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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER: 1-11961
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CARRIAGE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0423828
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1300 POST OAK BLVD., SUITE 1500, HOUSTON, TX 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (281) 556-7400
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Common Stock, $.01 Par Value
(TITLE OF CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
The aggregate market value of the voting stock held by nonaffiliates
(affiliates being, for these purposes only, directors, executive officers and
holders of more than 5% of the Company's Class A Common Stock) of the Registrant
as of February 28, 1997 was approximately $16,045,000.
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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 February 28, 1997 was 4,274,495 and 5,566,650, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement in connection with the 1997 annual meeting of shareholders,
incorporated in Part III of this Report.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Carriage Services, Inc. (the "Company") believes that it is the sixth
largest provider of death care services and products in the United States based
on 1996 revenues. The Company provides a complete range of funeral services and
products to meet families' needs, including consultation, removal and
preparation of remains, sale of caskets and related funeral merchandise,
transportation services and the use of funeral home facilities for visitation.
The Company also offers cemetery products and services, including rights to
interment in cemetery sites, interment services and related cemetery
merchandise. As of December 31, 1996, the Company operated 76 funeral homes and
10 cemeteries in 16 states. Funeral services constituted approximately 93% of
revenues in 1995 and 1996.
Since the Company's formation in 1991, management has undertaken a
disciplined approach to growth that has allowed the Company the necessary time
to integrate acquisitions, develop effective operating, administrative and
financial systems and controls, recruit an experienced operating management team
and promote a decentralized, entrepreneurial service culture. 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 believes that the infrastructure it developed during
this period positioned the Company to pursue an accelerated growth strategy
beginning in late 1995. As a result, the Company acquired 38 funeral homes and
seven cemeteries for consideration of $68 million during 1996 and an additional
16 funeral homes and two cemeteries for consideration of $55 million through
February 28, 1997. In addition, as of February 28, 1997, the Company had letters
of intent to acquire eight funeral homes for consideration of $10 million.
The Company was incorporated in Delaware on December 29, 1993. The
Company's principal executive office is located at 1300 Post Oak Blvd., Suite
1500, Houston, Texas 77056, and its telephone number is (281) 556-7400.
DEATH CARE INDUSTRY
Death care companies provide products and services to families in three
principal areas: (i) ceremony and tribute, generally in the form of a funeral or
memorial service; (ii) disposition of remains, either through burial or
cremation; and, (iii) memorialization, generally through monuments, markers or
inscriptions. The death care industry in the United States is characterized by
the following fundamental attributes:
HIGHLY FRAGMENTED OWNERSHIP. A significant majority of death care
operators consist of small, family-owned businesses that control one or several
funeral homes or cemeteries in a single community. Management estimates that
there are approximately 22,000 funeral homes and 9,600 commercial (as opposed to
religious, family, fraternal, military or municipal) cemeteries in the United
States. Less than 20% of the 1995 United States death care industry revenues are
represented by the Company and the four largest publicly traded domestic death
care companies.
BARRIERS TO ENTRY. Death care businesses have traditionally been
transferred to successive generations within a family and in most cases have
developed a local heritage and tradition that act as a formidable barrier for
those wishing to enter an existing market. Heritage and tradition afford an
established funeral home or cemetery a local franchise and provides the
opportunity for repeat business. Other difficulties faced by entities desiring
to enter a market include local zoning restrictions, substantial capital
requirements, increasing regulatory burdens and scarcity of cemetery land in
certain urban areas. In addition, established firms' backlog of preneed,
prefunded funerals or presold cemetery and mausoleum spaces also makes it
difficult for new entrants to gain entry into the marketplace.
STABILITY. The death rates in the United States are fairly predictable,
thereby affording stability to the death care industry. Since 1980, the number
of deaths in the United States has increased at a compounded rate of
approximately 1% per year. According to a 1993 report prepared by the U.S.
Department of
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Commerce Bureau of the Census, the number of deaths in the United States is
expected to increase by approximately 1% per year between 1997 and 2010. Because
the industry is relatively stable, non-cyclical and fairly predictable, business
failures are uncommon. As a result, ownership of funeral home and cemetery
businesses generally has not experienced significant turnover, and the
aggregate number of funeral homes and cemeteries in the United States has
remained relatively constant.
