to the Lender in the form received by
Subordinated Creditor (together with any necessary endorsement) to be applied on
the Superior Indebtedness.
Section 2.05 LIENS SUBORDINATE. The Subordinated Creditor agrees that any
Liens, upon the Borrower's assets securing payment of the Subordinated Debt
shall be and remain inferior and subordinate to any Liens securing payment of
the Superior Indebtedness regardless of whether such encumbrances in favor of
Subordinated creditor or the Lender presently exist or are hereafter created or
attach. Without the prior written consent of the Lender, the Subordinated
Creditor shall not foreclose, repossess, sequester or otherwise take steps or
institute any action or proceeding (judicial or otherwise, including without
limitation the commencement of or joinder in any liquidation, bankruptcy,
rearrangement, debtor's relief or insolvency proceeding) to enforce any Lien,
collateral right, judgment or other encumbrance on the Borrower's assets held by
the Subordinated Creditor.
Section 2.06 AGREEMENT NOT TO PURSUE ACTIONS.
(a) The Subordinated Creditor will not commence any action or proceeding
against the Borrower to recover all or any part of the Subordinated Debt or join
with any other creditor, unless the Lender shall also join, in bringing any
proceedings against the Borrower under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt, receivership, liquidation or
insolvency law or statute of the Federal or any state government unless and
until all Superior Indebtedness shall have been paid in full.
(b) In the event of any receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization or arrangement with creditors,
adjustment of debt, whether or not pursuant to the Federal Bankruptcy Code, the
sale of all or substantially all of the assets, dissolution, liquidation, or any
other marshaling of the assets and liabilities of the Borrower, the Subordinated
Creditor will at the Lender's request file any claim, proof of claim, proof of
interest or other instrument of similar character necessary to enforce the
obligations of the Borrower in respect of the Subordinated Debt and will hold in
trust for the Lender and pay over to the Lender, in the form received (together
with any necessary endorsement), to be applied on the Superior Indebtedness, any
and all monies, dividends, distributions or other assets received in any such
proceedings on account of the Subordinated Debt unless and until the Superior
Indebtedness shall be paid in full. In the event that the Subordinated Creditor
shall fail to take any such action requested by the Lender, the Lender, may, as
attorney-in-fact for the Subordinated Creditor take such action on behalf of the
Subordinated Creditor, and the Subordinated Creditor hereby appoints the Lender
as attorney-in-fact for the Subordinated Creditor to demand, sue for, collect
and receive any and all such monies, dividends, distributions or other assets
and give acquittance
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therefor, and to file any claim, proof of claim, proof of interest or other
instrument of similar character and to take such other proceedings in the
Lender's own name or in the name of the Subordinated Creditor as the Lender may
deem necessary or advisable for the enforcement of this Subordination Agreement;
and the Subordinated Creditor will execute and deliver to the Lender such other
and further powers of attorney or other instruments as the Lender may request in
order to accomplish the foregoing.
Section 2.07 RIGHTS OF LENDER. The Lender may, at any time, and from time
to time, without the consent of or notice to the Subordinated Creditor, without
incurring responsibility to the Subordinated Creditor, without impairing or
releasing any of the Lender's rights or any of the obligations of the
Subordinated Creditor under this Subordination Agreement:
(a) Change the amount, manner, place or terms of payment, or change or
extend for any period the time of payment of, or renew or otherwise alter the
Superior Indebtedness or any instrument or agreement now or hereafter executed
evidencing, in connection with, as security for or providing for the issuance of
any of the Superior Indebtedness in any manner, or enter into or amend in any
manner any other agreement relating to the Superior Indebtedness (including
provisions restricting or further restricting payments of the Subordinated
Debt);
(b) Sell, exchange, release or otherwise deal with all or any part of the
Property, if any, by whomsoever at any time pledged or mortgaged to secure the
Superior Indebtedness;
(c) Release any Person liable in any manner for payment or collection of
the Superior Indebtedness;
(d) Exercise or refrain from exercising any rights against the Borrower or
others, including the Subordinated Creditor; and
(e) Apply any sums received by the Lender, paid by any Person and however
realized, to payment of the Superior Indebtedness in such a manner as the
Lender, in its sole discretion, may deem appropriate.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 REPRESENTATIONS OF SUBORDINATED CREDITOR. The Subordinated
Creditor represents and warrants that: (a) neither the execution nor delivery of
this Subordination Agree ment nor fulfillment of or compliance with the terms
and provisions hereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any agreement or
instrument to which it is now subject; (b) it has all requisite authority to
execute, deliver and perform its obligations under this Subordination Agreement;
and (c) the outstanding principal amount of the Subordinated Debt, as of the
date hereof, is [$37,980,000].
