SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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: 1-11961
-------------------------
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0423828
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1300 POST OAK BLVD., SUITE 1500, HOUSTON, TX77056 (Address of
principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 556-7400
------------------------
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 [ ] No [X]
The number of shares of the Registrant's Class A Common Stock, $.01 par value
per share, and Class B Common Stock, $.01 par value per share, outstanding as of
October 29, 1997 was 5,541,780 and 5,050,485, respectively.
<PAGE>
CARRIAGE SERVICES, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
December 31, 1996 and September 30, 1997 ....................... 3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1996 and 1997 and the
Nine Months Ended September 30, 1996 and 1997 .................. 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1997 .................. 5
Notes to Consolidated Financial Statements ........................ 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................. 8
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES ....................................... 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................ 15
Signature ............................................................... 17
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Form 10-Q are forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include, but are
not limited to, the following: the Company's ability to sustain its rapid
acquisition rate, to manage the growth and to obtain adequate performance from
acquired businesses; the economy and financial market conditions, including
stock prices, interest rates and credit availability; and death rates and
competition in the Company's markets.
2
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December September
31, 30,
1996 1997
--------- ---------
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 1,712 $ 883
Accounts receivable --
Trade, net of allowance for doubtful
accounts of $530 in 1996 and $1,041 in 1997 5,665 8,218
Other ..................................... 673 1,042
--------- ---------
6,338 9,260
Inventories and other current assets ........... 3,350 5,109
--------- ---------
Total current assets ................. 11,400 15,252
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation of $4,095 in 1996 and
$6,335 in 1997 ................................. 46,112 71,942
CEMETERY PROPERTY, at cost .......................... 4,061 23,686
NAMES AND REPUTATIONS, net of accumulated
amortization of $2,007 in 1996 and $3,731 in
1997 62,568 94,440
DEFERRED CHARGES AND OTHER NONCURRENT ASSETS ........ 7,167 13,916
--------- ---------
$ 131,308 $ 219,237
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current liabilities .. $ 5,225 $ 7,089
Current portion of long-term debt and
obligations under capital leases ................ 1,086 1,328
--------- ---------
Total current liabilities ............. 6,311 8,417
PRENEED LIABILITIES, net ............................. 3,664 7,692
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL
LEASES, net of current portion .................. 43,290 85,642
DEFERRED INCOME TAXES ................................ 3,749 11,915
--------- ---------
Total liabilities ..................... 57,014 113,668
--------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ........................... 17,251 16,285
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value;
40,000,000 shares Authorized; 3,942,000 and
5,542,000 issued and outstanding at
December 31, 1996 and September 30, 1997,
respectively .................................... 40 55
Class B Common Stock; $.01 par value;
10,000,000 shares
Authorized; 4,502,000 and 5,050,000 issued
and outstanding at
December 31, 1996 and September 30, 1997,
respectively ......................................... 45 50
Contributed capital ............................. 63,966 93,439
Retained deficit ................................ (7,008) (4,260)
--------- ---------
Total stockholders' equity ............ 57,043 89,284
--------- ---------
$ 131,308 $ 219,237
========= =========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES, net
Funeral ......................... $ 9,303 $ 15,365 $ 24,951 $ 46,283
Cemetery ........................ 842 2,880 2,119 9,012
-------- -------- -------- --------
10,145 18,245 27,070 55,295
COSTS AND EXPENSES
Funeral ......................... 8,434 12,271 20,888 34,405
Cemetery ........................ 717 2,417 1,799 7,187
-------- -------- -------- --------
9,151 14,688 22,687 41,592
-------- -------- -------- --------
Gross profit .................... 994 3,557 4,383 13,703
GENERAL AND ADMINISTRATIVE EXPENSES .. 611 1,471 1,766 3,657
-------- -------- -------- --------
Operating income ................ 383 2,086 2,617 10,046
INTEREST EXPENSE, net ................ 1,069 1,457 3,713 4,028
-------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item .......... (686) 629 (1,096) 6,018
PROVISION (BENEFIT) FOR INCOME TAXES . (272) 282 (21) 2,357
-------- -------- -------- --------
Income (loss) before
extraordinary item .............. (414) 347 (1,075) 3,661
EXTRAORDINARY ITEM:
Loss on early extinguishment of
debt, net of income tax benefit
of $332 and $159, respectively .. (498) (195) (498) (195)
-------- -------- -------- --------
NET INCOME (LOSS) .................... (912) 152 (1,573) 3,466
Preferred stock dividend requirements 250 29 351 239
-------- -------- -------- --------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS ............. $ (1,162) $ 123 $ (1,924) $ 3,227
======== ======== ======== ========
INCOME (LOSS) PER SHARE:
Net income (loss) per common and
common equivalent share before
extraordinary item attributable
to common shareholders ........ $ (.11) $ .03 $ (.39) $ .31
Extraordinary item per share .... $ (.09) $ (.02) $ (.14) $ (.02)
-------- -------- -------- --------
Net income (loss) per common and
common equivalent share
attributable to common
shareholders .................. $ (.20) $ .01 $ (.53) $ .29
======== ======== ======== ========
Weighted average number of common and
common equivalent shares
outstanding ..................... 5,920 11,754 3,662 11,325
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CARRIAGE SEAVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
For the nine months
ended September 30,
--------------------
1996 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................... $ (1,573) $ 3,466
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities -- Depreciation and amortization ....... 2,410 5,644
Provision for losses on accounts receivable ....... 396 284
Loss on early extinguishment of debt, net of
income taxes ...................................... 498 195
Deferred income taxes ............................. (209) 1,574
Changes in assets and liabilities, net of
effects from acquisitions:
Increase in accounts receivable .............. (1,463) (1,768)
Increase in inventories and other current
assets ....................................... (823) (942)
Increase in accounts payable and other
current liabilities .......................... 315 1,062
Other, net ........................................ (147) (475)
-------- --------
Net cash provided by (used in)
operating activities .................... (596) 9,040
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired ................... (40,865) (43,568)
Purchase of property, plant and equipment ............ (2,945) (5,209)
Other, including disposition of assets ............... 1,297 (957)
-------- --------
Net cash provided by (used in)
investing activities ................................... (42,513) (49,734)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ......................... 56,388 41,884
Payments on long-term debt and obligations under
capital leases .................................... (65,724) (1,112)
Proceeds from issuance of common stock ............... 47,771 --
Payment of preferred stock dividends ................. (351) (712)
Exercise of stock options ............................ 44 113
Purchase of treasury stock ........................... (341) --
Payment of deferred debt charges .................... (446) (308)
-------- --------
Net cash provided by (used in)
financing activities ............... 37,341 39,865
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .......................................... (5,768) (829)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 7,573 1,712
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 1,805 $ 883
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid through issuance of new debt ........... $ 825 $ --
======== ========
Cash paid for interest ............................... $ 4,037 $ 4,030
======== ========
Cash paid for income taxes ........................... $ -- $ 812
======== ========
Non-cash consideration for acquisitions .............. $ 18,773 $ 28,328
======== ========
Retirement of debt through disposition of business ... $ 2,642 $ --
======== ========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include Carriage Services,
Inc. and its subsidiaries (the "Company"). All significant intercompany balances
and transactions have been eliminated.
The information for the three and nine months ended September 30, 1996 and
1997 is unaudited, but in the opinion of management, reflects all adjustments
which are of a normal, recurring nature necessary for a fair presentation of
financial position and results of operations for the interim periods. The
accompanying consolidated financial statements have been prepared consistent
with the accounting policies described in the Company's report on Form 10-K for
the year ended December 31, 1996, and should be read in conjunction therewith.
2. ACQUISITIONS
During the nine months ended September 30, 1997, the Company purchased 31
funeral homes and four cemeteries. 35 funeral homes and five cemeteries were
acquired during the nine months ended September 30, 1996. These acquisitions
have been accounted for by the purchase method, and their results of operations
are included in the accompanying consolidated financial statements from the
dates of acquisition.
The effect of the above acquisitions on the Consolidated Balance Sheets was
as follows:
September 30,
-----------------------
1996 1997
-------- --------
(in thousands)
Current Assets, net of cash acquired ............... $ 3,196 $ 7,671
Cemetery Property .................................. 2,088 19,645
Property, Plant and Equipment ...................... 20,719 22,902
Deferred Charges and Other Noncurrent Assets ....... 1,865 813
Names and Reputations .............................. 36,171 33,594
Current Liabilities ................................ (1,490) (801)
Other Liabilities .................................. (2,911) (11,928)
-------- --------
Total Acquisitions ............................ 59,638 71,896
Redeemable Preferred Stock issued .................. 17,776 20,000
Preferred Stock issued ............................. 555 --
Common Stock issued ................................ 442 8,328
-------- --------
Cash used for acquisitions .................... $ 40,865 $ 43,568
======== ========
The following table represents, on an unaudited pro forma basis, the combined
operations of the Company and the above noted acquisitions, as if such
acquisitions had occurred as of January 1, 1996.
6
<PAGE>
Appropriate adjustments have been made to reflect the accounting basis used in
recording these acquisitions; however, these unaudited pro forma results are
based on the acquired businesses' historical financial results and do not assume
any additional profitability resulting from the application of the Company's
revenue enhancement measures or cost reduction programs to the historical
results of the acquired businesses. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of the results
of operations that would have resulted had the combinations been in effect on
the dates indicated, that have resulted since the dates of acquisition or that
may result in the future.
Nine months ended September 30,
-----------------------------
1996 1997
------------ ------------
(Unaudited and in thousands)
Revenues, net ................................ $ 57,185 $ 59,347
Net income (loss) before income taxes ........ (1,671) 6,048
Net income (loss) attributable to common
stockholders ............................... (1,852) 3,286
Income (loss) per common and common
equivalent share ........................... (.51) .29
3. DEBT
In August 1996, the Company entered into a credit facility (the "Former
Credit Facility") for a $75 million revolving line of credit. The Former Credit
Facility provided for both LIBOR and base rate interest options. That facility
was unsecured and was for a term of three years. During September, 1997, the
Company entered into a new credit facility (the "New Credit Facility") for a
$150 million revolving line of credit. The New Credit Facility has a five year
term, is unsecured and contains customary restrictive covenants, including a
restriction on the payment of dividends on common stock, and requires the
Company to maintain certain financial ratios. Interest under the New Credit
Facility is provided at both LIBOR and prime rate options. As of September 30,
1997, $72.7 million was outstanding under the line of credit.
4. RECENT ACCOUNTING STANDARD
In February 1997, Financial Accounting Standards No. 128 ("FAS 128") Earnings
Per Share was issued. FAS 128 is effective for earnings per share calculations
for periods ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. The Company expects the new accounting standard to
have no significant effect on earnings per share.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in 1991 in order to take advantage of the attractive
fundamentals of and significant opportunities to consolidate the death care
industry. From 1992 through 1995, the Company acquired 42 funeral homes and four
cemeteries, for consideration ranging from approximately $9 million to $14
million in each of the four years. The Company intentionally took a disciplined,
deliberate approach to acquisitions that allowed management the time to
integrate early acquisitions, to develop and implement systems, including
operational procedures, administrative policies, financial systems and related
controls, and to promote a decentralized service culture.
Management believes that the Company's focus on controlled growth while
implementing operational and administrative systems and related controls to
effectively manage a highly decentralized management structure positioned it to
pursue an accelerated growth strategy beginning in late 1995. The Company
significantly expanded its corporate development and acquisition activities in
1996 and 1997, thus requiring additions to the corporate infrastructure. During
1996, the Company acquired 38 funeral homes and seven cemeteries for an
aggregate consideration of approximately $68 million. During the first nine
months of 1997, the Company acquired 31 funeral homes and four cemeteries for an
aggregate consideration of approximately $72 million.
Upon acquisition, the operations team focuses on increasing historic
operating income by improving the merchandising approach, pricing structure and
marketing strategy of acquired businesses. These enhancements, complemented by
discounts from consolidated purchasing, generally result in improved margins of
the acquired businesses within the first 12 months following acquisition.
RESULTS OF OPERATIONS
The following is a discussion of the Company's results of operations for the
three and nine month periods ended September 30, 1996 and 1997. For purposes of
this discussion, funeral homes and cemeteries owned and operated for the
entirety of each period being compared are referred to as "existing operations."
Operations acquired or opened during either period being compared are referred
to as "acquired operations."
FUNERAL HOME SEGMENT. The following table sets forth certain information
regarding the net revenues and gross profit of the Company from its funeral home
operations for the three and nine months ended September 30, 1996 compared to
the three and nine months ended September 30, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
Three months ended
September 30, Change
----------------- -----------------
1996 1997 Amount Percent
------- ------- ------- -------
(dollars in thousands)
Net revenues:
Existing operations .......... $ 8,447 $ 8,468 $ 21 .3%
Acquired operations .......... 856 6,897 6,041 *
======= ======= =======
Total net revenues ...... $ 9,303 $15,365 $ 6,062 65.2%
======= ======= =======
8
<PAGE>
Three months ended
September 30, Change
---------------- ------------------
1996 1997 Amount Percent
---- ------ ------ -----
(dollars in thousands)
Gross profit:
Existing operations .......... $751 $1,420 $ 669 89.1%
Acquired operations .......... 118 1,674 1,556 *
==== ====== ======
Total gross profit ..... $869 $3,094 $2,225 256.0%
==== ====== ======
NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997
Nine months ended
September 30, Change
------------------ --------------------
1996 1997 Amount Percent
------- ------- --------- --------
(dollars in thousands)
Net revenues:
Existing operations ........... $18,515 $18,254 $ (261) (1.4)%
Acquired operations ........... 6,436 28,029 21,593 *
======= ======= ========
Total net revenues ....... $24,951 $46,283 $ 21,332 85.5%
======= ======= ========
Nine months ended
September 30, Change
------------------- ------------------
1996 1997 Amount Percent
------ ------- ------ -----
(dollars in thousands)
Gross profit:
Existing operations ....... $2,981 $ 4,098 $1,117 37.5%
Acquired operations ....... 1,082 7,780 6,698 *
====== ======= ======
Total gross profit .... $4,063 $11,878 $7,815 192.4%
====== ======= ======
- ---------------
* Not meaningful.
Due to the rapid growth of the Company, "existing operations" represented
only 55% of the total funeral revenues and only 46% of the total funeral gross
profit for the three months ended September 30, 1997 and only 39% of the total
funeral revenues and only 35% of the total funeral gross profit for the nine
months ended September 30, 1997. Total funeral net revenues for the three months
ended September 30, 1997 increased $6.1 million or 65.2% over the three months
ended September 30, 1996. The higher net revenues reflect an increase of $6.0
million in net revenues from acquired operations and an increase in net revenues
of $21,000 or .3% from existing operations. Total funeral net revenues for the
nine months ended September 30, 1997 increased $21.3 million or 85.5% over the
nine months ended September 30, 1996. The higher net revenues reflect an
increase of $21.6 million in net revenues from acquired operations and a
decrease in net revenues of $261,000 or 1.4% from existing operations. Fewer
services were performed year to date in 1997 primarily due to lower than usual
seasonal death rates in certain of the Company's markets, especially in the East
North Central region of the country where the Company has a large number of
"existing operations."
Total funeral gross profit for the three months ended September 30, 1997
increased $2.2 million or 256.0% over the comparable three months of 1996. The
higher total gross profit reflected an increase of
9
<PAGE>
$1.6 million from acquired operations and an increase of $669,000 or 89.1% from
existing operations. Total funeral gross profit for the nine months ended
September 30, 1997 increased $7.8 million or 192.4% over the comparable nine
months of 1996. The higher total gross profit reflected an increase of $6.7
million from acquired operations and an increase of $1.1 million or 37.5% from
existing operations. Gross profit for existing operations increased for both
periods due to the efficiencies gained by consolidation, cost savings, improved
collections experience and the increasing effectiveness of the Company's
merchandising strategy, which were partially offset by lower revenues. Total
gross margin increased from 9% for the third quarter of 1996 to 20% for the
third quarter of 1997 and from 16% for the first nine months of 1996 to 26% for
the first nine months of 1997 due to these factors.
CEMETERY SEGMENT. The following table sets forth certain information
regarding the net revenues and gross profit of the Company from its cemetery
operations for the three and nine months ended September 30, 1996 compared to
the three and nine months ended September 30, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997
Three months ended
September 30, Change
-------------------- --------------------
1996 1997 Amount Percent
--------- --------- --------- ---------
(dollars in thousands)
Total net revenues ............ $ 842 $ 2,880 $ 2,038 242.0%
========= ========= =========
Total gross profit ............ $ 125 $ 588 $ 463 370.4%
========= ========= =========
NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997
Nine months ended
September 30, Change
-------------------- --------------------
1996 1997 Amount Percent
--------- --------- --------- ---------
(dollars in thousands)
Total net revenues ............ $ 1,799 $ 7,187 $ 5,388 299.5%
========= ========= =========
Total gross profit ............ $ 320 $ 1,825 $ 1,505 470.3%
========= ========= =========
Due to the rapid growth of the Company, "existing operations" represented
approximately 31% of cemetery revenues and approximately 16% of cemetery gross
profit for the three months ended September 30, 1997 and approximately 14% of
cemetery revenues and less than 7% of cemetery gross profit for the nine months
ended September 30, 1997. As a result, the Company does not believe it is
meaningful to present the results for "existing" and "acquired" operations
separately.
Total cemetery net revenues for the three months ended September 30, 1997
increased $2.0 million or 242.0% over the three months ended September 30, 1996
and total cemetery gross profit increased $463,000 or 370.4% over the comparable
three months of 1996. Total cemetery net revenues for the nine months ended
September 30, 1997 increased $5.4 million or 299.5% over the nine months ended
September 30, 1996 and total cemetery gross profit increased $1.5 million or
470.3% over the comparable nine months of 1996. Total gross margin increased
from 14.8% for the three months ended
10
<PAGE>
September 30, 1996 to 20.4% for the three months ended September 30, 1997 and
from 17.8% for the first nine months of 1996 to 25.4% for the first nine months
of 1997. These increases were due primarily to the Company's acquisition of the
Rolling Hills cemetery as part of the CNM Group acquisition in January 1997 and
increased preneed marketing efforts.
OTHER
General and administrative expenses for the nine months ended September 30,
1997 increased $1.9 million over the first nine months of 1996 due primarily to
the increased personnel expense necessary to support a higher rate of growth and
increased acquisition activity. General and administrative expenses as a
percentage of net revenues increased from 6.5% for the first nine months of 1996
to 6.6% for the comparable period of 1997, reflecting increased corporate
development activity and the continuing development of the infrastructure in
expectation of closing a large number of transactions during the fourth quarter
of 1997.
Interest expense for the nine months ended September 30, 1996 increased
$315,000 over the first nine months of 1996. However, as a percentage of net
revenues, interest expense decreased from 13.7% for the first nine months of
1996 to 7.3% primarily as a result of the Company's utilization of the net
proceeds from its initial public offering of common stock (the "IPO") and
borrowings under the Former Credit Facility to repay its outstanding
indebtedness in August 1996.
During 1996, the Company issued approximately $18 million of Series D
Redeemable Preferred Stock to fund a portion of its acquisition program.
Dividends on the majority of this preferred stock range from 6% - 7% per annum.
The majority of this preferred stock converted into common stock during the
first quarter of 1997. During the first three months of 1997, the Company issued
approximately $20 million of Series F Redeemable Preferred Stock. Dividends on
this preferred stock are currently 4% per annum. The Series F Redeemable
Preferred Stock is considered a common stock equivalent for purposes of
computing primary earnings per share. Therefore, only the dividends on the
Series D preferred stock of $239,000 are deducted from net income in determining
net income attributable to common stockholders for the nine months ended
September 30, 1997 ($29,000 for the three months ended September 30, 1997).
For the first six months of 1997, the Company provided for income taxes using
the federal and state rates of approximately 38.5%. This rate includes a 4.5%
net benefit for utilization of prior year net operating losses net of other tax
reserves. Excluding the 4.5% net benefit, the Company is providing for state and
federal income taxes at a rate of 43%. For the three months ended September 30,
1997, the Company provided for income taxes at the combined rates of
approximately 45%, which reflects the effect that stock acquisitions have on the
tax rate and operating in states that have high tax rates. For the nine months
ended September 30, 1997, the effective tax rate is 39.2%.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $.9 million at September 30, 1997,
representing a decrease of $.8 million from December 31, 1996. For the nine
months ended September 30, 1997, cash provided by operations was $9.0 million as
compared to cash used in operations of $596,000 for the nine months ended
September 30, 1996. The increase in net cash provided by operating activities
was principally due to the net income in 1997 compared to the net loss for 1996.
Cash used in investing activities was $49.7 million for the nine months ended
September 30, 1997 compared to $42.5 million for the first nine months of 1996,
due primarily to the increases in acquisition costs and construction of funeral
facilities. In the first nine months of 1997, cash flow provided by financing
activities amounted to approximately $39.9 million, primarily due to proceeds
from long term debt which were used to fund acquisitions.
11
<PAGE>
Historically, the Company has financed its acquisitions with proceeds from
debt and the issuance of common and preferred stock. The following table shows
the activity in the Series D and Series F Redeemable Preferred Stock for the
nine months ended September 30, 1997:
Number Number
of Shares of Shares
Outstanding Outstanding
at 12/31/96 Issuances Conversions at 9/30/97
---------- ---------- ----------- ----------
SERIES D PREFERRED STOCK
Convertible into Class A
Common Stock ........ 1,200,000 (1,200,000) 0
Convertible into Class B
Common Stock ........ 16,053,116 (14,370,616) 1,682,500
SERIES F PREFERRED STOCK
Convertible into Class A
Common Stock ........ 0 19,999,992 (5,388,315) 14,611,677
---------- ---------- ----------- ----------
Totals ................... 17,253,116 19,999,992 (20,958,931) 16,294,177
========== ========== =========== ==========
The following table shows the effect on common shares outstanding from the
Redeemable Preferred Stock conversions during the nine months ended September
30, 1997:
Increase in
Common
Conversion Shares
Conversions Price Outstanding
---------- ------------- -----------
SERIES D PREFERRED STOCK
Convertible into Class A
Common Stock ............... 1,200,000 $ 13.50 88,888
Convertible into Class B
Common Stock ............... 14,370,616 $ 13.50 1,064,481
SERIES F PREFERRED STOCK
Convertible into Class A
Common Stock ............... 5,388,315 $ 15.00 359,221
---------- ---------
Totals .......................... 20,958,931 1,512,590
========== =========
The holders of Series D Preferred Stock are entitled to receive annual cash
dividends of $.06 - $.07 per share depending upon when such shares were issued.
The current conversion rate is $14.50 per share. Commencing on the second
anniversary of the completion of the Company's IPO, the Company
12
<PAGE>
may, at its option, redeem all or any portion of the shares of Series D
Preferred Stock then outstanding at a redemption price of $1.00 per share,
together with all accrued and unpaid dividends. Such redemption is subject to
the right of each holder of Series D Preferred Stock to convert such holder's
shares into shares of Class B Common Stock. On December 31, 2001, the Company
must redeem all shares of Series D Preferred Stock then outstanding at a
redemption price of $1.00 per share, together with all accrued and unpaid
dividends.
The holders of the Series F Preferred Stock are entitled to receive cash
dividends at the annual rate initially of $.04 per share, with the annual rate
increasing by 5% per year commencing January 1, 1998 until January 1, 2001, at
which time the annual rate becomes fixed at $0.0486 per share. The current
conversion rate is $16.00 per share. On December 31, 2007, the Company must
redeem all shares of Series F Preferred Stock then outstanding at a redemption
price of $1.00 per share, together with all accrued and unpaid dividends. The
Company does not have the option to redeem any Series F Preferred Stock.