INCREASED CONSOLIDATION. In the past several years the industry has
experienced a trend toward consolidation of small death care operations with
large, primarily publicly owned death care providers that can benefit from
economies of scale, improved managerial control and more effective strategic
planning and greater financial resources. This trend appears to result
principally from increased regulation, a desire on the part of small, family
operated funeral businesses to address family succession and estate planning
issues, a desire for liquidity, and the increasing competitive threat posed by
the large death care providers. The active acquisition market for funeral homes
and cemeteries provides a source of potential liquidity that was not as readily
available to individual owners in the past. The consolidation trend has
accelerated in recent years as several large death care companies have expanded
their operations significantly through acquisitions.
CLUSTERED OR COMBINED OPERATIONS. The death care industry has also
witnessed a trend by companies to cluster their funeral home and cemetery
operations. Clusters refer to funeral homes and/or cemeteries which are grouped
together in a geographical region. Clusters provide a company with the ability
to generate cost savings through the sharing of personnel, vehicles and other
resources. Firms also are increasingly combining funeral home and cemetery
operations at a single site to allow cross-marketing opportunities and for
further cost reductions through shared resources. The ability to offer the full
range of products and services at one location or to cluster funeral home and
cemetery operations and cross-market the full range of death care services has
proven to be a competitive advantage which tends to increase the market share
and profitability of both the funeral home and cemetery.
PRENEED MARKETING. In addition to sales at the time of death or on an "at
need" basis, an increasing number of death care products and services are being
sold prior to the time of death or on a "preneed" basis by death care
providers who have developed sophisticated marketing organizations to actively
promote such products and services. At the same time, consumers are becoming
more aware of the benefits of advanced planning, such as the financial assurance
and peace of mind achieved by establishing in advance a fixed price and type of
service, and the elimination of the emotional strain of making death care plans
at the time of need. Effective marketing of preneed products and services
assures a backlog of future business.
CREMATION. In recent years, there has been steady, gradual growth in the
number of families in the United States that have chosen cremation as an
alternative to traditional methods of burial. According to industry studies,
cremations represented approximately 21% of the United States burial market in
1995, as compared to approximately 10% in 1980. Many parts of the Southern and
Midwestern United States and many non-metropolitan communities exhibit
significantly lower rates of cremation as a result of religious and cultural
traditions. Cremation historically has been marketed as a less costly
alternative to interment. However, cremation is increasingly marketed as part of
a complete death care package that includes traditional funeral services and
memorialization.
BUSINESS STRATEGY
The Company's objective is to become the preferred succession planning
alternative for premier funeral homes throughout the United States while
continuing to promote a decentralized, entrepreneurial service culture.
Management believes that the Company's reputation and collaborative operating
style have allowed it to successfully pursue attractive acquisition candidates.
The Company also has been successful in implementing programs to increase
profitability at newly acquired properties.
OPERATING STRATEGY. Since its formation, the Company has focused on
becoming a succession planning alternative to the larger death care providers.
The Company believes that its decentralized operating style, which provides
autonomy and flexibility to local management, is attractive to owners of funeral
homes seeking to sell their operations. Management believes that its operating
style is also a key
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component in its ability to attract and retain quality managers. While the
Company's management style allows local operators significant responsibility in
the daily operating decisions, financial parameters, jointly established during
the budgeting process, are monitored by senior management through the Company's
management and accounting systems. The Company utilizes computer systems linked
to most of the Company's funeral home locations. These systems enable a location
to function on its own by maintaining accounts receivables and payables locally,
at a cluster processing site, or at the Company's centralized processing center
at the option of the local manager. The same information is provided to the
Company's senior management which allows the Company, on a timely basis, to
access critical operating and financial data from a site in order to analyze the
performance of individual locations and institute corrective action if
necessary.
The Company has established a compensation structure that is designed to
maintain and create a sense of ownership. Local management is awarded meaningful
cash bonuses and stock options for exceptional performance when achieving
specified earnings objectives. The Company has also structured a stock option
program which awards options over a two year period to most full-time employees
based upon the performance of their local business during the period. As a
result, all management and most full-time employees have the opportunity to
increase their personal net worth through strong local and corporate
performance.