Section 3.02 COVENANTS. The Subordinated Creditor covenants that so long
as any of the Superior Indebtedness remains outstanding and until the
termination of the Commitment, the Subordinated Creditor shall: (a) cause all
Subordinated Debt to be evidenced by a note, debenture or other instrument
evidencing the Subordinated Debt; (b) at the Lender's request promptly
4
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surrender or cause to be surrendered any such note, debenture, or instrument
evidencing the Subordinated Debt so that a statement or legend may be entered
thereon to the effect that such note, debenture, or other instrument is
subordinated to the Superior Indebtedness in favor of the Lender in the manner
and to the extent set forth in this Subordination Agreement; (c) mark the books
of Subordinated Creditor to show that the Subordinated Debt is subordinated to
the Superior Indebtedness in the manner and to the extent set forth in this
Subordination Agreement; (d) execute any and all other instruments necessary as
required by the Lender to subordinate the Subordinated Debt to the Superior
Indebtedness as herein provided; (e) not assign or transfer to others any claim
the Subordinated Creditor has or may have against the Borrower as long as any of
the Superior Indebtedness remains outstanding, unless such assignment or
transfer is expressly made subject to this Subordination Agreement; (f) not ask
for, sue for, take, demand, receive or accept any principal or interest on any
of the Subordinated Debt, except as set forth in Section 2.02 hereof; (g) not
amend, supplement or otherwise modify the terms of the Subordinated Debt without
the express written consent of the Lender, which consent will not be
unreasonably withheld, other than to decrease the rate of interest therefor,
decrease the amount of any installment or to extend the maturity dates therefor;
(h) not ask for, take, demand, receive or accept any Property as collateral
security for the Subordinated Debt; and (i) promptly upon either receipt or
delivery, forward to the Lender a true and complete copy of any material notices
or communications either received or delivered with respect to the Subordinated
Debt.
ARTICLE IV
MISCELLANEOUS
Section 4.01 ASSIGNMENT BY LENDER. This Subordination Agreement may be
assigned by the Lender in connection with any assignment or transfer of the
Superior Indebtedness.
Section 4.02 NOTICES. Any notice required or permitted to be given under
or in connection with this Subordination Agreement shall be given as specified
in the Credit Agreement.
Section 4.03 AMENDMENTS AND WAIVERS. The Lender's acceptance of partial or
delinquent payments or any forbearance, failure or delay by the Lender in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any obligation of the Borrower or the Subordinated Creditor, or of any right,
power or remedy of the Lender; and no partial exercise of any right, power or
remedy shall preclude any other or further exercise thereof. The Lender may
remedy any Event of Default hereunder or in connection with the Superior
Indebtedness without waiving the Event of Default so remedied. The Subordinated
Creditor hereby agrees that if the Lender agrees to a waiver of any provision
hereunder, or an exchange of or release of the Collateral, or the addition or
release of any Person, any such action shall not constitute a waiver of any of
the Lender's other rights or of the Subordinated Creditor's obligations
hereunder. This Subordination Agreement may be amended only by an instrument in
writing executed jointly by Subordinated Creditor and the Lender and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
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Section 4.04 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SUBORDINATION
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS SUBORDINATION AGREEMENT, THE SUBORDINATED CREDITOR HEREBY
ACCEPTS AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF THE PROPERTY OF THE
SUBORDINATED CREDITOR, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH MAY NOW OR HEREAFTER BE
HAD TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT
PRECLUDE THE LENDER FROM OBTAINING JURISDICTION OVER THE SUBORDINATED CREDITOR
IN ANY COURT OTHERWISE HAVING JURISDICTION. THE SUBORDINATED CREDITOR AND THE
LENDER HEREBY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS SUBORDINATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(c) Nothing herein shall affect the right of the Lender or any holder of a
Note to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Subordinated creditor in any other
jurisdiction.