In conjunction with the closing of the IPO, the Company entered into a new
credit facility (the "Former Credit Facility") which provided for a $75 million
revolving line of credit with both LIBOR and base rate interest options. The
Former Credit Facility was unsecured and was for a term of three years. During
September, 1997, the Company entered into a new credit facility (the "New Credit
Facility") for a $150 million revolving line of credit. The New Credit Facility
has a five year term, is unsecured and contains customary restrictive covenants,
including a restriction on the payment of dividends on common stock, and
requires the Company to maintain certain financial ratios. Interest under the
New Credit Facility is provided at both LIBOR and prime rate options. As of
September 30, 1997, $72.7 million was outstanding under the line of credit.
The Company issued 573,979 shares of Class A Common Stock and approximately
20,000,000 shares of Series F Preferred Stock and paid $44 million in cash to
fund acquisitions during the nine months ended September 30, 1997. The Company
intends to fund future acquisitions through borrowings under its New Credit
Facility and additional issuances of Class A Common Stock or additional
preferred stock. In March 1997, the Company filed a shelf registration statement
relating to 2,000,000 shares of Class A Common Stock to be used to fund
acquisitions. The Company has budgeted $125 million for its acquisition program
in 1997 of which $72 million had been utilized as of October 29, 1997. As of
October 29, 1997, the Company had letters of intent for acquisitions involving
an aggregate purchase price of approximately $55 million.
The Company expects to continue to aggressively pursue additional
acquisitions of funeral homes and cemeteries to take advantage of the trend
toward consolidation occurring in the industry which will require significant
levels of funding from various sources. In addition, the Company currently
expects to incur less than $8 million of capital expenditures during 1997,
primarily for upgrading funeral home facilities. The Company believes that cash
flow from operations, borrowings under the New Credit Facility and its ability
to issue additional debt and equity securities should be sufficient to fund
acquisitions and its anticipated capital expenditures and other operating
requirements for the remainder of 1997. However, because future cash flows and
the availability of financing are subject to a number of variables, such as the
number and size of acquisitions made by the Company, there can be no assurance
that the Company's capital resources will be sufficient to fund its capital
needs. Additional debt and equity financings may be required to continue the
Company's acquisition program. The availability and terms of these capital
sources will depend on prevailing market conditions and interest rates and the
then-existing financial condition of the Company.
13
<PAGE>
SEASONALITY
Although the death care business is relatively stable and fairly predictable,
the Company's business can be affected by seasonal fluctuations in the death
rate. Generally, death rates are higher during the winter months. In addition
the quarterly results of the Company may fluctuate depending on the magnitude
and timing of acquisitions.
INFLATION
Inflation has not had a significant impact on the results of operations of
the Company.
14
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
From January 1, 1997 through May 31, 1997, the Company issued an aggregate of
462,994 shares of Class A Common Stock, valued at market prices, to the former
owners of acquired funeral homes and cemeteries. Consideration for such shares
consisted of ownership interests in funeral home and cemetery businesses. The
Company relied on an exemption under Section 4(2) of the Securities Act in
effecting these transactions. Beginning in June 1997, the Company began to issue
registered shares of Class A Common Stock to former owners of acquired
properties under its shelf registration statement on Form S-4.
On January 7, 1997, the Company issued 19,999,992 shares of Series F
Preferred Stock, valued at $1.00 per share, to the former owners of acquired
funeral homes and cemeteries. Consideration for such shares consisted of
ownership interests in funeral home and cemetery businesses. The Company relied
on an exemption under Section 4(2) of the Securities Act in effecting these
transactions.
On May 9, 1997, the Company filed a Certificate of Amendment, increasing the
authorized Class A Common Stock to 40,000,000 shares, reducing the authorized
Class B Common Stock to 10,000,000 shares, and increasing the authorized
Preferred Stock to 70,000,000 shares. The Company additionally filed, on May 9,
1997, a Certificate of Decrease, reducing the authorized Series D Preferred
Stock to 2,000,000 shares, and a Certificate of Decrease, reducing the
authorized Series F Preferred Stock to 15,000,000 shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 -- Loan Agreement by and among the Company and NationsBank of Texas,
N.A., dated September 9, 1997
10.2 -- Certificate of Amendment, increasing the authorized Class A Common
Stock, reducing the Class B Common Stock, and increasing the
authorized Preferred Stock dated May 9, 1997
10.3 -- Certificate of Decrease, reducing the authorized Series D
Preferred Stock
10.4 -- Certificate of Decrease, reducing the authorized Series F
Preferred Stock
11.1 -- Statement regarding computation of per share earnings
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on August 18, 1997 with
respect to its acquisition of substantially all of the operating assets of
McNary - Moore Funeral Service on August 1, 1997. The
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<PAGE>
Company also filed a Current Report on Form 8-K/A on October 14, 1997 to include
in the Form 8-K filed on August 18, 1997 the financial statements and pro forma
financial information required by item 7.
The Company filed a Current Report on Form 8-K on October 10, 1997 with respect
to its merger with Cemetery Enterprises, Inc. on September 25, 1997.
16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARRIAGE SERVICES, INC.
NOVEMBER 14, 1997 /s/ THOMAS C. LIVENGOOD
Date Thomas C. Livengood,
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
EXHIBIT 10.1
[Execution Version]
$150,000,000
CREDIT AGREEMENT
Dated as of September 9, 1997
Among
CARRIAGE SERVICES, INC.
AS BORROWER,
THE LENDERS NAMED IN THIS CREDIT AGREEMENT
AS LENDERS,
and
NATIONSBANK OF TEXAS, N.A.
AS AGENT
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms................................... 1
Section 1.02 Computation of Time Periods............................. 15
Section 1.03 Accounting Terms; Changes in GAAP....................... 15
Section 1.04 Types of Advances....................................... 16
Section 1.05 Miscellaneous........................................... 16
ARTICLE II THE CREDIT FACILITIES AND THE LETTERS OF CREDIT
Section 2.01 Commitment to Make Advances............................. 16
Section 2.02 Method of Advancing..................................... 16
Section 2.03 Swing Line Facility..................................... 19
Section 2.04 Fees.................................................... 20
Section 2.05 Reduction of the Commitments............................ 21
Section 2.06 Repayment............................................... 21
Section 2.07 Interest................................................ 21
Section 2.08 Prepayments............................................. 23
Section 2.09 Breakage Costs.......................................... 24
Section 2.10 Increased Costs......................................... 24
Section 2.11 Payments and Computations............................... 26
Section 2.12 Taxes................................................... 27
Section 2.13 Sharing of Payments, Etc................................ 29
Section 2.14 Letters of Credit....................................... 29
Section 2.15 Notice of Increased Costs; Lender Replacement........... 32
ARTICLE III CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Initial Borrowings and
Issuance of Letters of Credit.......................... 33
Section 3.02 Conditions Precedent to Each Borrowing.................. 35
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.01 Corporate Existence; Subsidiaries....................... 35
Section 4.02 Corporate Power......................................... 36
Section 4.03 Authorization and Approvals............................. 36
Section 4.04 Enforceable Obligations................................. 36
Section 4.05 Historical Financial Statements......................... 36
Section 4.06 True and Complete Disclosure............................ 37
Section 4.07 Litigation.............................................. 37
Section 4.08 Use of Proceeds......................................... 37
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Section 4.09 Investment Company Act.................................. 37
Section 4.10 Public Utility Holding Company Act...................... 37
Section 4.11 Taxes................................................... 37
Section 4.12 Pension Plans........................................... 38
Section 4.13 Condition of Property; Casualties....................... 38
Section 4.14 Insurance............................................... 39
Section 4.15 No Burdensome Restrictions; No Defaults................. 39
Section 4.16 Environmental Condition................................. 39
Section 4.17 Permits, Licenses, etc.................................. 40
Section 4.18 Funded Debt; Liens...................................... 40
Section 4.19 Direct Benefit From Borrowings.......................... 40
Section 4.20 Chief Executive Office.................................. 40
ARTICLE V AFFIRMATIVE COVENANTS
Section 5.01 Compliance with Laws, Etc............................... 40
Section 5.02 Maintenance of Insurance................................ 41
Section 5.03 Preservation of Corporate Existence, Etc................ 41
Section 5.04 Payment of Taxes, Etc................................... 41
Section 5.05 Visitation Rights....................................... 41
Section 5.06 Reporting Requirements.................................. 42
Section 5.07 Maintenance of Property................................. 44
Section 5.08 New Subsidiaries........................................ 45
Section 5.09 Maintenance of Trust Reserves and Trust Accounts........ 45
Section 5.10 Maintenance of Trust Balance............................ 45
Section 5.11 Hazardous Substances.................................... 45
ARTICLE VI NEGATIVE COVENANTS
Section 6.01 Liens, Etc.............................................. 46
Section 6.02 Debts, Guaranties and Other Obligations................. 47
Section 6.03 Agreements Restricting Liens and Distributions.......... 48
Section 6.04 Merger or Consolidation; Asset Sales.................... 48
Section 6.05 Restricted Payments; Issuance of Preferred Stock........ 49
Section 6.06 Investments; Lines of Business.......................... 49
Section 6.07 Acquisitions............................................ 50
Section 6.08 Capital Expenditures.................................... 51
Section 6.09 Affiliate Transactions.................................. 51
Section 6.10 Compliance with ERISA................................... 51
Section 6.11 Maintenance of Ownership of Subsidiaries................ 51
Section 6.12 Trust Funds............................................. 52
Section 6.13 Settlement of Litigation................................ 52
Section 6.14 Fixed Charge Coverage Ratio............................. 52
Section 6.15 Funded Debt to Total Capital Ratio...................... 52
Section 6.16 Net Worth............................................... 52
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ARTICLE VII REMEDIES
Section 7.01 Events of Default....................................... 53
Section 7.02 Optional Acceleration of Maturity....................... 55
Section 7.03 Automatic Acceleration of Maturity...................... 56
Section 7.04 Cash Collateral Account................................. 56
Section 7.05 Non-exclusivity of Remedies............................. 57
Section 7.06 Right of Set-off........................................ 57
ARTICLE VIII THE AGENT AND THE ISSUING LENDER
Section 8.01 Authorization and Action................................ 57
Section 8.02 Agent's Reliance, Etc................................... 58
Section 8.03 The Agent and Its Affiliates............................ 58
Section 8.04 Lender Credit Decision.................................. 58
Section 8.05 Indemnification......................................... 59
Section 8.06 Successor Agent and Issuing Lender...................... 59
ARTICLE IX MISCELLANEOUS
Section 9.01 Amendments, Etc......................................... 60
Section 9.02 Notices, Etc............................................ 60
Section 9.03 No Waiver; Remedies..................................... 61
Section 9.04 Costs and Expenses...................................... 61
Section 9.05 Binding Effect.......................................... 61
Section 9.06 Lender Assignments and Participations................... 62
Section 9.07 Indemnification......................................... 64
Section 9.08 Execution in Counterparts............................... 65
Section 9.09 Survival of Representations, etc........................ 65
Section 9.10 Severability............................................ 65
Section 9.11 Business Loans.......................................... 65
Section 9.12 Usury Not Intended...................................... 65
Section 9.13 Governing Law........................................... 66
Section 9.14 Amendment and Restatement............................... 66
EXHIBITS:
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Guaranty
Exhibit C - Form of Note
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Notice of Conversion or Continuation
Exhibit F - Form of NationsBank Letter of Credit Application
Exhibit G - Form of Borrower's and Subsidiaries' Counsel Opinion
Exhibit H - Form of Compliance Certificate
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Exhibit I - Form of Joinder Agreement
SCHEDULES:
Schedule 1 - Notice Information for Lenders
Schedule 2 - Existing Letters of Credit
Schedule 3 - Existing Preferred Stock
Schedule 4.01 - Subsidiaries
Schedule 4.16(b)- Environmental Condition
Schedule 6.06 - Certain Permitted Investments
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<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of September 9, 1997 is among Carriage
Services, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined
below), and NationsBank of Texas, N.A., as Agent for the Lenders.
The Borrower, the Lenders, and the Agent agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the term
"Borrower" shall have the meaning set forth above and the following terms shall
have the following meanings (unless otherwise indicated, such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"ACQUISITION" means the direct or indirect acquisition, whether in one or
more related transactions and whether by purchase, assignment, merger,
consolidation, share exchange, or other acquisition transaction, of any Person,
any group of Persons, or any related group of assets, liabilities, or securities
of any Person or any group of Persons.
"ADJUSTED BASE RATE" means, for any day, the fluctuating rate per annum of
interest equal to the greater of (a) the Base Rate in effect on such day or (b)
the Federal Funds Rate in effect on such day plus 1/2%.
"ADVANCE" means any advance (other than an advance by the Swing Line
Lender under the line of credit created by the Swing Line Note) by a Lender to
the Borrower as part of a Borrowing and refers to a Base Rate Advance or a
Eurodollar Rate Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of a Control Percentage, by contract or otherwise.
"AGENT" means NationsBank of Texas, N.A. in its capacity as agent pursuant
to Article VIII, and includes any successor agent pursuant to Section 8.06.
<PAGE>
"AGREEMENT" means this Credit Agreement dated as of September 9, 1997
among the Borrower, the Lenders, and the Agent, as it may be amended, restated,
modified or supplemented from time-to-time.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"APPLICABLE MARGIN" means, at any time, the following percentages
applicable during the periods described below determined as a function of the
ratio of the Borrower's (a) Funded Debt LESS Subordinated Debt to (b) Total
Capital as of the last day of the immediately preceding fiscal quarter as
follows:
<TABLE>
<CAPTION>
RATIO RATIO RATIO RATIO
EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO OR
GREATER THAN GREATER THAN GREATER THAN GREATER THAN RATIO
RATIO LESS 10% BUT LESS 20% BUT LESS 30% BUT LESS 40% BUT LESS GREATER THAN
THAN 10% THAN 20% THAN 30% THAN 40% THAN 50% OR EQUAL TO 50%
-------- -------- -------- ------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Eurodollar Rate .................... 0.500% 0.625% 0.875% 1.00% 1.125% 1.250%
Advance
Base Rate .......................... 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
Advance
Commitment ......................... 0.175% 0.200% 0.250% 0.250% 0.250% 0.300%
Fee
</TABLE>
The foregoing ratio shall be deemed to be equal to or greater than 40% but
less than 50% from the date of this Agreement until redetermination by the
Agent. The Agent shall thereafter calculate the foregoing ratio and the
resulting Applicable Margin based upon the most recent financial statements
dated as of the end of a fiscal quarter delivered to the Agent pursuant to
Section 5.06(c). Any adjustments to the Applicable Margin shall become effective
on the first day of the month following the month during which such financial
statements are required to be delivered to the Agent, but not before, provided,
however, that if such financial statements are not delivered when required
hereunder, the foregoing ratio shall be deemed to be greater than 50% and the
Applicable Margin shall increase to the maximum percentage amount set forth in
the table above from the date when such financial statements are due until three
days after the date such financial statements are actually delivered, when the
Agent shall recalculate the foregoing ratio, based upon such delivered financial
statements, and the resulting Applicable Margin and the same shall become
effective.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of the attached Exhibit A.
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<PAGE>
"BANK" means any Lender that is subject to regulation by the Federal
Reserve Board of the United States or the equivalent Governmental Authority of
any Lender organized in any jurisdiction outside the United States.
"BASE RATE" means a fluctuating interest rate per annum as shall be in
effect from time-to-time equal to the rate of interest publicly announced by
NationsBank as its prime, whether or not the Borrower has notice thereof.
"BASE RATE ADVANCE" means an Advance which bears interest as provided in
Section 2.07(a).
"BORROWING" means a borrowing consisting of simultaneous Advances of the
same Type made by each Lender pursuant to the revolving credit facility created
in Section 2.01 or Converted by each Lender to Advances of a different Type
pursuant to Section 2.02(b).
"BUSINESS DAY" means any Monday through Friday during which commercial
banks are open for business in Houston, Texas, and Dallas, Texas, and, if the
applicable Business Day relates to any Eurodollar Rate Advances, a day of the
year on which dealings in U.S. Dollars are carried on in the London interbank
market.
"CAPITAL LEASES" means, as applied to any Person, any lease of any
Property by such Person as lessee which would, in accordance with GAAP, be
required to be classified and accounted for as a capital lease on the balance
sheet of such Person.
"CASH COLLATERAL ACCOUNT" means a special interest bearing cash collateral
account containing cash deposited pursuant to Sections 2.14(a), 7.02(b) or
7.03(b) to be maintained at the Agent's office in accordance with Section 7.04.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMMITMENT" as to any Lender, has the meaning set forth in Section 2.01.
"COMMON STOCK" means the shares from time to time issued and outstanding
of any class or classes of Common Stock, $.01 par value per share, of the
Borrower.
"COMPLIANCE CERTIFICATE" means a Compliance Certificate in the form of the
attached Exhibit H.
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<PAGE>
"CONTROL PERCENTAGE" means, with respect to any Person, the percentage of
the outstanding capital stock of such Person having ordinary voting power which
gives the direct or indirect holder of such stock the power to elect a majority
of the Board of Directors of such Person.
"CONTROLLED GROUP" means all members of a controlled group of corporations
filing a consolidated federal income tax return with the Borrower.
"CONVERT", "CONVERSION", and "CONVERTED" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.02(b).
"CORE ACQUISITION" means any Acquisition of a funeral home, cemetery, or
related business.
"CREDIT DOCUMENTS" means this Agreement, the Notes, the Swing Line Note,
the Guaranty, and each other agreement, instrument or document executed at any
time in connection with this Agreement.
"DEBT," for any Person, means without duplication (a) indebtedness of such
Person for borrowed money, including, without limitation, obligations under
letters of credit and agreements relating to the issuance of letters of credit
or acceptance financing; (b) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) obligations of such Person
to pay the deferred purchase price of Property or services (other than trade
obligations incurred in the ordinary course of business) including (without
limitation) Deferred Purchase Price; (d) obligations of such Person as lessee
under Capital Leases; (e) obligations of such Person under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) of such
Person to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in the immediately preceding clauses (a) through (d) above; (f)
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (e) secured by any Lien on or in respect of any Property of such Person,
up to (but not exceeding) the value of such Property; (g) all liabilities of
such Person in respect of unfunded vested benefits under any Plan; and (h)
Pre-need Obligations, except to the extent that Pre-need Obligations are trusted
or covered by insurance.
"DEFAULT" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFERRED PURCHASE PRICE" means any purchase price or other consideration,
including payments under agreements not to compete, payable to the sellers in an
Acquisition (whether consummated before or after the date of this Agreement)
after consummation of such Acquisition, whether evidenced by notes, debentures
or the contractual promise to pay on a deferred basis.
"DOLLAR EQUIVALENT" means for all purposes of this Agreement, the
equivalent in another currency of an amount in Dollars to be determined by
reference to the rate of exchange quoted by NationsBank of Texas, N.A., at 10:00
a.m. (Houston, Texas time) on the date of determination, for the spot purchase
in the foreign exchange market of such amount of Dollars with such other
currency.
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<PAGE>
"DOLLARS" and "$" means lawful money of the United States of America.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule 1 or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.
"EBITDA" means, with respect to the Borrower and for any period of
determination, (a) Net Income for such period PLUS (b) to the extent deducted in
determining Net Income, without duplication, Interest Expense, income taxes and
other taxes measured by Net Income, depreciation and amortization and payments
by the Borrower in respect of Deferred Purchase Price, in each case, for such
period.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the laws
of the United States, or any State thereof, and having primary capital of not
less than $500,000,000 and approved by the Agent and, so long as no Default
exists, the Borrower, which approval by the Agent and the Borrower will not be
unreasonably withheld; (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development and having primary capital (or its equivalent) of not less than
$500,000,000 (or its Dollar Equivalent) and approved by the Agent and, so long
as no Default exists, the Borrower, which approval by the Agent and the Borrower
will not be unreasonably withheld; and (c) Provident, if approved by the Agent,
and so long as no Default exists, the Borrower, which approval by the Agent and
the Borrower shall not be unreasonably withheld.
"ENVIRONMENT" or "ENVIRONMENTAL" shall have the meanings set forth in 43
U.S.C.ss.9601(8) (1988).
"ENVIRONMENTAL CLAIM" means any action, lawsuit, claim, demand, regulatory
action or proceeding, order, decree, consent agreement or notice of potential or
actual responsibility or violation (including claims or proceedings under the
Occupational Safety and Health Acts or similar laws or requirements relating to
health or safety of employees) brought by a Governmental Authority which seeks
to impose a material liability under any Environmental Law.
"ENVIRONMENTAL LAW" means all Legal Requirements arising from, relating
to, or in connection with the Environment, health, or safety, including without
limitation CERCLA, relating to (a) pollution, contamination, injury,
destruction, loss, protection, cleanup, reclamation or restoration of the air,
surface water, groundwater, land surface or subsurface strata, or other natural
resources; (b) solid, gaseous or liquid waste generation, treatment, processing,
recycling, reclamation, cleanup, storage, disposal or transportation; (c)
exposure to pollutants, contaminants, hazardous, medical, infectious, or toxic
substances, materials or wastes; (d) the safety or health of employees; or (e)
the manufacture, processing, handling, transportation, distribution in commerce,
use, storage or disposal of hazardous, medical, infectious, or toxic substances,
materials or wastes.
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<PAGE>
"ENVIRONMENTAL PERMIT" means any permit, license, order, approval or other
authorization under Environmental Law material to the Business of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time-to-time.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" opposite its name on
Schedule 1 (or, if no such office is specified, its Domestic Lending Office) or
such other office of such Lender as such Lender may from time to time specify to
the Borrower and the Agent.
"EURODOLLAR RATE" means, for any Eurodollar Rate Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar
Rate Advance for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on
Reuters Screen LIBO Page (or any successor page), the applicable rate shall be
the arithmetic mean of all such rates.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.07(b).
"EURODOLLAR RATE RESERVE PERCENTAGE" of any Lender for the Interest Period
for any Eurodollar Rate Advance means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time-to-time by the Federal Reserve Board (or other
similar Governmental Authority) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Lender with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to such
Interest Period.
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"EVENT OF DEFAULT" has the meaning specified in Section 7.01.
"EXCLUDED CAPITAL STOCK" means, with respect to the Borrower, any class of
capital stock that is subject to mandatory dividend accrual or payment or
mandatory redemption, repurchase, repayment, refunding, or similar provisions or
arrangements, including preferred stock.
"EXISTING CREDIT AGREEMENT" has the meaning specified in Section 9.14.
"EXISTING LETTERS OF CREDIT" means those standby letters of credit issued
by the Issuing Lender and listed on Schedule 2.
"EXISTING PREFERRED STOCK" means the preferred stock of the Borrower which
is outstanding on the date of this Agreement and listed on Schedule 3.
"EXPIRATION DATE" means, with respect to any Letter of Credit, the date on
which such Letter of Credit will expire or terminate in accordance with its
terms.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FINANCIAL OFFICER" means the Borrower's Chief Financial Officer,
Controller, Treasurer, or Assistant Treasurer.
"FIXED CHARGE COVERAGE RATIO" means, with respect to the Borrower and for
any period of determination, the ratio of (i) EBITDA for such period MINUS the
Borrower's cash taxes paid during such period to (ii) the sum of (A) Interest
Expense during such period, PLUS (B) scheduled and required principal payments
during such period in respect of Funded Debt PLUS, (C) to the extent not
included in clause (A) or (B) above in this definition, scheduled and required
payments made by the Borrower in respect of Deferred Purchase Price for such
period.
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"FUND," "TRUST FUND," or "SUPERFUND" means the Hazardous Substance
Response Trust Fund, established pursuant to 42 U.S.C. ss. 9631 (1988) and the
Post-closure Liability Trust Fund, established pursuant to 42 U.S.C. ss. 9641
(1988), which statutory provisions have been amended or repealed by the
Superfunds Amendments and Reauthorization Act of 1986, and the "Fund," "Trust
Fund," or "Superfund" that are now maintained pursuant to ss. 9507 of the Code.