Management also believes that implementing its operating strategy in newly
acquired businesses leads to enhanced profitability of acquired operations. The
Company has an extensive merchandising and training program that is designed to
educate local funeral home operators about opportunities to improve marketing of
products and services, to share sales leads and other cross-marketing
opportunities, and to become familiar with, and adopt, the Company's business
objectives. The larger size of the Company, as compared to local operators, also
allows favorable pricing and terms to be achieved from vendors through volume
discounts on significant expenditures, such as caskets, vaults, memorials and
vehicles. In addition, while operational functions and management autonomy are
retained at the local level, centralizing certain financial, accounting, legal,
administrative and employee benefit functions allows for more efficient and
cost-effective operations. The Company also has recently greatly expanded its
preneed sales programs in selected local markets to maintain or increase market
presence and assure a backlog of future business.
ACQUISITION STRATEGY. The Company believes that significant acquisition
opportunities currently exist in the death care industry that the Company
intends to aggressively pursue. In evaluating specific acquisition candidates,
the Company considers such factors as the property's location, reputation,
heritage, physical size, volume of business, profitability, name recognition,
aesthetics, potential for development or expansion, competitive market position,
pricing structure and quality of operating management. The Company will continue
to aggressively pursue the acquisition of premier funeral homes that have a
strong local market presence and that conduct from 100 to 600 funeral services
per year, as well as funeral homes in close proximity to the Company's existing
businesses. In addition, although the Company traditionally has not focused on
acquiring cemetery operations, the Company intends to more aggressively pursue
cemetery acquisitions in markets where the Company operates, or plans to
operate, funeral homes to take advantage of cross-marketing opportunities. The
Company is also pursuing larger acquisition transactions which provides
significant strategic benefits to the Company, such as new market penetration.
For example, in January 1997, the Company merged with CNM, a premier
California-based company which operates 10 funeral homes and one cemetery. This
operation as a whole performs 2,100 funerals and 1,470 interments annually and
represents the Company's first entry into California. The Company also seeks to
issue, and has been successful in issuing, equity securities to the previous
owners of acquired businesses. Since inception through March 10, 1997, the
Company has issued 37,775,608 shares of redeemable preferred stock (convertible
into 1,361,338 shares of Class A Common Stock and 1,227,812 shares of Class B
Common Stock) and 225,857 shares of Class A Common Stock in conjunction with
acquisition transactions. As of March 10, 1997, a total of 16,039,116 shares of
redeemable preferred stock have converted into shares of Class A and Class B
Common Stock. Management believes that its success in issuing equity securities
in conjunction with acquisitions reflects in large part previous owners' desires
to remain affiliated with and to be invested in the Company.
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In purchasing the premier location in a particular market, management
believes that the Company is able to attract the most talented personnel,
minimize downside risk of loss of volume to competitors and provide
opportunities for increased profitability when such operations are coupled with
the Company's management techniques. In addition, the Company generally retains
the former owners and other key personnel of acquired funeral homes and provides
them with significant operating responsibility to assure the continuation of
high quality services and the maintenance of the acquired firm's reputation and
heritage. In nearly all cases, acquired funeral homes continue operations under
the same trade name as those of the prior owners. In addition, the Company views
experienced management of certain acquired operations as potential corporate
management candidates. Management believes that this potential for advancement
with the Company, combined with the Company's decentralized operating structure
and incentive-based compensation system, makes it a particularly attractive
acquirer to some independent owners. The Company also will continue to analyze
the possibility of acquiring additional funeral homes in present markets so that
personnel and vehicles can be shared and profit margins enhanced.
The Company follows a disciplined approach to acquisitions utilizing
specific operating and financial criteria. The Company develops pro forma
financial statements for acquisition targets reflecting estimates of revenue and
costs under the Company's ownership and then utilizes such information to
determine a purchase price which it believes is reasonable. The Company
anticipates that the consideration for future acquisitions will consist of a
combination of cash, deferred purchase price and preferred and common equity.
The Company also will typically enter into management, consulting and
non-competition agreements with former owners and key executive personnel of
acquired businesses.
Although the Company has not historically focused on acquiring cemetery
operations, as a result of the increased access to capital and the Company's
enhanced profile in the industry, the Company is encountering significant
cemetery acquisition opportunities. The Company will continue to pursue cemetery
acquisitions in markets where they operate funeral homes to take advantage of
cross-marketing opportunities and in markets where a funeral home acquisition
strategy is viable.