Section 4.05 ENTIRE AGREEMENT. THIS WRITTEN SUBORDINATION AGREEMENT
EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDER AND THE
SUBORDINATED CREDITOR AND SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS
WRITTEN SUBORDINATION AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN NEXT PAGE]
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WITNESS THE EXECUTION HEREOF, as of the date first above written.
SUBORDINATED CREDITOR:
T.Y.G. COMPANY, INC.
By:
Name:
Title:
Address:
SENIOR LENDER:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
Name:
Title:
Address:
712 Main Street, 5-TCBE-78
Houston, Texas 77002
Attention: Senior Vice President, H uston
Corporate Banking
Telephone: (713) 216-5341
Facsimile: (713) 216-6004
S-1
EXHIBIT 10.13
THE YORK GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I PURPOSE OF PLAN.......................................... 1
1.1 Purpose of Plan.......................................... 1
ARTICLE II DEFINITIONS.............................................. 1
2.1 Account.................................................. 1
2.2 Base Salary.............................................. 2
2.3 Beneficiary.............................................. 2
2.4 Board.................................................... 2
2.5 Change in Control........................................ 2
2.6 Code..................................................... 2
2.7 Committee................................................ 2
2.8 Company.................................................. 2
2.9 Compensation............................................. 2
2.10 Effective Date........................................... 3
2.11 Entry Date............................................... 3
2.12 Eligible Employee........................................ 3
2.13 Nonqualified Deferral Contribution....................... 3
2.14 Participant..................................................4
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PAGE
2.15 Participant Enrollment and Election Form................. 4
2.16 Plan..................................................... 4
2.17 Plan Year................................................ 4
ARTICLE III ELIGIBILITY AND PARTICIPATION............................ 4
3.1 Requirements............................................. 4
3.2 Re-Employment............................................ 5
ARTICLE IV NONQUALIFIED DEFERRAL CONTRIBUTIONS...................... 5
4.1 Nonqualified Deferral Elections.......................... 5
4.2 Payroll Deductions....................................... 5
ARTICLE V PLAN ACCOUNTS............................................ 6
5.1 Establishment of Accounts................................ 6
5.2 Allocation of Income..................................... 6
5.3 Accounting for Distributions............................. 6
ARTICLE VI VESTING.................................................. 7
6.1 Nonqualified Deferral Contributions...................... 7
ARTICLE VII PAYMENT OF BENEFITS...................................... 7
7.1 Payment of Benefits...................................... 7
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PAGE
7.2 Payments Upon Hardship .................................. 8
7.3 Change in Control........................................ 8
ARTICLE VIII BENEFICIARIES............................................ 8
8.1 Designation of Beneficiaries............................. 8
ARTICLE IX ADMINISTRATION........................................... 9
9.1 Administrative Authority................................. 9
9.2 Uniformity of Discretionary Acts......................... 11
9.3 Litigation............................................... 11
9.4 Payment of Administrative Expenses....................... 11
9.5 Claims Procedure......................................... 11
9.6 Liability of Committee, Indemnification.................. 14
9.7 Expenses................................................. 14
9.8 Taxes.................................................... 14
9.9 Attorney's Fees.......................................... 14
9.10 Right to Amend........................................... 15
9.11 Employer's Right to Terminate or Suspend Plan............ 15
9.12 Construction............................................. 15
9.13 Miscellaneous............................................ 16
<PAGE>
ARTICLE I - PURPOSE OF PLAN
1.1 PURPOSE OF PLAN. The Company intends and desires by the adoption of this
Plan to recognize the value to the Company of the services rendered by Eligible
Employees covered by the Plan and to encourage and assure their continued
service with the Company by making more adequate provisions for their future
retirement security.
This Plan is intended to be "a plan which is unfunded and maintained by an
employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and is intended to be unfunded for purposes of the Code, and
shall be interpreted and administered in a manner consistent with that intent.
ARTICLE II - DEFINITIONS
2.1 ACCOUNT means those separate book accounts established and maintained under
the Plan in the name of each Participant as required pursuant to the provisions
of Article V.
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2.2 BASE SALARY means annual cash salary paid by the Company to an Eligible
Employee with respect to his or her service for the Company.
2.3 BENEFICIARY means the beneficiary or beneficiaries as designated by the
Participant.
2.4 BOARD means the Board of Directors of The York Group, Inc.
2.5 CHANGE IN CONTROL means a change in the ownership of the Company, a change
in the effective control of the Company, or a change in ownership of a
substantial portion of the assets of the Company. Such determination shall be
made by the Committee.