"FUNDED DEBT" means, with respect to the Borrower and as of the date of
determination, without duplication, the Debt of the Borrower plus (to the extent
not already constituting Debt) the Letter of Credit Exposure.
"GAAP" means United States generally accepted accounting principles as in
effect from time-to-time, applied on a basis consistent with the requirements of
Section 1.03.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
any Lender, the Borrower, or the Borrower's Subsidiaries or any of their
respective Properties.
"GUARANTY" means the guaranty in the form of the attached Exhibit B
executed by the Subsidiaries of the Borrower, as the same may be amended,
restated, modified, or supplemented from time to time.
"HAZARDOUS SUBSTANCE" means the substances identified as such pursuant to
CERCLA and those regulated under any other Environmental Law, including without
limitation pollutants, contaminants, petroleum, petroleum products,
radionuclides, radioactive materials, and medical and infectious waste.
"HAZARDOUS WASTE" means the substances regulated as such pursuant to any
Environmental Law.
"HISTORICAL FINANCIAL STATEMENTS" means (i) the consolidated balance
sheets of the Borrower and its Subsidiaries at December 31, 1995 and 1996 and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended, together with the audit report
thereon of Arthur Andersen LLP, and (ii) the unaudited consolidated balance
sheet of the Borrower and its Subsidiaries at June 30, 1997, and the related
unaudited consolidated statements of operations, changes in stockholders' equity
and cash flows for the six-month period then ended.
"INTEREST EXPENSE" means, with respect to the Borrower and for any period
of determination, the interest expense of the Borrower for such period, whether
paid or accrued (including that attributable to obligations which have been or
should be, in accordance with GAAP, recorded as Capital Leases), including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs under any interest hedge, rate swap, cap, or similar arrangement providing
for the exchange of nominal interest obligations or a cap of the interest rates
applicable to Debt of the Borrower, all as determined in accordance with GAAP.
Interest Expense for a period also includes the aggregate amount of Restricted
Payments declared or paid by the Borrower during such period.
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"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part
of the same Borrowing, the period commencing on the date of such Advance or the
date of the Conversion of any Base Rate Advance into such an Advance and ending
on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.02 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.02. The duration of each such Interest Period
shall be one, two, three, or six months, in each case as the Borrower may, upon
notice received by the Agent not later than 10:00 a.m. (Houston, Texas time) on
the third Business Day prior to the first day of such Interest Period, select;
PROVIDED, HOWEVER, that:
(a) the Borrower may not select any Interest Period for any Advance which
ends after the Maturity Date;
(b) Interest Periods commencing on the same date for Advances comprising
part of the same Borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, PROVIDED that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and --------
(d) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month.
"ISSUING LENDER" means, with respect to all Letters of Credit, NationsBank
and any successor issuing Lender pursuant to Section 8.06.
"JOINDER AGREEMENT" means a joinder agreement in the form of the attached
Exhibit I executed by any Subsidiary of the Borrower.
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"KNOWLEDGE" means, with respect to the Borrower, the actual knowledge of
any member of the Borrower's executive officers, and does not include
constructive knowledge.
"LEGAL REQUIREMENT" means any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation of
any of the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, including, but not limited to, Regulations G, T, U and
X.
"LENDERS" means the lenders listed on the signature pages of this
Agreement and each Eligible Assignee that shall become a party to this Agreement
pursuant to Section 9.06.
"LETTER OF CREDIT" means, individually, any letter of credit issued by the
Issuing Lender which is subject to this Agreement, including the Existing
Letters of Credit, and "LETTERS OF CREDIT" collectively means all such letters
of credit.
"LETTER OF CREDIT DOCUMENTS" means, with respect to any Letter of Credit,
such Letter of Credit and any agreements, documents, and instruments entered
into in connection with or relating to such Letter of Credit.
"LETTER OF CREDIT EXPOSURE" means, at any time, without duplication, the
sum of (a) the aggregate undrawn maximum face amount of each Letter of Credit
outstanding at such time and (b) the aggregate unpaid amount of all
Reimbursement Obligations at such time.
"LETTER OF CREDIT OBLIGATIONS" means any obligations of the Borrower under
this Agreement and the Letter of Credit Documents in connection with the Letters
of Credit.
"LIEN" means any mortgage, lien, pledge, charge, deed of trust, security
interest, or encumbrance to secure or provide for the payment of any obligation
of any Person, whether arising by contract, operation of law or otherwise
(including, without limitation, the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement).
"LIQUID INVESTMENTS" means (a) direct or indirect obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States; (b) mutual funds investing in securities
issued by the United States, (c) (i) negotiable or nonnegotiable certificates of
deposit, time deposits, or other similar banking arrangements maturing within
180 days from the date of acquisition thereof ("bank debt securities"), issued
by (A) any Lender or (B) any other
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bank or trust company which has either (I) obtained insurance from the Federal
Depositor's Insurance Corporation supporting such bank's or trust company's
obligation to repay the bank debt securities or (II) a combined capital surplus
and undivided profit of not less than $250,000,000 or the Dollar Equivalent
thereof, if at the time of deposit or purchase, such bank debt securities are
rated not less than "A" (or the then equivalent) by the rating service of
Standard & Poor's Corporation or of Moody's Investors Service, Inc., and (ii)
commercial paper issued by (A) any Lender or (B) any other Person if at the time
of purchase such commercial paper is rated not less than "A-2" (or the then
equivalent) by the rating service of Standard & Poor's Corporation or not less
than "P-2" (or the then equivalent) by the rating service of Moody's Investors
Service, Inc., or upon the discontinuance of both of such services, such other
nationally recognized rating service or services, as the case may be, as shall
be selected by the Borrower with the consent of the Majority Lenders; (d)
repurchase agreements relating to investments described in clauses (a) and (c)
above with a market value at least equal to the consideration paid in connection
therewith, with any Person who regularly engages in the business of entering
into repurchase agreements and has a combined capital surplus and undivided
profit of not less than $250,000,000 or the Dollar Equivalent thereof, if at the
time of entering into such agreement the debt securities of such Person are
rated not less than "BBB" (or the then equivalent) by the rating service of
Standard & Poor's Corporation or of Moody's Investors Service, Inc.; and (e)
such other investments as the Borrower may request and the Agent may approve in
writing, which approval will not be unreasonably withheld.
"MAJORITY LENDERS" means, at any time, Lenders holding at least 51%
(without arithmetic rounding up) of the then aggregate unpaid principal amount
of the Notes held by the Lenders and the Letter of Credit Exposure of the
Lenders at such time, or, if no such principal amount and Letter of Credit
Exposure is then outstanding, Lenders having at least 51% (without arithmetic
rounding up) of the aggregate amount of the Commitments at such time.
"MATERIAL ADVERSE CHANGE" shall mean (a) a material adverse change in the
business, financial condition, or results of operations of the Borrower and its
Subsidiaries, taken as a whole, or (b) the occurrence and continuance of any
event or circumstance which could reasonably be expected to have a material
adverse effect on the Borrower's ability to perform its obligations under this
Agreement, any Note or any other Credit Document.
"MATURITY DATE" means the earlier of (a) September 1, 2002, and (b) the
earlier termination in whole of the Commitments pursuant to Section 2.04 or
Article VII.
"MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any member of the Controlled Group
is making or accruing an obligation to make contributions.
"NATIONSBANK" means NationsBank of Texas, N.A.
"NET INCOME" means, with respect to the Borrower and for any period of
determination, the net income of the Borrower for such period, as determined in
accordance with GAAP, excluding, however, extraordinary items, such as (i) any
net gain or loss during such period arising from the sale, exchange, or other
disposition of capital assets (such term to include all fixed assets and all
securities) other than in the ordinary course of business and (ii) any write-up
of assets.
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"NET WORTH" means, with respect to the Borrower and for any time of
determination, the sum of (a) the par value (or value stated on the books of the
Borrower) of all classes of capital stock of the Borrower other than Excluded
Capital Stock, (b) the additional paid-in capital of the Borrower allocable to
all classes of capital stock of the Borrower other than Excluded Capital Stock,
and (c) the amount of the surplus and retained earnings, whether capital or
earned, of the Borrower, all determined in accordance with GAAP.
"NOTE" means a promissory note of the Borrower (other than the Swing Line
Note) payable to the order of a Lender, in substantially the form of the
attached Exhibit C, evidencing indebtedness of the Borrower to such Lender
resulting from Advances owing to such Lender, as the same may be amended,
restated, modified or supplemented from time to time.
"NOTICE OF BORROWING" means a notice of borrowing in the form of the
attached Exhibit D signed by a Responsible Officer of the Borrower or the
written designee thereof.
"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion or
continuation in the form of the attached Exhibit E signed by a Responsible
Officer of the Borrower or the written designee thereof.
"OBLIGATIONS" means, as of any date, all principal, interest, fees,
reimbursements, indemnifications, cash collateral obligations, and other amounts
payable or owed by the Borrower to the Agent and the Lenders under this
Agreement, the Notes, the Swing Line Note, the Letter of Credit Documents, and
the other Credit Documents and any increases, extensions, and rearrangements of
those obligations under any amendments, supplements, and other modifications of
the documents and agreements creating those obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means the Liens permitted to exist pursuant to Section
6.01.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability corporation, limited
liability partnership, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof or any
trustee, receiver, custodian or similar official.
"PLAN" means an employee benefit plan (other than a Multiemployer Plan)
maintained for employees of the Borrower or any member of the Controlled Group
and covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code.
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"PRE-NEED OBLIGATIONS" means the liabilities and obligations of the
Borrower and its Subsidiaries to perform funeral or cemetery related services or
provide funeral or cemetery property, merchandise or inventory pursuant to
written contracts with their customers.
"PROPERTY" of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.
"PROVIDENT" means Provident Services, Inc., a Delaware corporation.
"PRO RATA SHARE" means, with respect to any Lender, either (a) the ratio
(expressed as a percentage) of such Lender's Commitments at such time to the
aggregate Commitments at such time or (b) if the Commitments have been
terminated, the ratio (expressed as a percentage) of such Lender's aggregate
outstanding Advances and Letter of Credit Exposure at such time to the aggregate
outstanding Advances and Letter of Credit Exposure of all the Lenders at such
time.
"QUALIFIED PREFERRED STOCK" means Redeemable Preferred Stock issued after
August 13, 1996, that provides (i) for its mandatory redemption on a date, if at
all, that is on or after the first anniversary of the Maturity Date, as the same
may be extended from time to time, and (ii) that no holder of such shares will
be entitled to retain or receive Restricted Payments in respect of such shares
for a period of not less than 180 days after receipt by such holder of written
notice from any Lender or the Borrower that an Event of Default hereunder has
occurred and is then continuing and that such payments should be blocked, and
indefinitely, for so long as there shall exist any default in the payment of any
Obligations, whether by maturity, acceleration, or otherwise, all such
provisions to be in form and content reasonably acceptable to the Agent.
"REDEEMABLE PREFERRED STOCK" means shares of Borrower's preferred stock
which by its terms requires or permits Borrower to redeem such shares.
"REGISTER" has the meaning set forth in paragraph (c) of Section 9.06.
"REGULATIONS G, T, U AND X" mean Regulations G, T, U and X of the Federal
Reserve Board, as the same is from time-to-time in effect, and all official
rulings and interpretations thereunder or thereof.
"REIMBURSEMENT OBLIGATIONS" means all of the obligations of the Borrower
set forth in paragraph (c) of Section 2.13.
"RELEASE" shall have the meaning set forth in CERCLA or under any other
Environmental Law.
"RESPONSE" shall have the meaning set forth in CERCLA or under any other
Environmental Law.
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"RESPONSIBLE OFFICER" means the Borrower's Chief Executive Officer,
President, Chief Financial Officer, Controller, Treasurer, or Assistant
Treasurer.
"RESTRICTED PAYMENT" means the declaration or making by any Person of any
dividends or other distributions (in cash, property, or otherwise) on, or any
payment for the purchase, redemption or other acquisition of, any shares of any
capital stock of such Person, other than any such dividends, distributions, and
payments payable in such Person's common stock.
"SUBORDINATED DEBT" means, with respect to the Borrower and as of any date
of its issuance, any unsecured indebtedness for borrowed money for which the
Borrower is directly and primarily obligated that is expressly subordinated to
the Obligations and is approved by the Majority Lenders in their sole discretion
that (a) arises after the date of this Agreement, (b) does not have any stated
maturity before the latest maturity of any of the Obligations, (c) has terms
that are no more restrictive than the terms of the Credit Documents, and (d) has
payment and other terms satisfactory to the Majority Lenders in their sole
discretion.
"SUBSIDIARY" means, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than director's
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such Person.
"SWING LINE LENDER" means NationsBank.
"SWING LINE LOAN" means the aggregate outstanding principal amount of the
advances made under the Swing Line Note.
"SWING LINE NOTE" means the promissory note of the Borrower in the
principal amount of $5,000,000 payable to the order of the Swing Line Lender
evidencing the indebtedness of the Borrower to the Swing Line Lender resulting
from advances to the Borrower under the line of credit created thereunder.
"TERMINATION EVENT" means (a) a Reportable Event described in Section 4043
of ERISA and the regulations issued thereunder (other than a Reportable Event
not subject to the provision for 30-day notice to the PBGC under such
regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or
(e) any other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.
"TOTAL CAPITAL" means, with respect to the Borrower and for any date of
determination, the sum of the Borrower's Net Worth PLUS Excluded Capital Stock
PLUS Funded Debt, all as of such date.
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"TRUST ACCOUNTS" means, collectively, those certain perpetual care trust,
pre-need trust, pre-construction trust or other trust arrangements established
by the Borrower as required to be established and maintained in accordance with
applicable Legal Requirements.
"TRUST RESERVES" means, at the time of any determination thereof, in
connection with the Trust Accounts, the aggregate of all amounts required by
applicable Legal Requirements to be set aside in reserve, trust, escrow or any
similar arrangement, and in respect to any jurisdiction in which the applicable
Legal Requirements do not require the trusting of any such funds, then 100% of
the funds received pursuant to each Trust Account.
"TYPE" has the meaning set forth in Section 1.04.
"VOTING SECURITIES" means (a) with respect to any corporation, capital
stock of the corporation having general voting power under ordinary
circumstances to elect directors of such corporation (irrespective of whether at
the time stock of any other class or classes shall have or might have special
voting power or rights by reason of the happening of any contingency), (b) with
respect to any partnership, any partnership interest or other ownership interest
having general voting power to elect the general partner or other management of
the partnership, and (c) with respect to any limited liability company,
membership certificates or interests having general voting power under ordinary
circumstances to elect the managers of such limited liability company.
Section 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
Section 1.03. ACCOUNTING TERMS; CHANGES IN GAAP.
(a) All accounting terms and expense estimates not specifically defined in
this Agreement shall be construed in accordance with GAAP applied on a basis
consistent with those applied in the preparation of the Historical Financial
Statements, subject to any changes in accounting standards (i) which are
required to conform to GAAP, (ii) which do not have a material impact on
Borrower's consolidated financial position, results of operations or cash flows
(unless in the absence of such change, however immaterial, Borrower would not be
in compliance with this Agreement), or (iii) which the Agent approves, such
approval not to be unreasonably withheld; provided, however, that the Agent's
failure to approve any such change or changes shall not be deemed for purposes
of this Agreement to be unreasonably withheld to the extent that, absent such
change or changes, the Borrower would not be in compliance with this Agreement.
(b) Unless otherwise indicated, all financial statements of the Borrower,
all calculations for compliance with covenants in this Agreement, all
determinations of the Applicable Margin, the commitment fees required by Section
2.04, and all calculations of any amounts to be calculated under the definitions
in Section 1.01 shall be based upon the consolidated accounts of the Borrower
and its Subsidiaries in accordance with GAAP applied as set forth in paragraph
(a) above.
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Section 1.04. TYPES OF ADVANCES. Advances are distinguished by "Type." The
"Type" of an Advance refers to the determination whether such Advance is a
Eurodollar Rate Advance or Base Rate Advance.
Section 1.05. MISCELLANEOUS. Article, Section, Schedule and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to this
Agreement, unless otherwise specified.
ARTICLE II
THE CREDIT FACILITIES AND THE LETTERS OF CREDIT
Section 2.01. COMMITMENT TO MAKE ADVANCES. Each Lender severally agrees,
on the terms and conditions set forth in this Agreement, to make Advances to the
Borrower from time-to-time on any Business Day during the period from the date
of this Agreement until the Maturity Date in an aggregate amount not to exceed
at any time outstanding (a) the amount set opposite such Lender's name on the
signature pages hereof as its Commitment, or if such Lender has entered into any
Assignment and Acceptance, the amount set forth for such Lender as its
Commitment in the Register maintained by the Agent pursuant to Section 9.06(c),
as such amount may be reduced pursuant to Section 2.05 (such Lender's
"Commitment") LESS (b) such Lender's Pro Rata Share of the Letter of Credit
Exposure at such time LESS (c) such Lender's Pro Rata Share of the Swing Line
Loan at such time. Each Borrowing shall, in the case of Borrowings consisting of
Base Rate Advances, be in an aggregate amount not less than $1,000,000 and in
integral multiples of $100,000 in excess thereof, and in the case of Borrowings
consisting of Eurodollar Rate Advances, be in an aggregate amount not less than
$1,000,000 or in integral multiples of $100,000 in excess thereof, and in each
case shall consist of Advances of the same Type made on the same day by the
Lenders ratably according to their respective Commitments. Within the limits of
each Lender's Commitment and subject to the other terms and conditions of this
Agreement, the Borrower may from time to time borrow, prepay pursuant to Section
2.08 and reborrow under this Section 2.01.
Section 2.02. METHOD OF ADVANCING.
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(a NOTICE. Each Borrowing shall be made pursuant to a Notice of Borrowing
(or by telephone notice promptly confirmed in writing by a Notice of Borrowing),
given not later than (i) 10:00 a.m. (Houston, Texas time) on the third Business
Day before the date of the proposed Borrowing, in the case of a Eurodollar Rate
Advance or (ii) 9:00 a.m. (Houston, Texas time) on the Business Day of the date
of the proposed Borrowing, in the case of a Base Rate Advance, by the Borrower
to the Agent, and, in the case of a Base Rate Advance, with a simultaneous
provision of such notice to Provident, and the Agent shall give to each Lender
prompt notice of such proposed Borrowing by telecopy or telex. In order to be an
effective Notice of Borrowing, each Notice of a Borrowing shall be by telecopy
or telex, followed immediately by delivery of the original executed Notice of
Borrowing, specifying the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
and (iv) if such Borrowing is to be comprised of Eurodollar Rate Advances, the
Interest Period for each such Advance. In the case of a proposed Borrowing
comprised of Eurodollar Rate Advances, the Agent shall promptly notify each
Lender of the applicable interest rate under Section 2.07(b). Each Lender shall,
before 12:00 p.m. (Houston, Texas time) on the date of such Borrowing, in the
case of a Eurodollar Rate Advance or before 2:00 p.m. (Houston, Texas time) on
the date of such Borrowing, in the case of a Base Rate Advance, make available
for the account of its Applicable Lending Office to the Agent at its address
referred to in Section 9.02, or such other location as the Agent may specify by
notice to the Lenders, in same day funds, such Lender's Pro Rata Share of such
Borrowing. After the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Agent will make such funds
available to the Borrower at its account with the Agent.
(b CONVERSIONS AND CONTINUATIONS OF ADVANCES. In order to elect to
Convert or continue an Advance under this Section, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Agent at the Agent's
office no later than 10:00 a.m. (Houston, Texas time) (i) on the Business Day of
the proposed Conversion date in the case of a Conversion to a Base Rate Advance
and (ii) on the date which is at least three Business Days in advance of the
proposed Conversion or continuation date in the case of a Conversion to, or a
continuation of, a Eurodollar Rate Advance. In order to be an effective Notice
of Conversion or Continuation, each such Notice of Conversion or Continuation
shall be in writing or by telex or telecopy followed immediately by delivery of
the original executed Notice of Conversion or Continuation, specifying (i) the
requested Conversion or continuation date (which shall be a Business Day), (ii)
the amount and Type of the Advance to be Converted or continued, (iii) whether a
Conversion or continuation is requested, and if a Conversion, into what Type of
Advance, and (iv) in the case of a Conversion to, or a continuation of, a
Eurodollar Rate Advance, the requested Interest Period. Promptly after receipt
of a Notice of Conversion or Continuation under this Section, the Agent shall
provide each Lender with a copy thereof and, in the case of a Conversion to or a
Continuation of a Eurodollar Rate Advance, notify each Lender of the applicable
interest rate under Section 2.07(b).
(c CERTAIN LIMITATIONS. Notwithstanding anything in paragraphs (a) and (b)
above:
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(i) at no time shall there be more than seven Interest Periods
applicable to outstanding Eurodollar Rate Advances;
(ii) if any Lender shall, at least one Business Day before the date
of any requested Borrowing, notify the Agent that the introduction of any
new law or regulation or any change in or in the interpretation of any
existing law or regulation makes it unlawful, or that any central bank or
other Governmental Authority asserts that it is unlawful, for such Lender
or its Eurodollar Lending Office to perform its obligations under this
Agreement to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances, the right of the Borrower to select Eurodollar
Rate Advances for such Borrowing or for any subsequent Borrowing shall be
suspended until such Lender shall notify the Agent that the circumstances
causing such suspension no longer exist (which notice such Lender agrees
to promptly provide), and each Advance comprising such Borrowing shall be
a Base Rate Advance;
(iii) if the Agent is, in good faith after reasonable efforts,
unable to determine the Eurodollar Rate for Eurodollar Rate Advances
comprising any requested Borrowing, the Agent shall give written notice to
the Borrower stating the reason for such determination and, after the
giving of such notice, the right of the Borrower to select Eurodollar Rate
Advances for such Borrowing or for any subsequent Borrowing shall be
suspended until the Agent shall notify the Borrower and the Lenders that
the circumstances causing such suspension no longer exist, and each
Advance comprising such Borrowing shall be a Base Rate Advance;
(iv) if the Majority Lenders shall in good faith, at least one
Business Day before the date of any requested Borrowing, notify the Agent
that the Eurodollar Rate for Eurodollar Rate Advances comprising such
Borrowing will not adequately reflect the cost to such Lenders of making
or funding their respective Eurodollar Rate Advances, as the case may be,
for such Borrowing, the right of the Borrower to select Eurodollar Rate
Advances for such Borrowing or for any subsequent Borrowing shall be
suspended (and such notice shall also include the rationale for such
suspension) until the Majority Lenders (through the Agent) shall notify
the Borrower and the Lenders that the circumstances causing such
suspension no longer exist (which notice shall be promptly provided), and
each Advance comprising such Borrowing shall be a Base Rate Advance; and
(v) if the Borrower shall fail to select the duration or
continuation of any Interest Period for any Eurodollar Rate Advances in
accordance with the provisions contained in the definition of "Interest
Period" in Section 1.01 and paragraph (b) above, the Agent will forthwith
so notify the Borrower and the Lenders and such Advances will be made
available to the Borrower on the date of such Borrowing as Base Rate
Advances or, if an existing Advance, Convert into Base Rate Advances.