2.6 CODE means the Internal Revenue Code of 1986 and the regulations thereunder,
as amended from time to time.
2.7 COMMITTEE means the Human Resources Committee appointed by the Board.
2.8 COMPANY means The York Group, Inc. or any company which is a successor
as a result of merger, consolidation, liquidation, transfer of assets, or
other reorganization.
2.9 COMPENSATION means up to fifty (50) percent of Base Salary and up to a
hundred (100) percent of the annual cash bonus.
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2.10 EFFECTIVE DATE means the date on which the Company adopts the Plan.
2.11 ENTRY DATE means the first day of the pay period following the date on
which the individual first becomes an Eligible Employee.
2.12 ELIGIBLE EMPLOYEE means a person employed by the Company who is determined
by the Committee to be a member of a select group of management or highly
compensated employees and who is designated by the Committee to be eligible
under the Plan. For the initial Plan Year, the Committee shall notify, by
December 31, 1996, those individuals, if any, who will be Eligible Employees.
For subsequent Plan Years, the Committee shall notify, by each December 1, those
individuals, if any, who will be Eligible Employees for the next Plan Year. If
the Employer determines that an individual first becomes an Eligible Employee
during a Plan Year, the Employer shall notify such individual of its
determination and of the date during the Plan Year on which the individual shall
first become an Eligible Employee.
2.13 NONQUALIFIED DEFERRAL CONTRIBUTION means Compensation that is due to be
earned and which would otherwise be paid to the Participant, which the
Participant elects to defer under the Plan and which is credited on behalf of
each Participant by the Company pursuant to the provisions of Article IV.
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2.14 PARTICIPANT means any person so designated in accordance with the
provisions of Article III.
2.15 PARTICIPANT ENROLLMENT AND ELECTION FORM means the form on which a
Participant elects to defer Compensation hereunder and on which the Participant
makes certain other designations as required thereon.
2.16 PLAN means The York Group, Inc. Nonqualified Deferred Compensation Plan.
2.17 PLAN YEAR means the calendar year.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.1 REQUIREMENTS. Every Eligible Employee as of the Effective Date shall be
eligible to become a Participant on the first day of the Plan Year occurring
after the Effective Date. Every other Eligible Employee shall be eligible to
become a Participant on the Entry Date occurring on or after the date on which
he or she becomes an Eligible Employee. No individual shall become a
Participant, however, if he or she is not an Eligible Employee on the date his
or her participation is to begin.
Participation in the Plan is voluntary. In order to participate, an otherwise
Eligible Employee must execute a valid Participant Enrollment and Election Form
in such
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manner as the Company may require and must agree to make Nonqualified Deferral
Contributions as provided in Article IV.
3.2 RE-EMPLOYMENT. If a Participant whose employment with the Company is
terminated is subsequently re-employed, he or she shall become a Participant in
the Plan in accordance with the provisions of Section 3.1 of this Article.
ARTICLE IV - NONQUALIFIED DEFERRAL CONTRIBUTIONS
4.1 NONQUALIFIED DEFERRAL ELECTIONS. In accordance with rules established by the
Company, a Participant may elect to make a Nonqualified Deferral Contribution
with respect to a Plan Year by use of a Participant Enrollment and Election Form
no later than the December 31st immediately preceding the Plan Year. For an
individual that first becomes an Eligible Employee during a Plan Year, the
election to make a Nonqualified Deferral Contribution for the remainder of the
Plan Year must be made prior to the Entry Date. Once made, such elections shall
be irrevocable with respect to the Plan Year.
4.2 PAYROLL DEDUCTIONS. Nonqualified Deferral Contributions shall be credited to
the Participant's Account when the respective payroll deductions are made. The
Participant may change the amount of his or her Nonqualified Deferral
Contribution amount by delivering to the Company prior to the beginning of any
Plan Year a new Participant Enrollment and Election Form, with such change being
first effective for
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Compensation to be earned in that Plan Year. Once made, a Nonqualified Deferral
Contribution payroll deduction election shall continue in force only for the
applicable Plan Year. A new Nonqualified Deferral Contribution payroll deduction
election must be made by completing a new Participant Enrollment and Election
Form for each subsequent Plan Year.