(d NOTICES IRREVOCABLE. Each Notice of Borrowing and Notice of Conversion
or Continuation shall be irrevocable and binding on the Borrower. In the case of
any Borrowing which
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the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each Lender against any loss, reasonable
out-of-pocket cost or expense incurred by such Lender as a result of any failure
to fulfill on or before the date specified in such Notice of Borrowing for such
Borrowing the applicable conditions set forth in Article III, unless and to the
extent the Eurodollar Rate Advance specified in such Notice of Borrowing is made
notwithstanding such failure, such indemnified losses to include, without
limitation, any loss (including any loss of anticipated profits), cost or
expense reasonably incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(e AGENT RELIANCE. Unless the Agent shall have received notice from a
Lender before the date of any Borrowing that such Lender will not make available
to the Agent such Lender's Pro Rata Share of such Borrowing, the Agent may
assume that such Lender has made its Pro Rata Share of such Borrowing available
to the Agent on the date of such Borrowing in accordance with paragraph (a) of
this Section 2.02, and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made its Pro Rata Share of such
Borrowing available to the Agent, such Lender and the Borrower severally agree
to immediately repay to the Agent on demand such corresponding amount, together
with interest on such amount, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent at
(i) in the case of the Borrower, the interest rate applicable on such day to
Advances comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Rate for such day. If such Lender shall repay to the Agent such
corresponding amount and interest as provided above, such corresponding amount
so repaid shall constitute such Lender's Advance as part of such Borrowing for
purposes of this Agreement even though not made on the same day as the other
Advances comprising such Borrowing.
(f LENDER OBLIGATIONS SEVERAL. The failure of any Lender to make the
Advance to be made by it as part of any Borrowing shall not relieve any other
Lender of its obligation, if any, to make its Advance on the date of such
Borrowing. No Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on the date of any Borrowing.
(g NOTES. The indebtedness of the Borrower to each Lender resulting from
Advances owing to such Lender shall be evidenced by the Note of the Borrower
payable to the order of such Lender in substantially the form of Exhibit C.
Section 2.03 SWING LINE FACILITY.
(a COMMITMENT. The Swing Line Lender agrees, on the terms and conditions
set forth in the Swing Line Note, to make advances to the Borrower under the
Swing Line Note.
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No Lender shall have any rights thereunder (but each Lender shall have the
obligation to make a Base Rate Advance to the Borrower in order to reimburse the
Swing Line Lender as set forth in paragraph (b) below). The indebtedness of the
Borrower to the Swing Line Lender resulting from the advances under the Swing
Line Note made by the Swing Line Lender shall be evidenced by the Swing Line
Note made by the Borrower. Within the limits of, and subject to the other terms
and conditions of, the Swing Line Note, the Borrower may from time to time
borrow, prepay pursuant to Section 2.08, and reborrow under the Swing Line Note.
(b REIMBURSEMENTS FOR SWING LINE LOAN OBLIGATIONS. With respect to the
Swing Line Loan and the interest, premium, fees, and other amounts owed by the
Borrower to the Swing Line Lender in connection with the Swing Line Note, and in
accordance with the terms of the Swing Line Note, the Borrower agrees to pay to
the Swing Line Lender such amounts when due and payable to the Swing Line Lender
under the Swing Line Note. If the Borrower does not pay to the Swing Line Lender
any such amounts when due and payable to the Swing Line Lender under the Swing
Line Note, in addition to any rights the Swing Line Lender may have under such
Swing Line Note, the Swing Line Lender may upon written notice to the Agent
request the satisfaction of such obligation by the making of a Borrowing in the
amount of any such amounts not paid when due and payable. Upon such request, the
Borrower shall be deemed to have requested the making of a Borrowing in the
amount of such obligation and the transfer of the proceeds thereof to the Swing
Line Lender. Such Borrowing shall be comprised of Base Rate Advances. The Agent
shall promptly forward notice of such Borrowing to the Borrower and the Lenders,
and each Lender shall, in accordance with the procedures of Section 2.01 and
2.02(a), other than limitations on the size of Borrowings, and notwithstanding
the failure of any conditions precedent, make available such Lender's ratable
share of such Borrowing to the Agent, and the Agent shall promptly deliver the
proceeds thereof to the Swing Line Lender for application to such amounts owed
to the Swing Line Lender. The Borrower hereby unconditionally and irrevocably
authorizes, empowers, and directs the Swing Line Lender to make such requests
for Borrowings on behalf of the Borrower, and the Lenders to make Advances to
the Agent for the benefit of the Swing Line Lender in satisfaction of such
obligations. The Agent and each Lender may record and otherwise treat the making
of such Borrowings as the making of a Borrowing to the Borrower under this
Agreement as if requested by the Borrower. Nothing herein is intended to release
the Borrower's obligations under the Swing Line Note, but only to provide an
additional method of payment therefor. The making of any Borrowing under this
Section 2.03 shall not constitute a cure or waiver of any Default or Event of
Default caused by the Borrower's failure to comply with the provisions of this
Agreement or the Swing Line Note.
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Section 2.04. FEES.
(a COMMITMENT FEES. The Borrower agrees to pay to the Agent for the
account of each Lender a commitment fee on the average daily amount by which
such Lender's Commitment exceeds the sum of such Lender's outstanding Advances
and Pro Rata Share of the Letter of Credit Exposure from the date of this
Agreement until the Maturity Date at a per annum rate equal to the Applicable
Margin for commitment fees. The fee payable pursuant to this clause (a) shall be
due and payable quarterly in arrears on the first day of each January, April,
July, and October commencing October 1, 1997, and on the Maturity Date.
(b FACILITY AND AGENT FEES. The Borrower agrees to pay to the Agent the
facility and agent's fees described in the letter agreement dated September 9,
1997 between the Agent and the Borrower, together with any other upfront fees
agreed to by the Borrower, the Agent, and each Lender.
(c LETTER OF CREDIT FEES. For each Letter of Credit issued by the Issuing
Lender, the Borrower shall pay to the Agent for the ratable benefit of the
Lenders a letter of credit fee equal to the Applicable Margin for Eurodollar
Rate Advances per annum on the face amount of such Letter of Credit for the
period such Letter of Credit is outstanding, with a minimum fee of $500. In
addition, for each Letter of Credit (other than the Existing Letters of Credit)
issued by the Issuing Lender, the Borrower shall pay to the Agent for the
benefit of the Issuing Lender a fronting fee of 0.125% per annum on the face
amount of such Letter of Credit for the stated term of such Letter of Credit,
with a minimum fee of $500 and a maximum fee of $750. The Borrower shall pay
such letter of credit fees for each Letter of Credit quarterly in arrears within
ten days after the Borrower's receipt of the invoice therefor from the Issuing
Lender.
Section 2.05. REDUCTION OF THE COMMITMENTS. The Borrower shall have the
right, upon at least three Business Days' irrevocable notice to the Agent, to
terminate in whole or reduce ratably in part the unused portion of the
Commitments; PROVIDED that each partial reduction shall be in the aggregate
amount of $5,000,000 or in integral multiples of $5,000,000 in excess thereof.
Any reduction or termination of the Commitments pursuant to this Section 2.05
shall be permanent, with no obligation of the Lenders to reinstate such
Commitments and the commitment fees provided for in Section 2.04(a) shall
thereafter be computed on the basis of the Commitments, as so reduced.
Section 2.06. REPAYMENT. The Borrower shall repay the outstanding
principal amount of each Advance on the Maturity Date; PROVIDED that, the
principal amount of any outstanding Advance may be prepaid in accordance with
the terms of Section 2.08.
Section 2.07. INTEREST. The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Lender from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
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(a BASE RATE ADVANCES. If such Advance is a Base Rate Advance, a rate per
annum equal at all times to the lesser of (i) the Adjusted Base Rate in effect
from time to time PLUS the Applicable Margin on Base Rate Advances in effect
from time to time, or (ii) the Maximum Rate, payable in arrears on the first day
of each January, April, July, and October and on the date such Base Rate Advance
shall be paid in full, PROVIDED that any amount of principal of a Base Rate
Advance which is not paid when due (whether at stated maturity, by acceleration
or otherwise) shall bear interest from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum equal
at all times to the lesser of (i) the Adjusted Base Rate in effect from time to
time PLUS the Applicable Margin on Base Rate Advances in effect from time to
time PLUS 2% or (ii) the Maximum Rate.
(b EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the lesser of (i) the Eurodollar Rate for such Interest Period PLUS
the Applicable Margin on Eurodollar Rate Advances in effect from time to time,
or (ii) the Maximum Rate, payable on the last day of such Interest Period, and,
in the case of six-month Interest Periods, on the day which occurs during such
Interest Period three months from the first day of such Interest Period;
PROVIDED that any amount of principal of a Eurodollar Rate Advance which is not
paid when due (whether at stated maturity, by acceleration or otherwise) shall
bear interest from the date on which such amount is due until such amount is
paid in full, payable on demand, at a rate per annum equal at all times to the
lesser of (i) the rate required to be paid on such Advance immediately prior to
the date on which such amount became due PLUS 2% or (ii) the Maximum Rate;
PROVIDED FURTHER that, if such overdue amount has not been paid within three
Business Days of the date due, such rate of interest under the immediately
preceding clause (i) shall be increased to the greater of (x) the Adjusted Base
Rate in effect from time to time PLUS the Applicable Margin on Base Rate
Advances in effect from time to time PLUS 2% and (y) the rate required to be
paid on such Advance immediately prior to the date on which such amount became
due PLUS 2%.
(c ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. The Borrower shall
pay to each Lender, so long as any such Lender shall be required under
regulations of the Federal Reserve Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Rate
Advance of such Lender, from the date of the Advance until such principal amount
is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (A) the Eurodollar Rate for the Interest
Period for such Advance from (B) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
of such Lender for such Interest Period, payable on each date on which interest
is payable on such Advance. Such additional interest payable to any Lender shall
be determined by such Lender and notified to the Borrower through the Agent
(such notice to include the calculation of such additional interest, which
calculation shall be conclusive in the absence of manifest error, and be
accompanied by any evidence indicating the need for such additional interest as
the Borrower may reasonably request).
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(d USURY RECAPTURE. In the event the rate of interest chargeable under
this Agreement or the Notes at any time is greater than the Maximum Rate, the
unpaid principal amount of the Notes shall bear interest at the Maximum Rate
until the total amount of interest paid or accrued on the Notes equals the
amount of interest which would have been paid or accrued on the Notes if the
stated rates of interest set forth in this Agreement had at all times been in
effect.
In the event, upon payment in full of the Notes, the total amount of
interest paid or accrued under the terms of this Agreement and the Notes is less
than the total amount of interest which would have been paid or accrued if the
rates of interest set forth in this Agreement had, at all times, been in effect,
then the Borrower shall, to the extent permitted by applicable law, pay the
Agent for the account of the Lenders an amount equal to the difference between
(i) the lesser of (A) the amount of interest which would have been charged on
the Notes if the Maximum Rate had, at all times, been in effect or (B) the
amount of interest which would have accrued on the Notes if the rates of
interest set forth in this Agreement had at all times been in effect and (ii)
the amount of interest actually paid or accrued under this Agreement on the
Notes.
In the event the Lenders ever receive, collect or apply as interest
any sum in excess of the Maximum Rate, such excess amount shall, to the extent
permitted by law, be applied to the reduction of the principal balance of the
Notes, and if no such principal is then outstanding, such excess or part thereof
remaining shall be paid to the Borrower.
Section 2.08. PREPAYMENTS.
(a RIGHT TO PREPAY. The Borrower shall have the right to prepay the
Advances in whole or in part, at any time or from time to time, subject to the
provisions of this Section 2.08. Except as provided in this Section 2.08, the
Borrower shall have no right to prepay any principal amount of any Advance.
(b OPTIONAL. The Borrower may elect to prepay any of the Advances, after
giving by 10:00 a.m. (Houston, Texas time) (i) in the case of Eurodollar Rate
Advances, at least two Business Days' or (ii) in case of Base Rate Advances,
same Business Day's prior written notice to the Agent stating the proposed date
and aggregate principal amount of such prepayment. If any such notice is given,
the Borrower shall prepay Advances comprising part of the same Borrowing in
whole or ratably in part in an aggregate principal amount equal to the amount
specified in such notice, together with accrued interest to the date of such
prepayment on the principal amount prepaid and amounts, if any, required to be
paid pursuant to Section 2.09 as a result of such prepayment being made on such
date; PROVIDED, however, that each partial prepayment shall be in an aggregate
principal amount not less than $1,000,000.
(c MANDATORY. On the date of each reduction of the aggregate Commitments
pursuant to Section 2.05, the Borrower agrees to make a prepayment in respect of
the outstanding amount of Advances to the extent, if any, that the aggregate
unpaid principal amount of all Advances, Letter of Credit Exposure, and the
Swing Line Loan exceeds the Commitments, as so reduced. Each prepayment pursuant
to this Section 2.08(c) shall be accompanied by accrued interest on the amount
prepaid to the date of such prepayment and amounts, if any, required to be paid
pursuant to Section 2.09 as a result of such prepayment being made on such date.
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(d ILLEGALITY. If any Lender shall notify the Agent and the Borrower that
the introduction of any new law or regulation or any change in or in the
interpretation of any existing law or regulation by the Governmental Authority
charged with the administration or interpretation thereof makes it unlawful, or
that any central bank or other Governmental Authority asserts that it is
unlawful, for such Lender or its Eurodollar Lending Office to perform its
obligations under this Agreement to maintain any Eurodollar Rate Advances of
such Lender then outstanding hereunder, (i) the Borrower shall, no later than
10:00 a.m. (Houston, Texas time) (A) if not prohibited by law, on the last day
of the Interest Period for each outstanding Eurodollar Rate Advance or (B) if
required by such notice, on the second Business Day following its receipt of
such notice, prepay all of the Eurodollar Rate Advances of all of the Lenders
then outstanding, together with accrued interest on the principal amount prepaid
to the date of such prepayment and amounts, if any, required to be paid pursuant
to Section 2.09 as a result of such prepayment being made on such date, (ii)
each Lender shall simultaneously make a Base Rate Advance to the Borrower on
such date in an amount equal to the aggregate principal amount of the Eurodollar
Rate Advances prepaid to such Lender, and (iii) the right of the Borrower to
select Eurodollar Rate Advances for any subsequent Borrowing shall be suspended
until the Lender which gave notice referred to above shall notify the Agent that
the circumstances causing such suspension no longer exist.
(e RATABLE PAYMENTS; EFFECT OF NOTICE. Each payment of any Advance
pursuant to this Section 2.08 or any other provision of this Agreement shall be
made in a manner such that all Advances comprising part of the same Borrowing
are paid in whole or ratably in part. All notices given pursuant to this Section
2.08 shall be irrevocable and binding upon the Borrower.
Section 2.09. BREAKAGE COSTS. If (a) any payment of principal on or any
conversion of any Eurodollar Rate Advance is made on any date other than the
last day of the Interest Period for such Eurodollar Rate Advance, whether as a
result of any voluntary or mandatory prepayment, any acceleration of maturity,
or any other cause (other than Section 2.08(d) above), (b) any payment of
principal on any Eurodollar Rate Advance is not made when due, or (c) any
Eurodollar Rate Advance is not borrowed, converted, or prepaid in accordance
with the respective notice thereof provided by the Borrower to the Agent,
whether as a result of any failure to meet any applicable conditions precedent
for borrowing, conversion, or prepayment, the permitted cancellation of any
request for borrowing, conversion, or prepayment, the failure of the Borrower to
provide the respective notice of borrowing, conversion, or prepayment, or any
other cause not specified above which is created by the Borrower, the Borrower
shall, within 10 days of any written demand sent to the Borrower through the
Agent by any Lender having made such Eurodollar Rate Advance, pay to the Agent
for the account of such Lender any amounts required to compensate such Lender
for any additional losses, reasonable out-of-pocket costs or expenses which it
may reasonably incur as a result of such payment or nonpayment, including,
without limitation, any loss (including loss of anticipated profits, other than
any loss of anticipated profits attributable solely to the Applicable Margin for
Eurodollar Rate Advances), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by any such Lender
reasonably necessary to fund or maintain such Advance.
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Section 2.10. INCREASED COSTS.
(a EURODOLLAR RATE ADVANCES. If, due to either (i) the introduction of
any new law or regulation or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any existing law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances, then the Borrower shall
from time to time, upon demand by such Lender (with a copy of such demand to the
Agent), immediately pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost and detailing the
calculation of such cost submitted to the Borrower and the Agent by such Lender
shall be conclusive and binding for all purposes, absent manifest error, and
shall be accompanied with any evidence of such increased cost as the Borrower
may reasonably request.
(b CAPITAL ADEQUACY. If any Lender (if a Bank) or the Issuing Lender (if
a Bank) determines in good faith that the introduction of any new law or
regulation or any change in or in the interpretation of any existing law or
regulation affects or would affect the amount of capital required or expected to
be maintained by such Lender or the Issuing Lender or any corporation
controlling such Lender or the Issuing Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend or the Issuing Lender's commitment to issue the Letters of Credit and
other commitments of this type, then, upon 30 days' prior written notice by such
Lender or the Issuing Lender (with a copy of any such demand to the Agent), the
Borrower shall immediately pay to the Agent for the account of such Lender or to
the Issuing Lender, as the case may be, from time to time as specified by such
Lender or the Issuing Lender, additional amounts sufficient to compensate such
Lender or the Issuing Lender, in light of such circumstances, (i) with respect
to such Lender, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend under this Agreement and (ii) with respect to the Issuing Lender, to the
extent that the Issuing Lender reasonably determines such increase in capital to
be allocable to the issuance or maintenance of the Letters of Credit. A
certificate as to such amounts and detailing the calculation of such amounts
submitted to the Borrower by such Lender or the Issuing Lender shall be
conclusive and binding for all purposes, absent manifest error, and shall be
accompanied with any evidence of the need for maintenance of such increased
capital as the Borrower may reasonably request.
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(c LETTERS OF CREDIT. With respect to any Issuing Lender which is a Bank,
if any change in any existing law or regulation or in the interpretation thereof
by any court or administrative or Governmental Authority charged with the
administration thereof shall either (i) impose, modify, or deem applicable any
reserve, special deposit, or similar requirement against letters of credit
issued by, or assets held by, or deposits in or for the account of, the Issuing
Lender or (ii) impose on the Issuing Lender any other condition regarding the
provisions of this Agreement relating to the Letters of Credit or any Letter of
Credit Obligations, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Issuing Lender of
issuing or maintaining any Letter of Credit (which increase in cost shall be
determined by the Issuing Lender's reasonable allocation of the aggregate of
such cost increases resulting from such event), then, upon demand by the Issuing
Lender, the Borrower shall pay to the Issuing Lender, from time to time as
specified by the Issuing Lender, additional amounts which shall be sufficient to
compensate the Issuing Lender for such increased cost. A certificate as to such
increased cost incurred by the Issuing Lender, as a result of any event
mentioned in clause (i) or (ii) above, and detailing the calculation of such
increased costs submitted by the Issuing Lender to the Borrower, shall be
conclusive and binding for all purposes, absent manifest error, and shall be
accompanied with any evidence of such increased cost as the Borrower may
reasonably request.
Section 2.11. PAYMENTS AND COMPUTATIONS.
(a PAYMENT PROCEDURES. The Borrower shall make each payment under this
Agreement and under the Notes not later than 10:00 a.m. (Houston, Texas time) on
the day when due in Dollars to the Agent at the location referred to in the
Notes (or such other location in the United States as the Agent shall designate
in writing to the Borrower) in same day funds without deduction, setoff, or
counterclaim of any kind (except as otherwise provided in Section 2.12(d)). The
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal, interest or fees ratably (other than amounts payable
solely to the Agent, the Issuing Lender, or a specific Lender pursuant to
Section 2.04(b), 2.04(c), 2.07(c), 2.09, 2.10, or 2.12, but after taking into
account payments effected pursuant to Section 9.04) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender or the Issuing Lender
to such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. If and to the extent
that the Agent receives any payment or prepayment from the Borrower and fails to
distribute such payment or prepayment to the Lenders ratably on the basis of
their respective Pro Rata Shares on the day the Agent receives such payment or
prepayment (if received prior to 10:00 a.m. (Houston, Texas time) on such day)
or the next Business Day (if received after 10:00 a.m. (Houston, Texas time) on
such day), then the Agent shall pay to each Lender such Lender's Pro Rata Share
of such payment or prepayment together with interest thereon at the Federal
Funds Rate for each day from the date such amount should have been distributed
by the Agent until such payment or prepayment is actually distributed to the
Lenders.
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(b COMPUTATIONS. All computations of interest based on the Base Rate
shall be made by the Agent on the basis of a year of 365 or 366 days, as the
case may be, and all computations of interest based on the Eurodollar Rate, the
Federal Funds Rate, and of fees shall be made by the Agent, on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day, but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Agent of an interest
rate shall be conclusive and binding for all purposes, absent manifest error.
(c NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
PROVIDED, however, that if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(d AGENT RELIANCE. Unless the Agent shall have received written notice
from the Borrower prior to the date on which any payment is due to the Lenders
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such date an amount equal to the amount then due such Lender. If and
to the extent the Borrower shall not have so made such payment in full to the
Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender, together with interest, for each day from the date
such amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate for such day.
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Section 2.12. TAXES.
(a NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the Borrower
shall be made, in accordance with Section 2.11, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings (except as otherwise provided in Section 2.12(d)), and
all liabilities with respect thereto, excluding, in the case of each Lender, the
Issuing Lender, and the Agent, any franchise taxes or taxes on the net income,
net worth or shareholders' capital of such Person (and taxes imposed in lieu of
any such taxes) imposed on such Person by the jurisdiction under the laws of
which it is organized or in which is located its Applicable Lending Office or
any political subdivision or taxing authority thereof or therein (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable to any
Lender, the Issuing Lender, or the Agent (i) the sum payable shall be increased
as may be necessary so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.12), such
Person receives an amount equal to the sum it would have received had no such
deductions been made; PROVIDED, however, that if the Borrower's obligation to
deduct or withhold Taxes is caused solely by such Person's failure or inability
to comply with the provisions of paragraph (d) of this Section 2.12, no such
increase shall be required; (ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and provide to
the Agent a receipt or a copy of a payment voucher from such relevant taxation
authority or other authority evidencing such payment.
(b OTHER TAXES. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Notes, or the other Credit Documents (hereinafter referred to as "Other Taxes").
(c INDEMNIFICATION. THE BORROWER INDEMNIFIES EACH LENDER, THE ISSUING
LENDER, AND THE AGENT FOR THE FULL AMOUNT OF ALL TAXES (AS DEFINED IN SECTION
2.12(A) ABOVE) AND OTHER TAXES (AS DEFINED IN SECTION 2.12(B) ABOVE) IMPOSED BY
ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.12 PAID BY SUCH LENDER,
THE ISSUING LENDER, OR THE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY
(INCLUDING INTEREST, PENALTIES AND EXPENSES (OTHER THAN INTEREST, PENALTIES AND
EXPENSES ARISING SOLELY FROM THE FAILURE OR INABILITY OF THE AGENT, THE ISSUING
LENDER, OR ANY LENDER TO PROVIDE THE FORMS DESCRIBED IN PARAGRAPH (D) OF THIS
SECTION 2.12)) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH
TAXES (AS DEFINED IN SECTION 2.12(A) ABOVE) OR OTHER TAXES (AS DEFINED IN
SECTION 2.12(B) ABOVE) WERE CORRECTLY OR LEGALLY ASSERTED. EACH PAYMENT REQUIRED
TO BE MADE BY THE BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO
THE AGENT FOR THE BENEFIT OF ANY LENDER CLAIMING SUCH INDEMNIFICATION WITHIN 30
DAYS FROM THE DATE THE BORROWER RECEIVES WRITTEN DEMAND THEREFOR FROM THE AGENT
ON BEHALF OF ITSELF AS AGENT, THE ISSUING LENDER, OR ANY SUCH LENDER. IF ANY
LENDER, THE AGENT, OR THE ISSUING LENDER RECEIVES A REFUND OR TAX CREDIT IN
RESPECT OF ANY TAXES (AS DEFINED IN SECTION 2.12(A) ABOVE) PAID BY THE BORROWER
UNDER THIS PARAGRAPH (C), SUCH LENDER, THE AGENT, OR THE ISSUING LENDER, AS THE
CASE MAY BE, SHALL PROMPTLY PAY TO THE BORROWER THE BORROWER'S SHARE OF SUCH
REFUND OR TAX CREDIT.
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(d FOREIGN LENDER WITHHOLDING EXEMPTION. Each Lender and Issuing Lender
that is not incorporated under the laws of the United States of America or a
state thereof agrees that it will deliver to the Borrower and the Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Lender is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, (ii) if applicable, an Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be, to establish an
exemption from United States backup withholding tax, and (iii) any other
governmental forms which are necessary or required under an applicable tax
treaty or otherwise by law to reduce or eliminate any withholding tax, which
have been reasonably requested by the Borrower. Each Lender which delivers to
the Borrower and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to
the next preceding sentence further undertakes to deliver to the Borrower and
the Agent two further copies of the said letter and Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms, or other manner of certification, as
the case may be, on or before the date that any such letter or form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent letter and form previously delivered by it to the Borrower and the
Agent, and such extensions or renewals thereof as may reasonably be requested by
the Borrower and the Agent certifying in the case of a Form 1001 or 4224 that
such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes. If an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any delivery required by the preceding
sentence would otherwise be required which renders all such forms inapplicable
or which would prevent any Lender from duly completing and delivering any such
letter or form with respect to it and such Lender advises the Borrower and the
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax, and in the case of a Form W-8
or W-9, establishing an exemption from United States backup withholding tax,
such Lender shall not be required to deliver such letter or forms. The Borrower
shall withhold tax at the rate and in the manner required by the laws of the
United States with respect to payments made to a Lender failing to timely
provide the requisite Internal Revenue Service forms.
Section 2.13. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) on account of the
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Advances or Letter of Credit Obligations made by it in excess of its Pro Rata
Share of payments on account of the Advances or Letter of Credit Obligations
obtained by all the Lenders, such Lender shall notify the Agent and forthwith
purchase from the other Lenders such participations in the Advances made by them
or Letter of Credit Obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
PROVIDED, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such Lender's ratable share (according to the
proportion of (a) the amount of the participation sold by such Lender to the
purchasing Lender as a result of such excess payment to (b) the total amount of
such excess payment) of such recovery, together with an amount equal to such
Lender's ratable share (according to the proportion of (a) the amount of such
Lender's required repayment to the purchasing Lender to (b) the total amount of
all such required repayments to the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.13 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
Section 2.14. LETTERS OF CREDIT.
(a ISSUANCE. From time-to-time from the date of this Agreement until the
Maturity Date, at the request of the Borrower, the Issuing Lender shall, on the
terms and conditions hereinafter set forth, issue, increase, or extend the
expiration date of Letters of Credit for the account of the Borrower on any
Business Day. No Letter of Credit will be issued, increased, or extended (i)
unless such issuance, increase, or extension would not cause (A) the Letter of
Credit Exposure to exceed the lesser of (1) $10,000,000 or (2) the aggregate
Commitments LESS the aggregate outstanding principal amount of all Advances LESS
the outstanding principal amount of the Swing Line Loan; (ii) unless such Letter
of Credit has an Expiration Date not later than the earlier of (A) 13 months
after the date of issuance thereof (or, if extendable beyond such period, unless
such Letter of Credit is cancelable upon 120 days' notice given by the Issuing
Lender to the beneficiary of such Letter of Credit) and (B) the Maturity Date;
(iii) unless such Letter of Credit is in form and substance acceptable to the
Issuing Lender in its sole discretion; (iv) unless such Letter of Credit is a
standby letter of credit not supporting the repayment of indebtedness for
borrowed money of any Person; and (v) unless the Borrower has delivered to the
Issuing Lender a completed and executed letter of credit application on the
Issuing Lender's standard form, which application for the initial Issuing Lender
is in the form of the attached Exhibit F. Notwithstanding the foregoing, if the
Agent and the Lenders permit the Expiration Date of any Letter of Credit to
extend beyond the Maturity Date, the Borrower shall either (i) deposit with the
Agent into the Cash Collateral Account on the Maturity Date an amount of cash
equal to the outstanding Letter of Credit Exposure as security for the
Obligations to the extent the Letter of Credit Obligations are not otherwise
paid at such time, or (ii) cause to be issued to the Issuing Lender, as
beneficiary, a standby letter of credit in the face amount of the Letter of
Credit Exposure, as security for the Letter of Credit Obligations, issued by a
commercial bank meeting the criteria of an Eligible Assignee, in form and
content reasonably acceptable to the Issuing Lender.
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(b PARTICIPATIONS. Upon the date of the issuance or increase of a Letter
of Credit, the Issuing Lender shall be deemed to have sold to each other Lender
and each other Lender shall have been deemed to have purchased from the Issuing
Lender a participation in the related Letter of Credit Obligations equal to such
Lender's Pro Rata Share at such date and such sale and purchase shall otherwise
be in accordance with the terms of this Agreement. The Issuing Lender shall
promptly notify each such participant Lender by telex, telephone, or telecopy of
each Letter of Credit issued or increased and the actual dollar amount of such
Lender's participation in such Letter of Credit.
(c REIMBURSEMENT. The Borrower hereby agrees to pay on demand to the
Issuing Lender for the benefit of the Lenders in respect of each Letter of
Credit, or as a Base Rate Advance as hereafter provided, an amount equal to any
draw paid by the Issuing Lender under or in respect of such Letter of Credit. In
the event the Issuing Lender makes a payment pursuant to a request for draw
presented under a Letter of Credit and such payment is not promptly reimbursed
by the Borrower upon demand, the Issuing Lender shall give notice of such
payment to the Agent and the Lenders, and each Lender shall promptly reimburse
the Issuing Lender for such Lender's Pro Rata Share of such payment, and such
reimbursement shall be deemed for all purposes of this Agreement to constitute a
Base Rate Advance to the Borrower from such Lender. If such reimbursement is not
made by any Lender to the Issuing Lender on the same day on which the Issuing
Lender shall have made payment on any such draw, such Lender shall pay interest
thereon to the Issuing Lender at a rate per annum equal to the Federal Funds
Rate. The Borrower hereby unconditionally and irrevocably authorizes, empowers,
and directs the Agent and the Lenders to record and otherwise treat such payment
under a Letter of Credit not immediately reimbursed by the Borrower as a
Borrowing comprised of Base Rate Advances to the Borrower.
(d OBLIGATIONS UNCONDITIONAL. The obligations of the Borrower under this
Agreement in respect of each Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit
Documents;
(ii) any amendment or waiver of, or any consent to departure from,
any Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against any beneficiary or
transferee of such Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Lender or
any other person or entity, whether in connection with this Agreement, the
transactions contemplated in this Agreement or in any Letter of Credit
Documents or any unrelated transaction;
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(iv) any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
to the extent the Issuing Lender would not be liable therefor pursuant to
the following paragraph (e);
(v) payment by the Issuing Lender under such Letter of Credit
against presentment of a draft or certificate which does not comply with
the terms of such Letter of Credit (unless such failure to comply is
evident on the face of such draft or certificate and such payment would
constitute gross negligence or willful misconduct by the Issuing Lender);
or
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;
PROVIDED, HOWEVER, that nothing contained in this paragraph (d) shall be deemed
to constitute a waiver of any remedies of the Borrower against the Issuing
Lender in connection with the Letters of Credit.
(e LIABILITY OF ISSUING LENDER. Except as otherwise provided herein, the
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letter of
Credit. Neither the Issuing Lender nor any of its officers or directors shall be
liable or responsible for:
(i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
(ii) the validity, sufficiency or genuineness of documents, or of
any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by the Issuing Lender against presentment of documents
which do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to
the relevant Letter of Credit (unless such failure to comply is evident on
the face of the draft or certificate and such payment would constitute
negligence or willful misconduct by the Issuing Lender); or
(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (including the Issuing Lender's own
negligence).
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EXCEPT that the Borrower shall have a claim against the Issuing Lender, and the
Issuing Lender shall be liable to the Borrower, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by (A) the Issuing Lender's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit or (B) the Issuing Lender's
willful failure to make lawful payment under any Letter of Credit after the
presentment to it of a draft and certificate strictly complying with the terms
and conditions of such Letter of Credit.
In furtherance and not in limitation of the foregoing, the Issuing Lender may
accept documents that appear on their face to comply with the terms of the
applicable Letter of Credit, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(f EXISTING LETTERS OF CREDIT. Upon the effectiveness of this Agreement,
all participations in Existing Letters of Credit shall be reallocated among the
Lenders such that the Issuing Lender for the Existing Letters of Credit shall be
deemed to have sold to each other Lender and each other Lender shall be deemed
to have purchased from such Issuing Lender such Lender's Pro Rata Share
participation in each such Existing Letter of Credit. The Agent shall ratably
distribute to the Lenders the fees payable with respect to such Existing Letters
of Credit which accrue on or after the date of this Agreement.
Section 2.15. NOTICE OF INCREASED COSTS; LENDER REPLACEMENT. Each Lender
seeking compensation pursuant to Sections 2.07(c), 2.08(d), 2.10(a), 2.10(b),
2.10(c) or 2.12 shall deliver the notices required by such Sections as promptly
as practicable, and in any event within 90 days after it becomes aware thereof
and determines to request compensation provided that, except as set forth in the
immediately succeeding sentence of this Section 2.15, the failure on the part of
any Lender to demand compensation under such Sections shall not constitute a
waiver of such Lender's rights under such Sections. Notwithstanding the
provisions of Sections 2.07(c), 2.08(d), 2.10(a), 2.10(b), 2.10(c) or 2.12 of
this Agreement and the other provisions of this Section 2.15, the Borrower shall
have no obligation to pay to any Lender (including the Issuing Lender and the
Agent) any compensation described in such Sections to the extent any such
compensation relates to any period which is more than 90 days prior to the date
such Lender delivers to the Borrower the notice or notices required by any such
Section or Sections, unless reasonably promptly following the date such Lender
became aware of the event or occurrence which results in such Lender's right to
receive such compensation under such Section or Sections of this Agreement such
Lender gave written notice thereof to the Borrower. To the extent requested by
Borrower and not inconsistent with the Lender requesting compensation, such
Lender shall use reasonable efforts and take such actions as are reasonably
appropriate if as a result thereof the additional moneys which would otherwise
be required to be paid to such Lender pursuant to such Sections would be
materially reduced, or the illegality or other adverse circumstances which would
otherwise require a Conversion would cease to exist, and in each case if, as
determined by such Lender in its sole discretion, the taking of such actions
would not have any cost to such Lender and would not adversely affect the
Advances made by such Lender. In the event any Lender shall give any notice to
the Borrower or the Agent pursuant
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to Sections 2.01(b), 2.07(c), 2.08(d), 2.10(a), 2.10(b), 2.10(c) or 2.12, the
Borrower may give notice to such Lender (with a copy to the Agent) that it
wishes to seek one or more Eligible Assignees (which may be one or more of the
Lenders) to assume the Commitment of such Lender and to purchase its Pro Rata
Share of the Obligations and its Note. Each Lender delivering a notice pursuant
to the foregoing Sections agrees to sell, without recourse, its Commitment, and
its Pro Rata Share of the Obligations and its Note to any such Eligible Assignee
for an amount equal to the sum of the outstanding principal amount of and
accrued interest on the Advances owing to such Lender plus all fees and other
amounts owing to such Lender under the Credit Documents (including, without
limitation, any compensation owing to such Lender pursuant to the foregoing
Sections) until the date such Commitment, Note and amounts are purchased,
whereupon such Lender shall have no further Commitment or other obligation to
the Borrower under this Agreement or any other Credit Document and such Eligible
Assignee shall thereupon be substituted in its place as a "Lender" hereunder.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. CONDITIONS PRECEDENT TO INITIAL BORROWINGS AND ISSUANCE OF
LETTERS OF CREDIT. The obligation of each Lender to make its initial Advance as
part of the initial Borrowing and of the Issuing Lender to issue the initial
Letters of Credit is subject to the conditions precedent that:
(a) DOCUMENTATION. On or before the day on which the initial Borrowing is
made or the initial Letters of Credit are issued, the Agent shall have received
the following, duly executed by all the parties thereto, in form and substance
satisfactory to the Agent and the Lenders, and (except for the Notes and unless
otherwise indicated) in sufficient copies for each Lender:
(i) this Agreement and all attached Exhibits and Schedules, and the
Notes payable to the order of each of the Lenders, respectively;
(ii) a Guaranty executed by each of the Borrower's Subsidiaries;
(iii) the Swing Line Note payable to the order of the Swing Line
Lender;
(iv) the letter agreement regarding fees dated as of September 9,
1997, between the Borrower and the Agent (such letter agreement to be
delivered only to the Agent);
(v) (A) certified copies of (I) the resolutions of the Board of
Directors of the Borrower and each of its Subsidiaries approving this
Agreement, the Notes and the other Credit Documents, (II) the articles or
certificate of incorporation and bylaws of the Borrower and each of its
Subsidiaries, and (III) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement,
the Notes and the other Credit Documents, and (B) certificates of good
standing, existence and authority for the Borrower (one copy only);
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(vi) a certificate of the Secretary or an Assistant Secretary of the
Borrower and each of its Subsidiaries dated as of the date of this
Agreement certifying the names and true signatures of those officers of
the Borrower and each of its Subsidiaries who are authorized to sign this
Agreement, the Notes, Notices of Borrowing, Notices of Conversion or
Continuation and the other Credit Documents (one copy only); and
(vii) a favorable opinion of Snell & Smith, A Professional
Corporation, counsel to the Borrower and its Subsidiaries, dated as of the
date of this Agreement and substantially in the form of the attached
Exhibit G.
(b) NO MATERIAL ADVERSE CHANGE. No event or events which, individually or
in the aggregate has had or is reasonably likely to cause a Material Adverse
Change, shall have occurred.
(c) PAYMENT OF FEES. On the date of this Agreement, the Borrower shall
have paid the fees required by paragraph (b) of Section 2.04 which are payable
as of such date and all costs and expenses which have been invoiced and are
payable pursuant to Section 9.04.
(d) NO DEFAULT. No Default shall have occurred and be continuing or would
result from such Borrowing or from the application of the proceeds therefrom or
from the issuance, increase or extension of such Letters of Credit.
(e) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Article IV hereof and in the Guaranty shall be true and correct in
all material respects on and as of the date of this Agreement and before and
after giving effect to the initial Borrowing and to the application of the
proceeds from such Borrowing or to the issuance, increase or extension of the
initial Letters of Credit, as though made on and as of such date.
(f) NO MATERIAL LITIGATION. No legal or regulatory action or proceeding
shall have commenced and then be continuing against the Borrower or any of its
Subsidiaries since the date of this Agreement which could reasonably be expected
to cause a Material Adverse Change.
Section 3.02. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation of
each Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing) and of the Issuing Lender to issue, increase, or extend any
Letter of Credit shall be subject to the further conditions precedent that on
the date of such Borrowing or the issuance, increase, or extension of such
Letter of Credit:
(a) the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing and the acceptance by the Borrower of the
proceeds of such Borrowing or the issuance,
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increase, or extension of such Letter of Credit shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
or the issuance, increase, or extension of such Letter of Credit such statements
are true):
(i) the representations and warranties contained in Article IV and
in the Guaranty are correct in all material respects on and as of the date
of such Borrowing or the issuance, increase, or extension of such Letter
of Credit, before and after giving effect to such Borrowing or to the
issuance, increase, or extension of such Letter of Credit and to the
application of the proceeds from such Borrowing, as though made on and as
of such date, except for such representations and warranties which, by
their nature, are made as of a specific date, which shall continue to be
correct in all material respects as of such specific date; and
(ii) no Default has occurred and is continuing or would result from
such Borrowing or from the application of the proceeds therefrom or from
the issuance, increase or extension of such Letter of Credit; and
(b) the Agent shall have received such other approvals or documents deemed
necessary by any Lender as a result of circumstances beyond the control of such
Lender occurring after the date of this Agreement, as any Lender through the
Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 4.01. CORPORATE EXISTENCE; SUBSIDIARIES. The Borrower is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware and in good standing and qualified to do business in each
jurisdiction where its ownership or lease of property or conduct of its business
requires such qualification and where a failure to be qualified could reasonably
be expected to cause a Material Adverse Change. Each Subsidiary of the Borrower
is a corporation duly organized, validly existing, and in good standing under
the laws of its jurisdiction of incorporation and in good standing and qualified
to do business in each jurisdiction where its ownership or lease of property or
conduct of its business requires such qualification and where a failure to be
qualified could reasonably be expected to cause a Material Adverse Change. The
Borrower has no Subsidiaries on the date of this Agreement other than the
Subsidiaries listed on the attached Schedule 4.01, and Schedule 4.01 lists the
jurisdiction of incorporation and the address of the principal office of each
such Subsidiary existing on the date of this Agreement.
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Section 4.02. CORPORATE POWER. The execution, delivery, and performance by
the Borrower of this Agreement, the Notes, and the other Credit Documents to
which it is a party, and by the Subsidiaries of the Borrower of the Guaranty and
the consummation of the transactions contemplated hereby and thereby (a) are
within the Borrower's and its Subsidiaries' respective corporate powers, (b)
have been duly authorized by all necessary corporate action required on their
part, (c) do not contravene (i) th Borrower's or its Subsidiaries' certificate
or articles, as the case may be, of incorporation or by-laws or (ii) any law or
any contractual restriction binding on or affecting the Borrower or its
Subsidiaries, and (d) will not result in or require the creation or imposition
of any Lien prohibited by this Agreement. At the time of each Borrowing, such
Borrowing and the use of the proceeds of such Borrowing will be within the
Borrower's corporate powers, will have been duly authorized by all necessary
corporate action, (a) will not contravene (i) the Borrower's certificate of
incorporation or by-laws or (ii) any law or any contractual restriction binding
on or affecting the Borrower and (b) will not result in or require the creation
or imposition of any Lien prohibited by this Agreement.
Section 4.03. AUTHORIZATION AND APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by the Borrower of this
Agreement, the Notes, or the other Credit Documents to which the Borrower is a
party or by each of Subsidiaries of the Borrower of its Guaranty or the
consummation of the transactions contemplated thereby. At the time of each
Borrowing, no further authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority will be required for such
Borrowing or the use of the proceeds of such Borrowing.
Section 4.04. ENFORCEABLE OBLIGATIONS. This Agreement, the Notes, and the
other Credit Documents to which the Borrower is a party have been duly executed
and delivered by the Borrower and the Guaranty has been duly executed and
delivered by the Subsidiaries of the Borrower. Each Credit Document is the
legal, valid, and binding obligation of the Borrower and each of its
Subsidiaries which is a party to it, enforceable against the Borrower and each
of its Subsidiaries in accordance with its terms, except as such enforceability
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium, or similar law affecting creditors' rights generally and by general
principles of equity.
Section 4.05. HISTORICAL FINANCIAL STATEMENTS. The Historical Financial
Statements, copies of which have been furnished to each Lender, fairly present,
in all material respects (a) the consolidated financial condition of the
Borrower and its Subsidiaries at December 31, 1995 and 1996 and June 30, 1997,
and (b) the consolidated results of their operations, changes in stockholders'
equity, and their cash flows for the periods covered thereby, in each case in
conformity with GAAP (subject, in the case of the financial statements at, and
for the six-month period ended June 30, 1997, to normal year-end adjustments and
the absence of footnotes). Since June 30, 1997, no Material Adverse Change has
occurred.
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Section 4.06. TRUE AND COMPLETE DISCLOSURE. All factual information
(excluding projections, estimates and pro forma financial information)
heretofore or contemporaneously furnished by the Borrower or any of its
Subsidiaries in writing to the Agent for purposes of or in connection with this
Agreement, any other Credit Document or any transaction contemplated hereby or
thereby is (taken as a whole) true and accurate in all material respects on the
date as of which such information is dated or certified and does not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein not misleading as of the date of this
Agreement. All projections, estimates, and pro forma financial information
furnished by the Borrower were prepared on the basis of assumptions, data,
information, tests, or conditions believed to be reasonable at the time such
projections, estimates, and pro forma financial information were furnished.
Section 4.07. LITIGATION. There is no pending or, to the Knowledge of the
Borrower, threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any court, Governmental Agency or arbitrator, which could
reasonably be expected to cause a Material Adverse Change or which purports to
affect the legality, validity, binding effect or enforceability of this
Agreement, any Note, or any other Credit Document.
Section 4.08. USE OF PROCEEDS. The proceeds of Advances and the Letters of
Credit will be used by the Borrower for general corporate purposes including,
but not limited to, Acquisitions. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U). No proceeds of any Advance will be used to
purchase or carry any margin stock in violation of Regulation G, T, U or X.
Section 4.09. INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of its Subsidiaries is a "holding company", or a "Subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "Subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 4.11. TAXES. Proper and accurate (in all material respects)
federal, state, local and foreign tax returns, reports and statements required
to be filed (after giving effect to any extension granted in the time for
filing) by the Borrower, its Subsidiaries or any member of the Controlled Group
(hereafter collectively called the "Tax Group") have been filed with the
appropriate governmental agencies in all jurisdictions in which such returns,
reports and statements are required to be filed and where the failure to file
would cause a Material Adverse Change, and all taxes (which are material in
amount) and other impositions due and payable have been timely paid prior to the
date on which any fine, penalty, interest, late charge or loss may be added
thereto for non-payment thereof except where contested in good faith and by
appropriate proceedings. Neither the Borrower
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nor any member of the Tax Group has given, or been requested to give, a waiver
of the statute of limitations relating to the payment of any federal, state,
local or foreign taxes or other impositions. Proper and accurate amounts have
been withheld by the Borrower and all other members of the Tax Group from their
employees for all periods to comply in all material respects with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law. Timely payment of all material sales and use taxes
required by applicable law have been made by the Borrower and all other members
of the Tax Group. The amounts shown on all tax returns to be due and payable
have been paid in full or adequate provision therefor is included on the books
of the appropriate member of the Tax Group.
Section 4.12. PENSION PLANS. All Plans are in compliance in all material
respects with all applicable provisions of ERISA. No Termination Event has
occurred with respect to any Plan, and each Plan has complied with and been
administered in all material respects with applicable provisions of ERISA and
the Code. No "accumulated funding deficiency" (as defined in Section 302 of
ERISA) has occurred and there has been no excise tax imposed under Section 4971
of the Code. Neither the Borrower nor any of its Subsidiaries has any
Multiemployer Plans. The present value of all benefits vested under each Plan
(based on the assumptions used to fund such Plan) did not, as of the last annual
valuation date applicable thereto, exceed the value of the assets of such Plan
allocable to such vested benefits. Based upon GAAP existing as of the date of
this Agreement and current factual circumstances, the Borrower has no reason to
believe that the annual cost during the term of this Agreement to the Borrower
or any member of the Controlled Group for post-retirement benefits to be
provided to the current and former employees of the Borrower or any member of
the Controlled Group under Plans that are welfare benefit plans (as defined in
Section 3(a) of ERISA) could, in the aggregate, reasonably be expected to cause
a Material Adverse Change.
Section 4.13. CONDITION OF PROPERTY; CASUALTIES. The material Properties
used or to be used in the continuing operations of the Borrower and each of its
Subsidiaries are in the condition required to adequately service the function
for which such Properties are used. Since June 30, 1997, neither the business
nor the material Properties of the Borrower and each of its Subsidiaries, taken
as a whole, has been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by a Governmental Authority, riot, activities
of armed forces or acts of God or of any public enemy.
Section 4.14. INSURANCE. The Borrower and each of its Subsidiaries carry
insurance with reputable insurers in respect of such of their respective
Properties, in such amounts and against such risks as is customarily maintained
by other Persons of similar size engaged in similar businesses.
Section 4.15. NO BURDENSOME RESTRICTIONS; NO DEFAULTS. Neither the
Borrower nor any of its Subsidiaries is a party to any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction or provision of applicable law or governmental
regulation which could reasonably be expected to cause a Material Adverse
Change.
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Neither the Borrower nor any of its Subsidiaries is in default or has received a
notice of default under or with respect to any contract, agreement, lease or
other instrument to which the Borrower or any of its Subsidiaries is a party and
which could reasonably be expected to cause a Material Adverse Change. No
Default has occurred and is continuing.