ARTICLE V - PLAN ACCOUNTS
5.1 ESTABLISHMENT OF ACCOUNTS. There shall be established and maintained by
the Company separate Accounts in the name of each Participant, as required
and as described in this Article V.
5.2 ALLOCATION OF INCOME. Earnings shall generally be credited to the
Participant's Account balances periodically at the discretion of the Committee,
but no later than annually. For those Participant's receiving a distribution
during the Plan Year pursuant to Article VII, earnings shall be credited to the
Participant's Account through the date of distribution. The method of computing
earnings shall be determined by the Committee.
5.3 ACCOUNTING FOR DISTRIBUTIONS. As of the date of any distribution under
the Plan, such distribution shall be charged to the applicable Participant's
Account.
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ARTICLE VI - VESTING
6.1 NONQUALIFIED DEFERRAL CONTRIBUTIONS. A Participant shall always be one
hundred percent (100%) vested in the Nonqualified Deferral Contributions and
related earnings credited to his or her Account.
ARTICLE VII - PAYMENTS OF BENEFITS
7.1 PAYMENTS OF BENEFITS. A Participant (or Beneficiary) shall become entitled
to receive, on or about the date of the Participant's termination of employment,
retirement, disability (as determined by the Committee), or death, a cash
distribution in an amount equal to the balance in the Participant's Account as
of that date. A Participant may elect to have payments distributed in either (1)
a cash lump sum as soon as practicable and no later than thirty (30) days after
the earlier of such termination of employment, retirement, incurrence of
disability, or death, or (2) in annual installments (beginning as soon as
practicable and no later than thirty (30) days after the earlier of such
termination of employment, retirement, incurrence of disability, or death) over
the period or periods approved by the Committee and selected by the Participant.
Any death benefit payable under this Plan shall be payable to the Participant's
Beneficiary in accordance with Article VIII.
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7.2 PAYMENTS UPON HARDSHIP. In the event of a hardship of the Participant, the
Participant may apply to the Company for a lump sum distribution of all or any
part of his or her Account. Upon a finding of hardship by the Committee using
the same standards as provided under the The York Group, Inc. 401(k) Plan and
Trust, the Company shall make the appropriate distribution to the Participant
from amounts credited by the Company in respect of the Participant's Accounts.
In no event shall the aggregate amount of the distribution exceed the amount
credited to the Participant's Accounts. A distribution may be made under this
Section only with the consent of the Company's Board.
7.3 CHANGE IN CONTROL. If a Change in Control occurs, the entire balance in
the Participant's Account at the date of the Change in Control shall be
payable in the form of a lump sum distribution.
ARTICLE VIII - BENEFICIARIES
8.1 DESIGNATION OF BENEFICIARIES. Each Participant may designate any person,
persons or entity to receive such benefits as may be payable under the Plan upon
or after the Participant's death, and such designation may be changed from time
to time by the Participant by filing with the Company a new Participant
Enrollment and Election Form. Each designation will revoke all prior
designations by the same Participant. In the absence of a valid Beneficiary
designation, or if, at the time any benefit payment is due to a Beneficiary,
there is no living Beneficiary validly named or
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the Committee is unable to locate the designated Beneficiary, the Company shall
pay such benefit payments to the Participant's spouse, if then living, but
otherwise to the Participant's estate.
ARTICLE IX - ADMINISTRATION
9.1 ADMINISTRATIVE AUTHORITY. Except as otherwise specifically provided herein,
the Company shall have the sole responsibility for and the sole control of the
operation and administration of the Plan, and shall have the power and authority
to take all actions and to make all decisions and interpretations which may be
necessary or appropriate in order to administer and operate the Plan, including,
without limiting the generality of the foregoing, the power, duty, and
responsibility to:
(a) Resolve and determine all disputes or questions arising under the Plan,
including the power to determine the rights of Eligible Employees,
Participants, and Beneficiaries, and their respective benefits, and to
remedy any ambiguities, inconsistencies, or omissions in the Plan.
(b) Adopt such rules of procedure and regulations as in its opinion may be
necessary for the proper and efficient administration of the Plan and as
are consistent with the Plan.
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(c) Implement the Plan in accordance with its terms and the rules and
regulations adopted as above.
(d) Make determinations with respect to the eligibility of any Eligible
Employee as a Participant and make determinations concerning the crediting
and distribution of Plan Accounts.