Section 4.16. ENVIRONMENTAL CONDITION.
(a) PERMITS, ETC. The Borrower and its Subsidiaries (i) have obtained all
Environmental Permits required by Governmental Authorities necessary for the
ownership and operation of their respective Properties and the conduct of their
respective businesses; (ii) to the Borrower's Knowledge, have been and are in
compliance with all terms and conditions of such Environmental Permits, if any,
and with all other material requirements of applicable Environmental Laws; (iii)
have not received notice of any violation or alleged violation of any
Environmental Law or Environmental Permit; and (iv) are not subject to any
actual or contingent Environmental Claim.
(b) CERTAIN LIABILITIES. Except as set forth on Schedule 4.16(b), to the
Borrower's Knowledge, none of the present or previously owned or operated
Properties of the Borrower or of any of its present or former Subsidiaries,
wherever located, (i) has been placed on or proposed to be placed on the
National Priorities List, the Comprehensive Environmental Response Compensation
Liability Information System list, or their state or local analogs, or have been
otherwise investigated, designated, listed, or identified as a potential site
for removal, remediation, cleanup, closure, restoration, reclamation, or other
response activity under any Environmental Laws; (ii) is subject to a Lien,
arising under or in connection with any Environmental Laws, that attaches to any
revenues or to any Property owned or operated by the Borrower or any of its
Subsidiaries, wherever located, which could reasonably be expected to have a
Material Adverse Change; or (iii) has been the site of any Release of Hazardous
Substances or Hazardous Wastes from present or past operations which has caused
at the site or at any third party site any condition that has resulted in or
could reasonably be expected to result in the need for Response that would cause
a Material Adverse Change.
(c) CERTAIN ACTIONS. Without limiting the foregoing, (i) all necessary
notices have been properly filed, and no further action is required under
current Environmental Law as to each Response or other restoration or remedial
project taken by the Borrower, or its present or former Subsidiaries on any of
their presently or formerly owned or operated Properties and (ii) the present
and, to the Borrower's Knowledge, future liability, if any, of the Borrower and
its Subsidiaries which could reasonably be expected to arise in connection with
requirements under Environmental Laws will not result in a Material Adverse
Change.
Section 4.17. PERMITS, LICENSES, ETC. The Borrower and its Subsidiaries
possess all permits, licenses, patents, patent rights or licenses, trademarks,
trademark rights, trade names rights and copyrights which are necessary and
material to the conduct of their businesses. To the Borrower's Knowledge, the
Borrower and its Subsidiaries manage and operate their business in all material
respects in accordance with all applicable Legal Requirements and standard
industry practices.
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Section 4.18. FUNDED DEBT; LIENS. As of the date hereof, neither Borrower
nor any of its Subsidiaries is subject to any Funded Debt, except for (a) Funded
Debt disclosed on the Borrower's consolidated balance sheet at June 30, 1997,
included within the Historical Financial Statements, (b) Funded Debt incurred
under the Existing Credit Agreement since the date of such balance sheet, and
(c) obligations under agreements not to compete. As of the date hereof, none of
the respective assets or Properties of the Borrower or any of its Subsidiaries
is subject to any Liens, other than those which would constitute Permitted Liens
under Section 6.01.
Section 4.19. DIRECT BENEFIT FROM BORROWINGS. The Borrower and each of its
Subsidiaries has received, or, upon the execution and funding thereof, will
receive (i) direct benefit from the making and execution of this Agreement and
the other Credit Documents to which each of them is a party, and (ii) fair and
independent consideration for the entry into, and performance of, this Agreement
and the other Credit Documents to which each of them is a party.
Section 4.20. CHIEF EXECUTIVE OFFICE. As of the date of this Agreement,
the chief executive office of the Borrower is the address set forth in SECTION
9.02 hereof.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have
any Commitment hereunder, the Borrower agrees, unless the Majority Lenders shall
otherwise consent in writing, to comply with the following covenants.
Section 5.01. COMPLIANCE WITH LAWS, ETC. The Borrower will comply, and
cause each of its Subsidiaries to comply, in all material respects with all
Legal Requirements. Without limiting the generality and coverage of the
foregoing, the Borrower shall comply, and shall cause each of its Subsidiaries
to comply, in all material respects, with all Environmental Laws and all laws,
regulations, or directives with respect to equal employment opportunity and
employee safety in all jurisdictions in which the Borrower, or any of its
Subsidiaries do business; PROVIDED, however, that this Section 5.01 shall not
prevent the Borrower, or any of its Subsidiaries from, in good faith and with
reasonable diligence, contesting the validity or application of any such laws or
regulations by appropriate legal proceedings.
Section 5.02. MAINTENANCE OF INSURANCE. The Borrower will maintain, and
cause each of its Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower or any
such Subsidiary operates.
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Section 5.03. PRESERVATION OF CORPORATE EXISTENCE, ETC. The Borrower will
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified, and cause
each such Subsidiary to qualify and remain qualified, as a foreign corporation
in each jurisdiction in which qualification is necessary or desirable in view of
its business and operations or the ownership of its properties, and, in each
case, where failure to qualify or preserve and maintain its rights and
franchises could reasonably be expected to cause a Material Adverse Change;
PROVIDED, HOWEVER, that nothing herein contained shall prevent (i) any
transaction permitted by Section 6.04, or (ii) the dissolution, liquidation or
termination of existence of any Subsidiary of Borrower, provided that all of the
Property of any such Subsidiary is transferred to Borrower or another Subsidiary
of Borrower.
Section 5.04. PAYMENT OF TAXES, ETC. The Borrower will pay and discharge,
and cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or Property that are material in
amount prior to the date on which penalties attach thereto and (b) all lawful
claims that are material in amount which, if unpaid, might by law become a Lien
upon its Property; PROVIDED, HOWEVER, that neither the Borrower nor any such
Subsidiary shall be required to pay or discharge any such tax, assessment,
charge, levy, or claim which is being contested in good faith and by appropriate
proceedings, and with respect to which reserves in conformity with GAAP have
been provided.
Section 5.05. VISITATION RIGHTS. At any reasonable time and from
time-to-time, upon reasonable notice, the Borrower will, and will cause its
Subsidiaries to, permit the Agent and any Lender or any of its agents or
representatives thereof, to (a) examine and make copies of and abstracts from
the records and books of account of, and visit and inspect at its reasonable
discretion the properties of, the Borrower and any such Subsidiary, and (b)
discuss the affairs, finances and accounts of the Borrower and any such
Subsidiary with any of their respective officers or directors. The Borrower
shall pay all reasonable expenses in connection with such visits and
inspections; PROVIDED, HOWEVER, that, the Borrower shall not be obligated to pay
travel and hotel expenses incurred by representatives of the Agent or any Lender
in connection with inspections or visits made before the occurrence of an Event
of Default.
Section 5.06. REPORTING REQUIREMENTS. The Borrower will furnish to the
Agent and each Lender:
(a) DEFAULTS. As soon as possible and in any event within 5 days after the
occurrence of each Default known to a Responsible Officer of the Borrower which
is continuing on the date of such statement, a written statement of a Financial
Officer of the Borrower setting forth the details of such Default and the
actions which the Borrower has taken and proposes to take with respect thereto;
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(b) OTHER DEFAULTS. As soon as possible and in any event within 15 days
after the occurrence of each material default known to a Responsible Officer of
the Borrower which is continuing on the date of such statement, a written
statement of a Financial Officer of the Borrower setting forth the details of
any material default under or with respect to any contract, agreement, lease or
other instrument to which the Borrower or any of its Subsidiaries is a party and
which requires the payment by the Borrower or any of its Subsidiaries of an
aggregate amount equal to or exceeding $1,000,000 and the actions which the
Borrower has taken and proposes to take with respect thereto;
(c) QUARTERLY FINANCIALS. As soon as available and in any event not later
than 45 days after the end of each of the fiscal quarters of the Borrower, the
consolidated balance sheets of Borrower and its Subsidiaries as of the end of
such quarter and the consolidated statements of income, retained earnings and
cash flows of the Borrower and its Subsidiaries for the period commencing at the
end of the previous year and ending with the end of such quarter, all in
reasonable detail and duly certified with respect to such consolidated
statements (subject to year-end audit adjustments and the absence of footnotes)
by a Financial Officer of the Borrower on behalf of the Borrower as having been
prepared in accordance with GAAP, together with a Compliance Certificate
executed by a Financial Officer of the Borrower;
(d) ANNUAL FINANCIALS. As soon as available and in any event not later
than 90 days after the end of each fiscal year of the Borrower, a copy of the
annual audit report for such year for the Borrower and its Subsidiaries,
including therein consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and consolidated statements of
income, retained earnings and cash flows of the Borrower and its Subsidiaries
for such fiscal year, in each case certified by Arthur Andersen LLP or other
independent certified public accountants of recognized standing reasonably
acceptable to the Agent, together with (i) an unqualified opinion and a
certificate of such accounting firm to the Lenders stating that, in the course
of the regular audit of the business of the Borrower and its Subsidiaries, which
audit was conducted by such accounting firm in accordance with generally
accepted auditing standards, such accounting firm has obtained no knowledge that
a Default has occurred and is continuing, or if, in the opinion of such
accounting firm, a Default has occurred and is continuing, a statement as to the
nature thereof, (ii) a Compliance Certificate executed by a Financial Officer of
the Borrower, and (iii) a listing of all Subsidiaries of the Borrower as of the
date of such annual audit report, certified by a Responsible Officer of the
Borrower;
(e) SECURITIES LAW FILINGS. Promptly and in any event within 15 days after
the sending or filing thereof, copies of all proxy material, reports and other
information which the Borrower sends to its stockholders generally;
(f) TERMINATION EVENTS. As soon as possible and in any event (i) within 30
days after the Borrower or any member of the Controlled Group knows or has
reason to know that any Termination Event described in clause (a) of the
definition of Termination Event with respect to any Plan has occurred, and (ii)
within 10 days after the Borrower or any of its Affiliates knows or has reason
to know that any other Termination Event with respect to any Plan has occurred,
a statement of the Chief Financial Officer of the Borrower describing such
Termination Event and the action, if any, which the Borrower or such Affiliate
proposes to take with respect thereto;
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(g) TERMINATION OF PLANS. Promptly and in any event within 5 Business Days
after receipt thereof by the Borrower or any member of the Controlled Group from
the PBGC, copies of each notice received by the Borrower or any such member of
the Controlled Group of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(h) OTHER ERISA NOTICES. Promptly and in any event within 5 Business Days
after receipt thereof by the Borrower or any member of the Controlled Group from
a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or
any member of the Controlled Group concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA;
(i) ENVIRONMENTAL NOTICES. A copy of any form of written notice, summons
or citation, promptly upon the receipt thereof by the Borrower or any of its
Subsidiaries, if received from the Environmental Protection Agency or any other
Governmental Authority or, upon a Responsible Officer having Knowledge of the
receipt thereof by the Borrower or any of its Subsidiaries, if received from any
other Person, concerning (i) violations or alleged violations of Environmental
Laws, which seeks to impose any liability therefor, (ii) any action or omission
on the part of the Borrower or any of its present or former Subsidiaries in
connection with Hazardous Waste or Hazardous Substances which could reasonably
result in the imposition of any liability therefor, including without limitation
any notice of potential responsibility under CERCLA, or (iii) concerning the
filing of a Lien upon, against or in connection with the Borrower, its present
or former Subsidiaries, or any of their leased or owned Property, wherever
located;
(j) OTHER GOVERNMENTAL NOTICES. Promptly and in any event within 5
Business Days after receipt thereof by the Borrower or any Subsidiary, a copy of
any notice, summons, citation, or proceeding seeking to modify in any material
respect, revoke, or suspend any material contract, license, or Agreement with
any Governmental Authority;
(k) MATERIAL CHANGES. Prompt written notice of any condition or event of
which the Borrower has Knowledge, which condition or event has resulted or may
reasonably be expected to result in (i) a Material Adverse Change or (ii) a
breach of or noncompliance with any material term, condition, or covenant of any
contract to which the Borrower or any of its Subsidiaries is a party or by which
they or their properties may be bound and which is material to the business of
the Borrower and its Subsidiaries, taken as a whole;
(l) PENDING OR THREATENED LITIGATION. Prompt written notice of any pending
or, to the Knowledge of the Borrower, threatened action or proceeding affecting
the Borrower or any of its Subsidiaries before any court, Governmental Agency or
arbitrator, if the amount asserted in such action or proceeding against the
Borrower or any of its Subsidiaries equals or exceeds $1,000,000,
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or if no amount is asserted, the Borrower reasonably believes, after any
consultation with its attorneys or other advisors, as the Borrower deems
appropriate, to involve an amount against the Borrower or any of its
Subsidiaries equal to or exceeding $1,000,000 and, contemporaneously with the
delivery by the Borrower of its financial statements pursuant to Section 5.06(d)
for a fiscal year of the Borrower, a list of each pending or, to the Knowledge
of the Borrower, threatened action or proceeding affecting the Borrower or any
of its Subsidiaries before any court, Governmental Agency or arbitrator as of
December 31 of such fiscal year, if the amounts asserted in such action or
proceeding exceeds $100,000 or, if no amount is asserted, the Borrower
reasonably believes, after consultation with its attorneys or other advisors, as
the Borrower deems appropriate, to involve an amount against the Borrower or any
of its Subsidiaries in excess of $100,000;
(m) DISPUTES, ETC. Prompt written notice of any claims, proceedings, or
disputes, or to the Knowledge of the Borrower threatened, or affecting the
Borrower, or any of its Subsidiaries which could reasonably be expected to cause
a Material Adverse Change, or any material labor controversy of which the
Borrower has Knowledge resulting in or reasonably considered to be likely to
result in a general labor strike against the Borrower or any of its
Subsidiaries; and
(n) QUALIFIED PREFERRED STOCKHOLDERS. Promptly following each issuance of
Qualified Preferred Stock, a list of the names, addresses, fax numbers (if
available) and number of shares of Qualified Preferred Stock acquired by each
Person in such issuance.
(o) OTHER INFORMATION. Such other information respecting the business or
Properties, or the condition or operations, financial or otherwise, of the
Borrower, or any of its Subsidiaries, as any Lender through the Agent may from
time-to-time reasonably request.
Section 5.07. MAINTENANCE OF PROPERTY. Borrower shall, and shall cause
each of its Subsidiaries to, maintain their owned, leased, or operated Property,
equipment, buildings and fixtures necessary for the operation of their business
in good condition (ordinary wear and tear excepted) and shall make all repairs
necessary to maintain such condition; and shall abstain, and cause each of its
Subsidiaries to abstain from and not knowingly or willfully permit the
commission of waste or other injury, destruction or loss of natural resources,
or the occurrence of pollution, contamination or any other condition in, on or
about the owned or operated Property involving the Environment that could
reasonably be expected to result in Response activities, the costs of which
would substantially exceed the accrual established by Borrower or by any of its
Subsidiaries for those purposes.
Section 5.08. NEW SUBSIDIARIES. Upon Borrower's formation or acquisition
of any new Subsidiary, the Borrower shall cause such Subsidiary to promptly
execute and deliver to the Agent a Joinder Agreement with such modifications
thereto as the Agent may reasonably request for the purpose of joining such
Subsidiary as a party to the Guaranty. In connection therewith, the Borrower
shall provide, contemporaneously with the delivery of its financial statements
pursuant to Section 5.06(c), corporate documentation and, if requested by the
Agent, opinion letters reasonably
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satisfactory to the Agent reflecting the corporate status of such Subsidiary and
the enforceability of such Joinder Agreement; PROVIDED, that upon the Agent's
written request, the Borrower shall promptly provide such corporate
documentation with respect to any previously formed or acquired Subsidiary for
which such items have not previously been provided, and shall thereafter provide
such corporate documentation contemporaneously with the execution and delivery
of each Joinder Agreement in connection with any subsequent formation or
acquisition of any new Subsidiary.
Section 5.09. MAINTENANCE OF TRUST RESERVES AND TRUST ACCOUNTS. The
Borrower shall set aside, and shall cause its Subsidiaries to set aside, where
appropriate, in the appropriate Trust Accounts, all applicable Trust Reserves at
the time such funds are received by the Borrower or any of its Subsidiaries, and
Borrower shall, and shall cause its Subsidiaries to, establish and maintain all
of the funding obligations of each of the Trust Accounts in accordance with
applicable Legal Requirements and the provisions set forth herein and in the
other Credit Documents.
Section 5.10. MAINTENANCE OF TRUST BALANCE. Borrower shall comply, and
shall cause its Subsidiaries to comply, with all merchandise, perpetual care and
other trusting requirements imposed on the Borrower or any of its Subsidiaries
by any and all applicable states having jurisdiction thereof, as in effect on
the date hereof ("EXISTING TRUSTING LAWS"). If, however, the monetary trusting
provisions of the laws of the applicable state are amended during the term of
this Agreement ("AMENDED TRUSTING LAWS"), the Borrower agrees that it will trust
or cause to be trusted, and will cause its Subsidiaries to trust or cause to be
trusted, in accordance with the provisions of Existing Trusting Laws or the
Amended Trusting Laws, whichever requires the Borrower or any such Subsidiary to
place greater amounts in trust, unless otherwise agreed to by the Majority
Lenders.
Section 5.11. HAZARDOUS SUBSTANCES. (a) The Borrower shall keep and
maintain, and shall cause its Subsidiaries to keep and maintain, the Properties
owned or leased by them in compliance in all material respects with, and shall
not cause or permit any of the Properties owned or leased by them to be in
violation of, any Environmental Law on, under or about their Properties,
including but not limited to soil and ground water conditions. Neither the
Borrower nor any of its Subsidiaries shall, except in compliance in all material
respects with Environmental Law, use, generate, manufacture, store or dispose
of, on, under or about its properties or transport to or from their properties
any Hazardous Substances.
(b) The Borrower shall remove, and shall cause its Subsidiaries to remove
any Hazardous Substances from any of their Properties in accordance with
applicable Legal Requirements (or if removal is prohibited by law, to take
whatever action is required by applicable Requirements) within 60 days after
discovery or generation thereof, at the sole expense of the Borrower and its
Subsidiaries. The Borrower will establish and implement, and will cause its
Subsidiaries to establish and implement, such procedures as may be necessary to
determine and assure that all of their Properties and operations thereof and
thereon are in material compliance with Environmental Law. The Borrower will
promptly notify the Agent and each Lender in writing of any existing, pending or
threatened action, investigation or inquiry by any governmental authority in
connection with any Environmental Law.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit remain outstanding, or any Lender shall have any
Commitment, the Borrower agrees, unless the Majority Lenders otherwise consent
in writing, to comply with the following covenants.
Section 6.01. LIENS, ETC. The Borrower will not create, assume, incur or
suffer to exist, or permit any of its Subsidiaries to create, assume, incur, or
suffer to exist, any Lien on or in respect of any of its Property whether now
owned or hereafter acquired, or assign any right to receive income, except that
the Borrower and its Subsidiaries may create, incur, assume or suffer to exist
Liens:
(a) securing the Obligations;
(b) for taxes, assessments or governmental charges or levies on Property
of the Borrower or any of its Subsidiaries to the extent not required to be paid
pursuant to Sections 5.01 and 5.04;
(c) imposed by law, such as landlords', carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business securing obligations which are not overdue for a period of more than 30
days and which are being contested in good faith and by appropriate proceedings
if adequate reserves with respect thereto are maintained on the books of the
Borrower and its Subsidiaries in accordance with GAAP;
(d) arising in the ordinary course of business out of pledges or deposits
under workers' compensation laws, unemployment insurance, old age pensions or
other social security or retirement benefits, or similar legislation or to
secure public or statutory obligations of the Borrower or any of its
Subsidiaries;
(e) existing on Property acquired by the Borrower or any of its
Subsidiaries prior to its acquisition of such Property or existing on Property
of a newly acquired Subsidiary prior to the Borrower's or any other Subsidiary's
acquisition of stock of such newly acquired Subsidiary; PROVIDED, HOWEVER, that
the aggregate outstanding principal amount of the indebtedness secured by the
Liens permitted by this paragraph (e) shall not, when combined with the
aggregate outstanding principal amount of indebtedness secured by Liens
permitted by paragraph (f) of this Section 6.01, exceed 10% of the Borrower's
Net Worth at any time on or after the date on which such Lien is created,
assumed or incurred;
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(f) purchase money liens or purchase money security interests upon or in
any Property acquired or held by the Borrower or any of its Subsidiaries to
secure the purchase price of such Property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such Property, PROVIDED
that the aggregate outstanding principal amount of the indebtedness secured by
the Liens permitted by this paragraph (f) shall not, when combined with the
aggregate outstanding principal amount of indebtedness secured by Liens
permitted by paragraph (e) of this Section 6.01, exceed 10% of the Borrower's
Net Worth at any time on or after the date on which such Lien is created,
assumed or incurred;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of Property or
minor imperfections in title thereto which, in the aggregate, are not material
in amount, and which do not in any case materially detract from the value of the
Property subject thereto or interfere with the ordinary conduct of the business
of the Borrower and its Subsidiaries.
Section 6.02. DEBTS, GUARANTIES AND OTHER OBLIGATIONS. (a) The Borrower
will not, and will not permit any of its Subsidiaries to, create, assume, suffer
to exist or in any manner become or be liable in respect of any Debt except:
(i) Debt of the Borrower and its Subsidiaries under the Credit
Documents;
(ii) intercompany indebtedness owed between any Subsidiary of the
Borrower and the Borrower, PROVIDED that the payment of such indebtedness
is subordinate to the payment of the Obligations pursuant to Section 3.2
of the Guaranty or otherwise in a manner satisfactory to the Agent;
(iii) Subordinated Debt; and
(iv) Debt of the Borrower or any of its Subsidiaries (in addition to
Debt described in paragraphs (i) through (iii) above), provided that the
aggregate outstanding principal amount of such Debt does not exceed 20% of
the Borrower's Net Worth at any time on or after the date on which such
Debt is created, assumed or incurred.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
create, assume, suffer to exist, or in any manner become or be liable in respect
of any trade payables or other current operating liabilities more than 90 days
past due, except for such trade payables or other current operating liabilities
which (i) are being contested in good faith by appropriate proceedings and
adequate reserves therefor have been established and reflected in the financial
statements of such Person in accordance with GAAP, or (ii) do not exceed
$100,000 in the aggregate outstanding at any time.
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(c) The Borrower will not, and will not permit any of its Subsidiaries to,
create, assume, suffer to exist, or in any manner become or be liable in respect
of obligations with respect to any swap, hedge, cap, collar, or similar
arrangement providing for the exchange of risks related to price changes in any
commodity ("Derivatives"), including money, other than Derivatives used by such
Person in such Person's business operations in aggregate notional quantities not
to exceed the reasonably anticipated consumption of such Person of the
underlying commodity for the relevant period, but no Derivatives which are
speculative in nature.
(d) The Borrower will not, and will not permit any of its Subsidiaries to,
create, assume, suffer to exist, or in any manner become or be liable in respect
of any obligations with respect to guaranties or like assurances of payment or
performance other than (i) those incurred in the ordinary course of business or
(ii) those described in clause (e) of the definition of Debt; PROVIDED, HOWEVER,
that (A) the Borrower or any of its Subsidiaries shall be permitted to create,
assume, suffer to exist, or in any manner become or be liable in respect of any
obligations with respect to guaranties or like assurances of payment or
performance in respect of any of the obligations or liabilities of any of the
Subsidiaries permitted hereunder and (B) any of the Subsidiaries shall be
permitted to create, assume, suffer to exist, or in any manner become or be
liable in respect of any obligations with respect to guaranties or like
assurances of payment or performance in respect of any of the obligations and
liabilities of the Borrower permitted hereunder.
Section 6.03. AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS. The Borrower
will not, nor will it permit any of its Subsidiaries to, enter into any
agreement (other than a Credit Document) which (a) except with respect to
specific Property encumbered to secure payment of Debt related to such Property,
imposes restrictions upon the creation or assumption of any Lien upon its other
Properties, revenues or assets, whether now owned or hereafter acquired or (b)
limits Restricted Payments to or any advance by any of the Borrower's
Subsidiaries to the Borrower.
Section 6.04. MERGER OR CONSOLIDATION; ASSET SALES. The Borrower will not,
and will not permit any of its Subsidiaries to:
(a) merge or consolidate with or into any other Person, except (i) that
the Borrower may merge with any of its Subsidiaries and any of the Borrower's
Subsidiaries may merge with another of the Borrower's Subsidiaries, PROVIDED
that immediately after giving effect to any such proposed transaction no Default
would exist and in the case of any such merger to which the Borrower is a party,
the Borrower is the surviving corporation and (ii) for mergers and
consolidations consummated in connection with Acquisitions permitted under
Section 6.07 hereof, provided that the surviving corporation is the Borrower or
one of its Subsidiaries (or, contemporaneously with such consummation, will
become one of its Subsidiaries), or in connection with the disposition of the
Borrower's Subsidiaries that, if structured as the disposition of Property,
would be permitted under paragraph (b) below; or
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(b) sell, lease, transfer, or otherwise dispose of any of its Property,
except for (i) sales of funeral merchandise, cemetery property, mausoleum spaces
and related merchandise and other inventory, (ii) sales in the ordinary course
of business of inventory and Property of the Borrower and its Subsidiaries not
included in clause (i) of this paragraph (b), (iii) sales of funeral homes, to
the extent that the same would not reasonably be expected to cause a Material
Adverse Change, (iv) sales of assets outside the ordinary course of business in
an aggregate amount for any fiscal year not to exceed $1,000,000, and (v) sales,
leases, transfers and dispositions between the Borrower and its Subsidiaries or
between or among one or more Subsidiaries of the Borrower.
Section 6.05. RESTRICTED PAYMENTS; ISSUANCE OF PREFERRED STOCK.
(a) The Borrower will not make or pay any Restricted Payment other than
(i) payments of dividends on and redemptions of Existing Preferred Stock, (ii)
payments of dividends on Qualified Preferred Stock permitted under paragraph (b)
below, (iii) repurchases of Common Stock in an aggregate amount not to exceed
$500,000 in any fiscal year of the Borrower, and (iv) with respect to shares of
Common Stock purchased from the Borrower by employees or former employees of the
Borrower or any of its Subsidiaries in connection with the exercise of stock
options granted by the Borrower, the purchase by the Borrower of a number of
such shares, in an aggregate amount not to exceed $5,000,000 in any fiscal year
of the Borrower. In no event shall Borrower make or declare any Restricted
Payment during the existence of an Event of Default or if the making of such
Restricted Payment would cause an Event of Default.
(b) The Borrower will not issue or have outstanding any Redeemable
Preferred Stock, other than (i) Existing Preferred Stock, or (ii) Qualified
Preferred Stock, PROVIDED that the maximum aggregate redemption price for all
Qualified Preferred Stock which may be outstanding at any time under this clause
(ii) shall not exceed $50,000,000.
Section 6.06. INVESTMENTS; LINES OF BUSINESS. (a) The Borrower will not,
and will not permit any of its Subsidiaries to, make or permit to exist any
loans, advances or capital contributions to, or make any investment in, or
purchase or commit to purchase any stock or other securities or evidences of
indebtedness of or interests in any Person, except the following:
(i) as shown on the attached Schedule 6.06;
(ii) the purchase of Liquid Investments or the making of Acquisitions
permitted by Section 6.07;
(iii) trade and customer accounts receivable which are for goods furnished
or services rendered in the ordinary course of business and are payable in
accordance with customary trade terms;
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(iv) ordinary course of business contributions, loans or advances to, or
investments in, (A) a direct or indirect Subsidiary of the Borrower, or (B) the
Borrower;
(v) investments not covered by clauses (i) through (iv) above in an
aggregate amount not to exceed at any time $2,500,000; and
(vi) investments in or by any perpetual care trust, merchandise trust,
preneed trust, preconstruction trust or other trust arrangements established by
the Borrower or any of its Subsidiaries in accordance with applicable laws,
regulations and interpretations.
(b) The Borrower will not, and will not permit its Subsidiaries, taken as
a whole together with the Borrower, to, change the character of the business
(other than to a type of business reasonably related to the business) as
conducted by the Borrower and its Subsidiaries, taken as a whole, on the date of
this Agreement or engage in any type of business not reasonably related to such
business as presently and normally conducted.
Section 6.07. ACQUISITIONS. The Borrower will not, and will not permit any
of its Subsidiaries to, make an Acquisition in a transaction or related series
of transactions unless:
(a) such Acquisition would not, after giving effect thereto, result in a
Default;
(b) such Acquisition is a Core Acquisition;
(c) the amount of the consideration paid or contributed for such
Acquisition (including all cash paid and Property contributed for such
Acquisition, the amount of any liabilities (including unfunded Pre-need
Obligations) assumed, and Deferred Purchase Price, but excluding the value of
any Common Stock or any preferred stock (including, but not limited to,
Redeemable Preferred Stock) that is not prohibited by Section 6.05 of this
Agreement, of the Borrower or its Subsidiaries transferred or issued as
consideration for such Acquisition), does not, at the time of the making of such
Acquisition, exceed 20% of the Borrower's Net Worth as reflected on (i) the most
recent financial statements of the Borrower delivered to the Lenders pursuant to
Section 5.06(c) or (ii) any certificate delivered by the Borrower to the Agent
setting forth, in reasonable detail, a calculation of the Borrower's Net Worth
as of time of making such Acquisition; and
(d) the Property to be acquired in connection with such Acquisition is in
compliance with Environmental Law and the Borrower, at its expense, shall have
conducted such affirmative due diligence concerning the environmental condition
of such Property (which may include environmental questionnaires or independent
site assessments) as shall be warranted by such Property.
Section 6.08. CAPITAL EXPENDITURES. Neither Borrower nor any of its
Subsidiaries will make or commit to make any expenditure in respect of the
purchase or construction or other acquisition (excluding any deemed purchases
allocable to Acquisitions)
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of fixed or capital assets that would cause the aggregate amount of all such
expenditures during the four fiscal quarters then most recently ended to exceed
10% of the Borrower's Net Worth as of the last day of such four quarter period.
Section 6.09. AFFILIATE TRANSACTIONS. Except as expressly permitted
elsewhere in this Agreement, the Borrower will not, and will not permit any of
its Subsidiaries to, make, directly or indirectly: (a) any investment in any
Affiliate (other than a Subsidiary of the Borrower); (b) any transfer, sale,
lease, assignment or other disposal of any assets to any such Affiliate or any
purchase or acquisition of assets from any such Affiliate; or (c) any
arrangement or other transaction directly or indirectly with or for the benefit
of an such Affiliate (including without limitation, guaranties and assumptions
of obligations of an Affiliate); PROVIDED, HOWEVER, that the Borrower and its
Subsidiaries may enter into any arrangement or other transaction with any such
Affiliate providing for the leasing of property, the making of Acquisitions
permitted under Section 6.07 hereof, the rendering or receipt of services or the
purchase or sale of inventory and other assets in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Borrower and its Subsidiaries as the
monetary or business consideration which it would obtain in a comparable arm's
length transaction with a Person not such an Affiliate.
Section 6.10. COMPLIANCE WITH ERISA. The Borrower will not, and will not
permit any of its Subsidiaries to, (a) terminate any Plan so as to result in any
material (in the opinion of the Majority Lenders) liability of the Borrower or
any of its Subsidiaries to the PBGC, unless the Plan was in effect prior to
consummation of an Acquisition permitted under Section 6.07 hereof to which the
Plan relates, the Borrower or applicable Subsidiary has been fully indemnified
in respect of any such liability and the Borrower has reasonably assured itself
of adequate capital, offset or security for such indemnity or (b) permit to
exist any occurrence of any Reportable Event (as defined in Title IV of ERISA),
or any other event or condition, which presents a material (in the opinion of
the Majority Lenders) risk of such a termination by the PBGC of any Plan.
Section 6.11. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Except as
permitted by Sections 5.03 and 6.04, the Borrower will not, and will not permit
any of its Subsidiaries to, sell or otherwise dispose of any shares of capital
stock of any of its Subsidiaries or permit any of its Subsidiaries to issue,
sell or otherwise dispose of any shares of its capital stock or the capital
stock of any of the its Subsidiaries, except that, where required by applicable
law, up to 20% of the outstanding stock of any of the Borrower's Subsidiaries
may be issued to and held by employees of the Borrower or any such Subsidiary
who are licensed funeral directors.
Section 6.12. TRUST FUNDS. Without the prior written consent of the
Majority Lenders or as otherwise required by applicable Legal Requirement,
Borrower will not withdraw or otherwise remove, and will cause all of its
Subsidiaries not to withdraw or otherwise remove, any monies or other assets
(whether principal, interest or other earnings) from any merchandise, service or
other trust fund or trust account except for the purpose of providing the
merchandise or services which are intended to be provided out of such trust fund
or trust account.
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Section 6.13. SETTLEMENT OF LITIGATION. Without prior written notice to
the Lenders, Borrower will not, and will cause all of its Subsidiaries not to,
settle or compromise, during any fiscal year of the Borrower, any threatened
action or proceeding affecting the Borrower or any of its Subsidiaries before
any court, Governmental Agency or arbitrator, if the amount of the proposed
settlement or compromise required to be paid by the Borrower or any of its
Subsidiaries (excluding any amounts to be paid or to be reimbursed to the
Borrower or any of its Subsidiaries from any insurance proceeds), together with
the amount of all settlements and compromises (excluding any amounts paid or to
be reimbursed to the Borrower or any of its Subsidiaries from any insurance
proceeds) previously paid by the Borrower or any of its Subsidiaries during such
fiscal year of the Borrower, exceeds $1,000,000.
Section 6.14. FIXED CHARGE COVERAGE RATIO. The Borrower will not permit
its Fixed Charge Coverage Ratio for the three fiscal quarters ending September
30, 1997, to be less than 1.70 to 1.00. Beginning December 31, 1997, and on the
last day of each fiscal quarter thereafter, the Borrower will not permit its
Fixed Charge Coverage Ratio for the four fiscal quarters then ended to be less
than 1.70 to 1.00.
Section 6.15. FUNDED DEBT TO TOTAL CAPITAL RATIO. The Borrower will not
permit at any time the ratio of its Funded Debt to its Total Capital to be
greater than .60 to 1.00.
Section 6.16. NET WORTH. The Borrower will not permit at any time its Net
Worth to be less than an amount equal to the sum of (a) $75,000,000, PLUS (b)
50% of the Borrower's Net Income for each fiscal quarter ending on or after
September 30, 1997, during which Borrower had positive Net Income PLUS (c) 100%
of the net proceeds received by Borrower from any sale or issuance of any equity
securities of, or any other additions to capital by, the Borrower or its
Subsidiaries during each fiscal quarter ending on or after September 30, 1997.
ARTICLE VII
REMEDIES
Section 7.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under any Credit Document:
(a) PAYMENT. The Borrower shall fail to pay (i) any principal of any Note,
the Swing Line Note or any Reimbursement Obligation when the same becomes due
and payable, or (ii) any interest on any Note or the Swing Line Note, or any fee
or other amount payable hereunder or under any other Credit Document, within 5
Business Days after the same becomes due and payable;
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(b) REPRESENTATION AND WARRANTIES. Any representation or warranty made or
deemed to be made (i) by the Borrower in this Agreement or in any other Credit
Document, (ii) by the Borrower (or any of its Responsible Officers) in
connection with this Agreement or any other Credit Document, or (iii) by any of
the Borrower's Subsidiaries in any Credit Document shall prove to have been
incorrect in any material respect when made or deemed to be made;
(c) COVENANT BREACHES. (i) The Borrower shall (A) fail to perform or
observe any covenant contained in Section 5.05, 5.06(a) or (b), or Article VI of
this Agreement or (B) fail to perform or observe any other term or covenant set
forth in this Agreement or in any other Credit Document which is not covered by
clause (i)(A) above or any other provision of this Section 7.01 if such failure
shall remain unremedied for 30 days after the earlier of written notice of such
failure shall have been given to the Borrower by the Agent or any Lender or the
Borrower's Knowledge of such failure or (ii) any of the Borrower's Subsidiaries
shall fail to perform or observe any covenant contained in the Guaranty (after
any applicable grace period);
(d) CROSS-DEFAULTS. (i) The Borrower or any its Subsidiaries shall fail to
pay any principal of or premium or interest on its Debt (but excluding Debt
constituting Obligations under the Credit Documents) which is outstanding in an
amount of at least (A) with respect to Debt which constitutes Deferred Purchase
Price, $2,000,000 individually or when aggregated with all other Debt of the
Borrower or its Subsidiaries which constitutes Deferred Purchase Price and is so
in default; or (B) with respect to any other Debt, $500,000 individually or when
aggregated with all such other Debt of the Borrower or its Subsidiaries so in
default, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating to the Debt
specified in clause (i)(A) or (B) of this paragraph (d) and shall continue after
the applicable grace period, if any, specified in such agreement or instrument,
if the effect of such event or condition is to accelerate the maturity of such
Debt; or (iii) any Debt specified in clause (i)(A) or (B) of this paragraph (d)
shall properly be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof; and in any such event, if (in the case of Debt constituting
Deferred Purchase Price only) such default is not cured in full within ten (10)
Business Days thereafter;
(e) INSOLVENCY. (i) The Borrower or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; (ii) any proceeding shall be instituted by or against
the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against the Borrower
or any such Subsidiary, either such proceeding shall remain undismissed for a
period of 60 days or any of the actions sought in such proceeding shall occur;
or (iii) the Borrower or any of its Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this paragraph (e), except
for any of the foregoing events affecting any of the Borrower's Subsidiaries
which is not reasonably likely to cause a Material Adverse Change;
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(f) JUDGMENTS. One or more judgments or orders for the payment of money in
excess of $1,000,000 in the aggregate (after giving effect to insurance
proceeds, if any, received or to be received by the Borrower or any of its
Subsidiaries) shall be rendered against the Borrower or any of its Subsidiaries
and either (A) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (B) there shall be any period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;
(g) TERMINATION EVENTS. Any Termination Event with respect to a Plan shall
have occurred, and, 30 days after notice thereof shall have been given to the
Borrower by the Agent, (i) such Termination Event shall not have been corrected
and (ii) the then present value of such Plan's vested benefits exceeds the then
current value of assets accumulated in such Plan by more than the amount of
$500,000 (or in the case of a Termination Event involving the withdrawal of a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount);
(h) PLAN WITHDRAWALS. The Borrower or any member of the Controlled Group
as employer under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability in an annual amount exceeding
$500,000;
(i) GUARANTY. Any material provision of the Guaranty shall for any reason
cease to be valid and binding on any applicable Subsidiary of the Borrower or
the applicable Subsidiary of the Borrower shall so state in writing;
(j) CHANGE OF CONTROL. (i) As a result of one or more transactions after
the date of this Agreement, any "person" or related persons constituting a
"group" of persons shall have "beneficial ownership" of more than 20% of the
total voting power of all classes then outstanding of Voting Securities of the
Borrower (all within the meaning of Section 13(d) or 14(d), as applicable, of
the Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder), provided that the relationships among the respective
shareholders of the Borrower on the date of this Agreement shall not be deemed
to constitute all or any combination of them as a "group" or (ii) individuals
who, at the beginning of any period of 12 consecutive months, constitute the
Borrower's board of directors (together with any new director whose election by
the Borrower's board of directors or whose nomination for election by the
Borrower's stockholders entitled to vote thereon was approved by a vote of at
least a majority of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason (other than death or disability) to
constitute a majority of the Borrower's board of directors then in office; or
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(k) CERTIFICATES. The Borrower shall fail to deliver to the Agent within
30 days after the date of this Agreement any of the following items: (i)
certificates of good standing, existence and authority for each Subsidiary of
the Borrower, or (ii) a supplemental, favorable opinion of Snell & Smith, A
Professional Corporation, counsel to the Borrower and its Subsidiaries, dated as
of the date of this Agreement, regarding the existence, good standing, and
authority of each Subsidiary of the Borrower, in form and substance reasonably
satisfactory to the Agent.
Section 7.02. OPTIONAL ACCELERATION OF MATURITY. If any Event of Default
(other than an Event of Default pursuant to paragraph (e) of Section 7.01) shall
have occurred and be continuing, then, and in any such event:
(a) the Agent (i) shall at the request, or may with the consent, of the
Majority Lenders, by notice to the Borrower, declare the obligation of each
Lender to make Advances and the obligation of the Issuing Lender to issue
Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Majority Lenders, by notice to the Borrower, declare the Notes, all interest
thereon, the Letter of Credit Obligations, and all other Obligations payable
under this Agreement to be forthwith due and payable, whereupon the Notes, all
such interest, all such Letter of Credit Obligations and all such other
Obligations shall become and be forthwith due and payable in full, without
presentment, demand, protest or further notice of any kind (including, without
limitation, any notice of intent to accelerate or notice of acceleration), all
of which are (unless otherwise provided for herein) hereby expressly waived by
the Borrower; and
(b) the Borrower shall, on demand of the Agent at the request or with the
consent of the Majority Lenders, either deposit with the Agent into the Cash
Collateral Account an amount of cash equal to the outstanding Letter of Credit
Exposure as security for the Obligations to the extent the Letter of Credit
Obligations are not otherwise paid at such time, or cause to be issued and
delivered to the Issuing Lender a standby letter of credit of the type described
in Section 2.13(a).
Section 7.03. AUTOMATIC ACCELERATION OF MATURITY. If any Event of Default
pursuant to paragraph (e) of Section 7.01 shall occur,
(a) the obligation of each Lender to make Advances, the obligation of the
Issuing Lender to issue, increase, or extend Letters of Credit, and all other
commitments of the Lender under the Credit Documents shall immediately and
automatically be terminated and the Notes, all interest on the Notes, all Letter
of Credit Obligations, and all other Obligations shall immediately and
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automatically become and be due and payable in full, without presentment,
demand, protest or any notice of any kind (including, without limitation, any
notice of intent to accelerate or notice of acceleration), all of which are
(unless otherwise provided for herein) hereby expressly waived by the Borrower
and
(b) the Borrower shall either deposit with the Agent into the Cash
Collateral Account an amount of cash equal to the outstanding Letter of Credit
Exposure as security for the Obligations to the extent the Letter of Credit
Obligations are not otherwise paid at such time, or cause to be issued and
delivered to the Issuing Lender a standby letter of credit of the type described
in Section 2.13(a).
Section 7.04. CASH COLLATERAL ACCOUNT.
(a) If at any time the Borrower is required to deposit funds in the Cash
Collateral Account and the same has not been administratively established, the
Borrower and the Agent shall establish the Cash Collateral Account and the
Borrower shall execute any documents and agreements, including the Agent's
standard form assignment of deposit accounts, that the Agent requests in
connection therewith to establish the Cash Collateral Account and confirm the
Agent a first priority security interest in such account and the funds therein.
The Borrower hereby pledges to the Agent and grants the Agent a security
interest in the Cash Collateral Account, whenever established, all funds held in
the Cash Collateral Account from time to time, and all proceeds thereof as
security for the payment of the Obligations.
(b) During the existence of any Event of Default, funds held in the Cash
Collateral Account shall be held as cash collateral for Obligations with respect
to Letters of Credit and promptly applied by the Agent to any reimbursement or
other Obligations arising under the Letter of Credit Documents. To the extent
that any surplus funds are held in the Cash Collateral Account above the Letter
of Credit Exposure, the Agent may (A) hold such surplus funds in the Cash
Collateral Account as cash collateral for the Obligations or (B) apply such
surplus funds to any Obligations. Upon cure of all Events of Default, the Agent
shall release to the Borrower at the Borrower's written request any funds held
in the Cash Collateral Account.
(c) Funds held in the Cash Collateral Account shall be invested in money
market funds of the Agent or in another investment if mutually agreed upon by
the Borrower and the Agent, but the Agent shall have no other obligation to make
any other investment of the funds therein. The Agent shall exercise reasonable
care in the custody and preservation of any funds held in the Cash Collateral
Account and shall be deemed to have exercised such care if such funds are
accorded treatment substantially equivalent to that which the Agent accords its
own property, it being understood that the Agent shall not have any
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any such funds.
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Section 7.05. NON-EXCLUSIVITY OF REMEDIES. No remedy conferred upon the
Agent is intended to be exclusive of any other remedy, and each remedy shall be
cumulative of all other remedies existing by contract, at law, in equity, by
statute or otherwise.
Section 7.06. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Agent and each Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Agent or such Lender to or for the credit or the account of
the Borrower (other than deposits specifically maintained to support Pre-need
Obligations) against any and all of the Obligations of the Borrower now or
hereafter existing, irrespective of whether or not the Agent or such Lender
shall have made any demand, and although such obligations may be unmatured. The
Agent and each Lender agrees to promptly notify the Borrower after any such
set-off and application made by the Agent or such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent and each Lender under this Section are in
addition to any other rights and remedies (including, without limitation, other
rights of set-off) which the Agent or such Lender may have.
ARTICLE VIII
THE AGENT AND THE ISSUING LENDER
Section 8.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on behalf of such Lender and
to exercise such powers under this Agreement as are delegated to the Agent by
the terms hereof and of the other Credit Documents, together with such powers as
are reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement or any other Credit Document (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders (or all the Lenders
where unanimity is required), and such instructions shall be binding upon all
Lenders and all holders of the Notes; PROVIDED, HOWEVER, that the Agent shall
not be required to take any action which exposes the Agent to personal liability
or which is contrary to this Agreement, any other Credit Document, or applicable
law.
Section 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of the
Agent's directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken (including the Agent's own negligence) by it or
them under or in connection with this Agreement or the other Credit Documents,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may treat the
payee of any Note as the holder thereof until the Agent receives written notice
of the assignment or transfer thereof signed by
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such payee and in form satisfactory to the Agent; (b) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Credit Documents; (d) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Agreement or any other Credit Document on the part of the Borrower or its
Subsidiaries or to inspect the property (including the books and records) of the
Borrower or its Subsidiaries; (e) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Credit Document; and (f) shall incur no
liability under or in respect of this Agreement or any other Credit Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopy, telegram, cable or telex) reasonably believed by it
to be genuine and signed or sent by the proper party or parties.
Section 8.03. THE AGENT AND ITS AFFILIATES. With respect to its
Commitment, the Advances made by it and the Note issued to it, the Agent shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not an Agent hereunder. The term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include the Agent in its
individual capacity. The Agent and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower or any of its Subsidiaries, and any Person who
may do business with or own securities of the Borrower or any such Subsidiary,
all as if the Agent were not an agent hereunder and without any duty to account
therefor to the Lenders.
Section 8.04. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 4.05 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other 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 this Agreement.
Section 8.05. INDEMNIFICATION. THE LENDERS SEVERALLY AGREE TO INDEMNIFY
THE AGENT AND THE ISSUING LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE
BORROWER), ACCORDING TO THEIR RESPECTIVE PRO RATA SHARES FROM AND AGAINST ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR
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ASSERTED AGAINST THE AGENT AND THE ISSUING LENDER IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR THE
ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (INCLUDING THE
AGENT'S AND THE ISSUING LENDER'S OWN NEGLIGENCE), PROVIDED THAT NO LENDER SHALL
BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
FROM THE AGENT'S OR THE ISSUING LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE AGENT
PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES
(INCLUDING COUNSEL FEES) INCURRED BY THE AGENT IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT, TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR
SUCH EXPENSES BY THE BORROWER.