(e) Appoint any persons or firms, or otherwise act to secure specialized
advice or assistance, as it deems necessary or desirable in connection
with the administration and operation of the Plan, and the Company shall
be entitled to rely conclusively upon, and shall be fully protected in
any action or omission taken by it in good faith reliance upon the
advice or opinion of such firms or persons. The Company shall have the
power and authority to delegate from time to time by written instrument
all or any part of its duties, powers, or responsibilities under the
Plan, both ministerial and discretionary, as it deems appropriate, to
any person or committee, and in the same manner to revoke any such
delegation of duties, powers, or responsibilities. Any action of such
person or committee in the exercise of such delegated duties, powers, or
responsibilities shall have the same force and effect for all purposes
hereunder as if such action had been taken by the Company. Further, the
Company may authorize one or more persons to execute any certificate or
document on behalf of the Company, in which event any person notified by
the Company of such authorization shall be entitled to accept and
conclusively rely upon any such certificate or document
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executed by such person as representing action by the Company until such
third person shall have been notified of the revocation of such authority.
9.2 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the administration or
operation of the Plan discretionary actions by the Company are required or
permitted, such actions shall be consistently and uniformly applied to all
persons similarly situated, and no such action shall be taken which shall
discriminate in favor of any particular person or group of persons.
9.3 LITIGATION. Except as may be otherwise required by law, in any action or
judicial proceeding affecting the Plan, no Participant or Beneficiary shall be
entitled to any notice or service of process, and any final judgment entered in
such action shall be binding on all persons interested in, or claiming under,
the Plan.
9.4 PAYMENT OF ADMINISTRATION EXPENSES. All expenses incurred in the
administration and operation of the Plan shall be paid by the Company.
9.5 CLAIMS PROCEDURE.
(a) Notice of Claim. Any Eligible Employee or Beneficiary, or the duly
authorized representative of an Eligible Employee or Beneficiary, may
file with the Committee a claim for a Plan benefit. Such a claim must be
in writing on a form provided by the Committee and must be delivered to
the Committee, in
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person or by mail, postage prepaid. Within ninety (90) days after the
receipt of such a claim, the Committee shall send to the claimant, by
mail, postage prepaid, a notice of the granting or the denying, in whole
or in part, of such claim, unless special circumstances require an
extension of time for processing the claim. In no event may the
extension exceed ninety (90) days from the end of the initial period. If
such an extension is necessary, the claimant will be given a written
notice to this effect prior to the expiration of the initial ninety (90)
day period. The Committee shall have full discretion to deny or grant a
claim in whole or in part in accordance with the terms of the plan. If
notice of the denial of a claim is not furnished in accordance with this
Section, the claim shall be denied and the claimant shall be permitted
to exercise his or her right to review pursuant to Sections 9.5(c) and
9.5(d) of the Plan, as applicable.
(b) Action on Claim. The Committee shall provide to every claimant who is
denied a claim for benefits a written notice setting forth, in a manner
calculated to be understood by the claimant:
(i) The specific reason or reasons for the denial;
(ii) A specific reference to the pertinent Plan provisions on which
the denial is based;
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(iii) A description of any additional material or information
necessary of the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(iv) An explanation of the Plan's claim review procedure.
(c) Review of Denial. Within sixty (60) days after the receipt by a claimant
of written notification of the denial (in whole or in part) of a claim,
the claimant or the claimant's duly authorized representative, upon
written application to the Committee, delivered in person or by
certified mail, postage prepaid, may review pertinent documents and may
submit to the Committee, in writing, issues and comments concerning the
claim.
(d) Decision on Review. Upon the Committee's receipt of a notice of a
request for review, the Committee shall make a prompt decision on the
review and shall communicate the decision on review in writing to the
claimant. The decision on review shall be written in a manner
calculated to be understood by the claimant and shall include
specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based. The
decision on review shall be made not later than sixty (60) days after
the Committee's receipt of a request for a review, unless special
circumstances require an extension of time for processing, in which
case a decision shall be rendered not later than one hundred twenty
(120) days after receipt of the
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request for review. If an extension is necessary, the claimant shall be
given written notice of the extension by the Committee prior to the
expiration of the initial sixty (60) day period. If notice of the
decision on review is not furnished in accordance with this Section, the
claim shall be denied on review.