Section 8.06. SUCCESSOR AGENT AND ISSUING LENDER. The Agent or the Issuing
Lender may resign at any time by giving written notice thereof to the Lenders
and the Borrower and may be removed at any time with cause by the Majority
Lenders upon receipt of written notice from the Majority Lenders to such effect.
Upon receipt of notice of any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Agent or Issuing Lender with, if no
Default exists, the consent of the Borrower, which consent shall not be
unreasonably withheld. If no successor Agent or Issuing Lender shall have been
so appointed by the Majority Lenders with the consent of the Borrower, if
required, and shall have accepted such appointment, within 30 days after the
retiring Agent's or Issuing Lender's giving of notice of resignation or the
Majority Lenders' removal of the retiring Agent or Issuing Lender, then the
retiring Agent or Issuing Lender may, on behalf of the Lenders and the Borrower,
appoint a successor Agent or Issuing Lender, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000 and, in the
case of the Issuing Lender, a Lender. Upon the acceptance of any appointment as
Agent or Issuing Lender by a successor Agent or Issuing Lender, such successor
Agent or Issuing Lender shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent or Issuing
Lender, and the retiring Agent or Issuing Lender shall be discharged from its
duties and obligations under this Agreement and the other Credit Documents,
except that the retiring Issuing Lender shall remain the Issuing Lender with
respect to any Letters of Credit outstanding on the effective date of its
resignation or removal and the provisions affecting the Issuing Lender with
respect to such Letters of Credit shall inure to the benefit of the retiring
Issuing Lender until the termination of all such Letters of Credit. After any
retiring Agent's or Issuing Lender's resignation or removal hereunder as Agent
or Issuing Lender, the provisions of this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
or Issuing Lender under this Agreement and the other Credit Documents.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Credit Document, nor consent to any
departure by the Borrower or any of its Subsidiaries therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Majority Lenders and the Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01 or 3.02, (b) increase the Commitments
of the Lenders, (c) reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder or under any other Credit Document, (d)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (e) amend Section 2.01(b),
Section 2.13, Section 2.14(a) or this Section 9.01, (f) release the Guaranty or
any guarantor thereunder (other than the release of a guarantor which is one of
the Borrower's Subsidiaries in connection with the sale or transfer thereof,
whether by sale of stock, merger, consolidation or otherwise, to the extent
permitted under this Agreement), or (g) amend the definitions of "Majority
Lenders" and "Maturity Date"; and PROVIDED, further, that no amendment, waiver
or consent shall, unless in writing and signed by the Agent or the Issuing
Lender in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent or the Issuing Lender, as the case may be, under
this Agreement or any other Credit Document.
Section 9.02. NOTICES, ETC. All notices and other communications shall be
in writing (including telecopy, telegraphic or telex) and mailed, telecopied,
telegraphed, telexed, hand delivered or delivered by a nationally recognized
overnight courier, if to the Borrower, at its address at 1300 Post Oak Blvd.,
Suite 1500, Houston, Texas 77056, Attention: Chief Financial Officer (telecopy:
(281) 556-7401; telephone: (281) 556-7400), with a copy to: Mr. W. Christopher
Schaeper, Snell & Smith, A Professional Corporation, 1000 Louisiana, Suite 1200,
Houston, Texas 77002 (telecopy: (713) 651-8010; telephone (713) 652-3300; if to
any Lender at its Domestic Lending Office specified opposite its name on
Schedule 1 or pursuant to Section 2.10(b); and if to the Agent or the Issuing
Lender, at its address at 700 Louisiana, 7th Floor, Houston, Texas 77002,
Attention: Mr. Albert L. Welch (telecopy: (713) 247-7748; telephone: (713)
247-6631); or, as to each party, at such other address or teletransmission
number as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall, when mailed, telecopied,
telegraphed, telexed, hand delivered or delivered, be effective three days after
deposited in the mails, telecopy transmission is completed, delivered to the
telegraph company, confirmed by telex answer-back or, if hand delivered or
delivered by a courier, when received, respectively, except that notices and
communications to the Agent pursuant to Article II or VIII shall not be
effective until received by the Agent.
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Section 9.03. NO WAIVER; REMEDIES. No failure on the part of any Lender,
the Agent, or the Issuing Lender to exercise, and no delay in exercising, any
right hereunder or under any Credit Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9.04. COSTS AND EXPENSES. The Borrower agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent (including the
reasonable fees and expenses of its legal counsel) in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other Credit Documents including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent and with respect to advising the Agent as to its rights and
responsibilities under this Agreement, and all reasonable out-of-pocket costs
and expenses, if any, of the Agent, the Issuing Lender, and each Lender
(including, without limitation, reasonable counsel fees and expenses of the
Agent, the Issuing Lender, and each Lender) in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Notes and the other Credit Documents.
Section 9.05. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Agent, and when the Agent
shall have, as to each Lender, either received a counterpart hereof executed by
such Lender or been notified by such Lender that such Lender has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Agent, the Issuing Lender, and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
or delegate its duties under this Agreement or any interest in this Agreement
without the prior written consent of each Lender.
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Section 9.06. LENDER ASSIGNMENTS AND PARTICIPATIONS.
(a) ASSIGNMENTS. Any Lender may assign to one or more Eligible Assignees
all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it, the Note held by it, and the participation interest in the Letter
of Credit Obligations held by it); PROVIDED, HOWEVER, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of such
Lender's rights and obligations under this Agreement, (ii) the amount of the
Commitment, Advances, and Letter of Credit Exposure of such Lender being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall be, if to an
entity other than a Lender, not less than $5,000,000 and, unless such assignment
is an assignment of 100% of such Lender's rights and obligations hereunder,
shall be an integral multiple of $1,000,000, (iii) each such assignment shall be
to an Eligible Assignee, (iv) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Note subject to such assignment,
and (v) each Eligible Assignee (other than the Eligible Assignee of the Agent)
shall pay to the Agent a $3,500 administrative fee. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least three
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto for all purposes and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder and (B) such Lender
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of such
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but all indemnification provisions contained herein shall
continue to inure for the benefit of such departing Lender with respect to
matters arising during the period such Lender was a party hereto).
(b) TERM OF ASSIGNMENTS. By executing and delivering an Assignment and
Acceptance, the Lender thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or its
Subsidiaries or the performance or observance by the Borrower or its
Subsidiaries of any of their obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.05 (or its most recently furnished
financial statements pursuant to Section 5.06) and such other documents and
information
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as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such Lender or any other
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 this Agreement; (v) such assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(c) THE REGISTER. The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent, the Issuing Lender, and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) PROCEDURES. Upon its receipt of an Assignment and Acceptance executed
by a Lender and an Eligible Assignee, together with the Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of the attached Exhibit A, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower, with its own
attorney's fees being its own expense, shall execute and deliver to the Agent in
exchange for the surrendered Notes a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if such Lender has retained any Commitment
hereunder, a new Note to the order of such Lender in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of the attached Exhibit C.
(e) PARTICIPATIONS. Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it, its participation interest in the Letter
of Credit Obligations, and the Notes held by it); PROVIDED, HOWEVER, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Commitments to the Borrower hereunder) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any such Notes for all purposes of this Agreement, (iv) the Borrower, the Agent,
and the Issuing Lender and the other Lenders shall continue to deal solely and
directly with such Lender in
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connection with such Lender's rights and obligations under this Agreement, and
(v) such Lender shall not require the participant's consent to any matter under
this Agreement, except for change in the principal amount of the Notes,
reductions in fees or interest, or extending the Maturity Date. The Borrower
hereby agrees that participants shall have the same rights under Sections 2.09,
2.10, 2.12(c), and 9.07 as a Lender to the extent of their respective
participations.
(f) CONFIDENTIALITY. Each Lender may furnish any information concerning
the Borrower and its Subsidiaries in the possession of such Lender from
time-to-time to assignees and participants (including prospective assignees and
participants); PROVIDED that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree in writing to
preserve the confidentiality of any confidential information relating to the
Borrower and its Subsidiaries received by it from such Lender. Such Lender
shall, upon the Borrower's request, deliver a signed copy of any such
confidentiality agreement to the Borrower.
Section 9.07. INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE AGENT, THE
LENDERS, THE ISSUING LENDER, AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (COLLECTIVELY, THE "RELATED PARTIES")
FROM, AND DISCHARGE, RELEASE, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND
ALL LOSSES, LIABILITIES, CLAIMS OR DAMAGES TO WHICH ANY OF THEM MAY BECOME
SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR
RESULT FROM (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OR ANY AFFILIATE OF
THE BORROWER OF THE PROCEEDS OF ANY ADVANCE, (II) ANY BREACH BY THE BORROWER OF
ANY PROVISION OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, (III) ANY
INVESTIGATION, LITIGATION OR OTHER PROCEEDING (INCLUDING ANY THREATENED
INVESTIGATION OR PROCEEDING) RELATING TO THE FOREGOING, OR (IV) ANY
ENVIRONMENTAL CLAIM OR REQUIREMENT OF ENVIRONMENTAL LAWS CONCERNING OR RELATING
TO THE PRESENT OR PREVIOUSLY OWNED OR OPERATED PROPERTIES, OR THE OPERATIONS OR
BUSINESS, OF THE BORROWER OR ANY OF ITS SUBSIDIARIES, INCLUDING WITHOUT
LIMITATION THOSE MATTERS SET FORTH IN SCHEDULES 4.16(A) AND (B), AND THE
BORROWER SHALL REIMBURSE THE AGENT, THE ISSUING LENDER, AND EACH LENDER, AND
EACH OF THEIR RESPECTIVE RELATED PARTIES, UPON DEMAND FOR ANY REASONABLE
OUT-OF-POCKET EXPENSES (INCLUDING LEGAL FEES) INCURRED IN CONNECTION WITH ANY
SUCH INVESTIGATION, LITIGATION OR OTHER PROCEEDING; AND EXPRESSLY INCLUDING ANY
SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES, OR EXPENSE INCURRED BY REASON OF THE
PERSON BEING INDEMNIFIED'S OWN NEGLIGENCE, BUT EXCLUDING ANY SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES OR EXPENSES INCURRED BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
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Section 9.08. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 9.09. SURVIVAL OF REPRESENTATIONS, ETC. All representations and
warranties contained in this Agreement or made in writing by or on behalf of the
Borrower in connection herewith shall survive the execution and delivery of this
Agreement and the Credit Documents, the making of the Advances and any
investigation made by or on behalf of the Lenders, none of which investigations
shall diminish any Lender's right to rely on such representations and
warranties. All obligations of the Borrower provided for in Sections 2.09, 2.10,
2.12(c), and 9.07 shall survive any termination of this Agreement and repayment
in full of the Obligations.
Section 9.10. SEVERABILITY. In case one or more provisions of this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not be affected or impaired thereby.
Section 9.11. BUSINESS LOANS. The Borrower warrants and represents that
the Loans evidenced by the Notes and the Swing Line Note are and shall be for
business, commercial, investment or other similar purposes and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One ("Chapter One") of the Texas Credit Code. At all such times, if any,
as Chapter One shall establish a Maximum Rate, the Maximum Rate shall be the
"indicated rate ceiling" (as such term is defined in Chapter One) from time to
time in effect.
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Section 9.12. USURY NOT INTENDED. It is the intent of the Borrower and
each Lender in the execution and performance of this Agreement and the other
Credit Documents to contract in strict compliance with applicable usury laws,
including conflicts of law concepts, governing the Advances of each Lender
including such applicable laws of the State of Texas and the United States of
America from time to time in effect. In furtherance thereof, each Lender and the
Borrower stipulate and agree that none of the terms and provisions contained in
this Agreement or the other Credit Documents shall ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Maximum Rate applicable to such
Lender and that for purposes hereof "interest" shall include the aggregate of
all charges which constitute interest under such laws that are contracted for,
charged or received under this Agreement; and in the event that, notwithstanding
the foregoing, under any circumstances the aggregate amounts taken, reserved,
charged, received or paid on the Advances, include amounts which by applicable
law are deemed interest which would exceed the Maximum Rate applicable to such
Lender, then such excess shall be deemed to be a mistake and such Lender shall
credit the same on the principal of its Note (or if such Note shall have been
paid in full, refund said excess to the Borrower). In the event that the
maturity of the Notes are accelerated by reason of any election of the Majority
Lenders resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
to any Lender that constitutes interest may never include more than the Maximum
Rate for such Lender and excess interest, if any, provided for in this Agreement
or otherwise shall be cancelled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by such
Lender on its Note (or, if its Note shall have been paid in full, refunded to
the Borrower of such interest). The provisions of this Section shall control
over all other provisions of this Agreement or the other Credit Documents which
may be in apparent conflict herewith. In determining whether or not the interest
paid or payable under any specific contingencies exceeds the Maximum Rate
applicable to a Lender, the Borrower and such Lender shall to the maximum extent
permitted under applicable law give effect to Section 2.06(d) and amortize,
prorate, allocate and spread in equal parts during the period of the full stated
term of its Note all amounts considered to be interest under applicable law at
any time contracted for, charged, received or reserved in connection with the
Obligations.
Section 9.13. GOVERNING LAW. This Agreement, the Notes and the other
Credit Documents shall be governed by, and construed and enforced in accordance
with, the laws of the State of Texas. Borrower and each Lender agree that the
provisions of TEX. REV. CIV. STA. ANN. Art. 5069-15.1 ET SEQ. Vernon (1987), as
amended (regulating certain revolving credit loans and revolving tri-party
accounts) shall not apply to the Credit Documents.
Section 9.14 AMENDMENT AND RESTATEMENT. This Agreement represents a full
and complete amendment and restatement of the Credit Agreement dated as of
August 13, 1996 (the "Existing Credit Agreement"), among the Borrower, the
Agent, as administrative agent, Provident, as documentation agent, and the
Lenders named therein, and that prior version is deemed replaced hereby as of
the effectiveness of this Agreement. The indebtedness under such prior version
of this Agreement continues under this Agreement (as reallocated among the
Lenders in connection with
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the effectiveness of this Agreement) and the execution of this Agreement does
not indicate a payment, satisfaction, novation, or discharge thereof. All
support for the indebtedness under the prior version of this Agreement continues
to support the indebtedness hereunder. Upon the effectiveness of this Agreement,
all outstanding Advances shall be reallocated among the Lenders ratably in
accordance with their Commitments. Amounts payable under the prior version of
this Agreement shall accrue thereunder until the effectiveness of this Agreement
and the Agent shall arrange with the Borrower and the Lenders to prorate and
ratably distribute to the Agent and the Lenders all amounts payable under the
prior version of this Agreement for the periods prior to the effectiveness of
this Agreement.
THE BORROWER, THE LENDERS, THE ISSUING LENDER AND THE AGENT HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER CREDIT
DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, A
CREDIT AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE CREDIT AGREEMENT EXCEEDS
$50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN AGREEMENT IS IN WRITING AND
SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN CREDIT
AGREEMENT, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY
AND MERGED INTO THE CREDIT AGREEMENT. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
-68-
<PAGE>
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
CARRIAGE SERVICES, INC.
By:_______________________________________
Thomas C. Livengood, Executive Vice
President and Chief Financial Officer
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By:_______________________________________
Albert L. Welch
Vice President
COMMITMENT: LENDERS:
NATIONSBANK OF TEXAS, N.A.,
By: ______________________________________
$40,000,000 Albert L. Welch
Vice President
$40,000,000 PROVIDENT SERVICES, INC.
By: ______________________________________
Daniel M. Chong
Vice President
-69-
<PAGE>
$25,000,000 BANK ONE, TEXAS, NA
By: ______________________________________
H. Gale Smith
Vice President
$15,000,000 CIBC INC.
By: ______________________________________
Chris Kleczkowski
Director, CIBC Wood Gundy Securities
Corp., AS AGENT
$15,000,000 CORESTATES BANK, N.A.
By: ______________________________________
Geoffrey Smith
Commercial Officer
$15,000,000 TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
============
$150,000,000 TOTAL COMMITMENTS
-70-
EXHIBIT 10.2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CARRIAGE SERVICES, INC.
* * * * * * * *
CARRIAGE SERVICES, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting
duly held on January 29, 1997, adopted the following resolution proposing and
declaring advisable an amendment to the Certificate of Incorporation of the
Corporation, as follows:
RESOLVED: That the first paragraph of Article IV of the Certificate
of Incorporation of the Corporation be amended in its entirety so that, as
amended, the first paragraph of said Article IV shall read as follows:
"The total number of shares of stock that the Corporation shall have
authority to issue is 120,000,000 shares of capital stock,
consisting of (i) 70,000,000 shares of preferred stock, par value
$.01 per share ('Preferred Stock'); (ii) 40,000,000 shares of Class
A Common Stock, par value $.01 per share ('Class A Common Stock');
and (iii) 10,000,000 shares of Class B Common Stock, par value $.01
per share ('Class B Common Stock'; the Class A Common Stock and the
Class B Common Stock are collectively referred to as the 'Common
Stock')."
SECOND: That a majority of the outstanding stock entitled to vote on
such amendment, and a majority of the outstanding stock of each class entitled
to vote thereon as a class, has been voted in favor of such amendment.
<PAGE>
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused
this Certificate of Amendment to be executed by MARK W. DUFFEY, the
President of the Corporation, this 7th day of May, 1997.
CARRIAGE SERVICES, INC.
By:_________________________________
MARK W. DUFFEY, President
-2-
EXHIBIT 10.3
CERTIFICATE OF DECREASE
OF
SERIES D PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to Section 151 of the General Corporation Law of the State
of Delaware, CARRIAGE SERVICES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (herein referred to as the
"Corporation"), DOES HEREBY CERTIFY:
That pursuant to authority granted to the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, such Board of Directors at a meeting
duly held on May 7, 1997, duly adopted a resolution providing for the reduction
in the number of shares designated in a series of preferred stock of the
Corporation, which resolution is as follows:
WHEREAS, the Corporation has previously established and designated a
series of Preferred Stock, $.01 par value, designated as its Series D
Preferred Stock ("Series D Preferred Stock"), consisting of up to
10,000,000 shares, pursuant to the Certificate of Designation,
Preferences, Rights and Limitations filed with the Secretary of State of
Delaware on March 6, 1996, as amended and restated (in connection with
which the number of shares authorized thereunder was increased to
20,000,000 shares of Series D Preferred Stock) in the form attached as
Exhibit D to the Corporation's Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on July 3,
1996, and as further amended by the Certificate of Decrease filed with the
Secretary of State of Delaware on October 25, 1996 (in connection with
which the number of shares authorized thereunder was decreased to
19,000,000 shares of Series D Preferred Stock) (as so amended, the "Series
D Certificate of Designation"); and
WHEREAS, there are currently 1,682,500 shares of Series D Preferred
Stock which are currently issued and outstanding;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
expressly granted and vested in the Board of Directors of the
Corporation in accordance with the provisions
<PAGE>
of the Amended and Restated Certificate of Incorporation of the
Corporation and Section 151(g) of the General Corporation Law of the
State of Delaware, the number of shares designated as Series D
Preferred Stock pursuant to the Series D Certificate of Designation
is hereby decreased to TWO MILLION (2,000,000).
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused
this Certificate of Decrease to be signed by Mark W. Duffey, its
President, as of the 7th day of May, 1997.
CARRIAGE SERVICES, INC.
By:____________________________
MARK W. DUFFEY, President
-2-
EXHIBIT 10.4
CERTIFICATE OF DECREASE
OF
SERIES F PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to Section 151 of the General Corporation Law of the State
of Delaware, CARRIAGE SERVICES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (herein referred to as the
"Corporation"), DOES HEREBY CERTIFY:
That pursuant to authority granted to the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, such Board of Directors at a meeting
duly held on May 7, 1997, duly adopted a resolution providing for the reduction
in the number of shares designated in a series of preferred stock of the
Corporation, which resolution is as follows:
WHEREAS, the Corporation has previously established and designated a
series of Preferred Stock, $.01 par value, designated as its Series F
Preferred Stock ("Series F Preferred Stock"), consisting of up to
20,000,000 shares, pursuant to the Certificate of Designation,
Preferences, Rights and Limitations filed with the Secretary of State of
Delaware on November 6, 1996, as amended by the Amended Certificate of
Designation, Preferences, Rights and Limitations filed with the Secretary
of State of Delaware on December 17, 1996 (as so amended, the "Series F
Certificate of Designation"); and
WHEREAS, there are currently 14,611,677 shares of Series F Preferred
Stock which are currently issued and outstanding;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
expressly granted and vested in the Board of Directors of the
Corporation in accordance with the provisions of the Amended and
Restated Certificate of Incorporation of the Corporation and Section
151(g) of the General Corporation Law of the State of Delaware, the
number of shares designated as Series F Preferred Stock pursuant to
the Series F Certificate of
<PAGE>
Designation is hereby decreased to FIFTEEN MILLION (15,000,000).
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused
this Certificate of Decrease to be signed by Mark W. Duffey, its
President, as of the 7th day of May, 1997.
CARRIAGE SERVICES, INC.
By:________________________________
MARK W. DUFFEY, President
-2-
EXHIBIT 11.1
CARRIAGE SERVICES, INC.
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE DATA)
Earnings per share for the three and nine month periods ended September 30,
1997 and 1996 is calculated based on the weighted average number of common and
common equivalent shares outstanding during the period as proscribed by APB 15.
Earnings (loss) per common and common equivalent share for the three and nine
month periods ending September 30, 1996 and 1997 was as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
-------------------------- ---------------------------
1996 1997 1996 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
Income (loss) before extraordinary item .................. $ (414) $ 347 $(1,075) $ 3,661
Extraordinary item ....................................... (498) (195) (498) (195)
-------- ------- --------
Net income (loss) ........................................ (912) 152 (1,573) 3,466
Series D preferred stock dividends
(a) ...................................................... 250 29 351 239
------- -------- ------- --------
Net income (loss) attributable to
common Stockholders .................................... $(1,162) $ 123 $(1,924) $ 3,227
======= ======== ======= ========
Common shares outstanding ................................ 5,920 10,546 3,662 10,039
Common equivalent shares:
Stock options, treasury stock
method .............................................. -- 295 -- 283
Assumed conversion of
preferred stock ..................................... -- 913 -- 1,002
------- -------- ------- --------
Total weighted average number of
common and common equivalent
shares outstanding .................................. 5,920 11,754 3,662 11,325
======= ======== ======= ========
NET INCOME (LOSS) PER SHARE:
Net income (loss) per common
and common equivalent share before
extraordinary item attributable to
common shareholders ................................. $ (.11) $ .03 $ (.39) $ .31
Extraordinary item per share ........................ $ (.09) $ (.02) $ (.14) $ (.02)
------- -------- ------- --------
Net income (loss) per common
and common equivalent share
attributable to common
shareholders .................................... $ (.20) $ .01 $ (.53) $ .29
======= ======== ======= ========
</TABLE>
(a) The Company's Series F Preferred Stock is considered a common stock
equivalent for purposes of computing earnings per share. Therefore, the
dividends applicable to the Series F Preferred Stock are not reflected in the
net income (loss) attributable to common stockholders.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 9,259
<ALLOWANCES> 1,041
<INVENTORY> 5,109
<CURRENT-ASSETS> 15,252
<PP&E> 78,277
<DEPRECIATION> 6,335
<TOTAL-ASSETS> 219,237
<CURRENT-LIABILITIES> 8,417
<BONDS> 85,642
0
16,285
<COMMON> 105
<OTHER-SE> 89,179
<TOTAL-LIABILITY-AND-EQUITY> 219,237
<SALES> 55,295
<TOTAL-REVENUES> 55,295
<CGS> 41,592
<TOTAL-COSTS> 41,592
<OTHER-EXPENSES> 3,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,028
<INCOME-PRETAX> 6,018
<INCOME-TAX> 2,357
<INCOME-CONTINUING> 3,661
<DISCONTINUED> 0
<EXTRAORDINARY> 195
<CHANGES> 0
<NET-INCOME> 3,466
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