9.6 LIABILITY OF COMMITTEE, INDEMNIFICATION. To the extent permitted by law, the
Committee shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Plan unless
attributable to his or her own bad faith or willful misconduct.
9.7 EXPENSES. The cost of the establishment of the Plan and the adoption of the
Plan by Company, including but not limited to legal and accounting fees, shall
be borne by Company.
9.8 TAXES. All amounts payable hereunder shall be reduced by any and all
Federal, state, and local taxes imposed upon an Eligible Employee or his or her
Beneficiary which are required to be paid or withheld by Company. The
determination by the Company regarding applicable income and employment tax
withholding requirements shall be final and binding on the Eligible Employee.
9.9 ATTORNEY'S FEES. The Company shall pay the reasonable attorney's fees
incurred by any Eligible Employee in an action brought against Company to
enforce
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the Eligible Employee's rights under the Plan, provided that such fees shall
only be payable in the event that the Eligible Employee prevails in such action.
9.10 RIGHT TO AMEND. The Company, by written instrument executed by the Company,
shall have the right to amend the Plan, at any time and with respect to any
provisions hereof, and all parties hereto or claiming any interest hereunder
shall be bound by such amendment; provided, however, that no such amendment
shall deprive a Participant or Beneficiary of a right accrued hereunder prior to
the date of the amendment.
9.11 EMPLOYER'S RIGHT TO TERMINATE OR SUSPEND PLAN. The Company reserves the
right, at any time, to terminate the Plan and/or its obligation to make further
credits to Plan Accounts. The Company also reserves the right, at any time, to
suspend the operation of the Plan for a fixed or indeterminate period of time.
9.12 CONSTRUCTION. If any provision of the Plan is held to be illegal or void,
such illegality or invalidity shall not affect the remaining provisions of the
Plan, but shall be fully severable, and the Plan shall be construed and enforced
as if said illegal or invalid provision had never been inserted herein. For all
purposes of the Plan, where the context permits, the singular shall include the
plural, and the plural shall include the singular. Headings of Articles and
Sections herein are inserted only for convenience of reference and are not to be
considered in the construction of the Plan. The laws of the state of Texas shall
govern, control, and determine all questions of law arising with
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respect to the Plan and the interpretation and validity of its respective
provisions, except where those laws are preempted by the laws of the United
States. Participation under the Plan will not give any Participant the right to
be retained in the service of the Company nor any right or claim to any benefit
under the Plan unless such right or claim has specifically accrued hereunder.
The Plan is intended to be and at all times shall be interpreted and
administered so as to qualify as an unfunded deferred compensation plan, and no
provision of the Plan shall be interpreted so as to give any individual any
right in any assets of the Company which right is greater than the rights of a
general unsecured creditor of the Company.
9.13 MISCELLANEOUS. This Plan constitutes a mere promise by the Company to make
benefit payments in the future. Additionally, a Participant's rights to benefit
payments under the Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or the Participant's Beneficiaries.
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ATTEST/WITNESS: THE YORK GROUP, INC.
____________________________ By: ________________________
Print Name: Print Name:
____________________________ ________________________________
Date: ________________________
[SEAL]
-17-
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated February 7, 1997, in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statement File No. 333-21363.
ARTHUR ANDERSEN LLP
Lancaster, Pa
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE YORK GROUP, INC. 1996 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 32,056
<SECURITIES> 0
<RECEIVABLES> 13,980
<ALLOWANCES> 1,755
<INVENTORY> 19,101
<CURRENT-ASSETS> 67,195
<PP&E> 45,697
<DEPRECIATION> 16,377
<TOTAL-ASSETS> 99,935
<CURRENT-LIABILITIES> 13,368
<BONDS> 25,097
0
0
<COMMON> 80
<OTHER-SE> 55,966
<TOTAL-LIABILITY-AND-EQUITY> 99,935
<SALES> 138,170
<TOTAL-REVENUES> 138,170
<CGS> 107,931
<TOTAL-COSTS> 107,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (86)
<INTEREST-EXPENSE> (787)
<INCOME-PRETAX> 17,678
<INCOME-TAX> 6,626
<INCOME-CONTINUING> 11,052
<DISCONTINUED> 0
<EXTRAORDINARY> (736)
<CHANGES> 0
<NET-INCOME> 10,316
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.39
</TABLE>