While the Company focuses its efforts on identifying individual acquisition
candidates with the potential for a negotiated, non-competitive acquisition
process, the Company also competes for more broadly marketed acquisition
opportunities. In many cases, the Company has been successful in acquiring
operations where it has not been the highest bidder because of the Company's
reputation, operating strategy and corporate culture. Management believes that
the issuance of equity securities to fund certain funeral home acquisitions has
been, and will continue to be, attractive to select acquisition candidates.
The Company has successfully executed this acquisition strategy since its
inception, as demonstrated in the table set forth below.
FUNERAL
YEAR CONSIDERATION HOMES(1) CEMETERIES(2)
- ------------------ ---------------------- -------- -------------
(DOLLARS IN THOUSANDS)
1992............... $ 11,832 14 2
1993............... 13,843 11 1
1994............... 9,153 9 1
1995............... 12,191 8 0
1996(3)............ 68,181 38 7
---------------------- -- --
$115,200 80 11
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(1) The Company subsequently divested four of these funeral homes.
(2) The Company subsequently divested one of these cemeteries.
(3) From January 1, 1997 through March 10, 1997, the Company has acquired
16 funeral homes and two cemeteries for aggregate consideration of $55
million.
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OPERATIONS
The Company's funeral home operations, cemetery operations and preneed
programs are managed by service-minded professionals with extensive death care
industry experience. In response to the rapid growth experienced in 1996, the
Company increased operations staffing, including a new transition team, to
provide local managers with the additional support and direction needed during
the integration of newly acquired properties.
Although certain financial management and policy matters are centralized,
local funeral home and cemetery managers have substantial autonomy in
determining the manner in which their services and products are marketed and
delivered and their funeral homes are managed. The Company believes that this
strategy permits each local firm to maintain its unique style of operation and
to capitalize on its reputation and heritage while the Company maintains
centralized supervisory controls and provides specialized services at the
corporate level.
FUNERAL HOME OPERATIONS. As of December 31, 1996, the Company operated 76
funeral homes in 16 states. Funeral home revenues accounted for approximately
93% of the Company's net revenues for each of the years ended December 31, 1995
and 1996. The Company's funeral home operations are managed by a team of
experienced death care industry professionals.
The Company's funeral homes offer a complete range of services to meet
family's funeral needs, including consultation, the removal and preparation of
remains, the sale of caskets and related funeral merchandise, the use of funeral
home facilities for visitation and worship, and transportation services. Most of
the Company's funeral homes have a non-denominational chapel on the premises,
which permits family visitation and religious services to take place at one
location, which reduces transportation costs to the Company and inconvenience to
the family.
CEMETERY OPERATIONS. As of December 31, 1996, the Company operated 10
cemeteries in six states. Cemetery revenues accounted for approximately 7% of
the Company's net revenues for each of the years ended December 31, 1995 and
1996.
As of December 31, 1996, the Company employed a staff of approximately 70
cemetery sales counselors for the sale of interment rights and merchandise. As a
result of a growing number of potential cemetery acquisition candidates, the
Company has made additional investments in the cemetery operations
infrastructure. During the fourth quarter of 1996, experienced preneed marketing
professionals were added at the national and regional levels. This investment in
additional preneed sales management should allow the Company to increase preneed
sales at existing cemetery properties and will position the Company to more
effectively integrate future cemetery acquisitions.
The Company's cemetery products and services include interment services,
the rights to interment in cemetery sites (including grave sites, mausoleum
crypts and niches) and related cemetery merchandise such as memorials and
vaults. Cemetery operations generate revenues through sales of interment rights,
memorials, fees for interment and cremation services, memorial installations,
interest income from installment sales contracts and investment income from
preneed cemetery merchandise and perpetual care trusts.
PRENEED PROGRAMS. In addition to sales of funeral merchandise and services
and cemetery interment rights, merchandise and services at the time of need, the
Company also markets funeral and cemetery services and products on a preneed
basis. Preneed funeral or cemetery contracts enable families to establish in
advance the type of service to be performed, the products to be used and the
cost of such products and services in accordance with prices prevailing at the
time the contract is signed rather than when the products and services are
delivered. Preneed contracts permit families to eliminate the emotional strain
of making death care plans at the time of need and enable the Company to
establish a portion of its future market
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share. Proceeds from the sale of preneed funeral contracts are not recognized as
revenues until the time the funeral service is performed. The Company sold 2,610
and 3,760 preneed funeral contracts in the years ended December 31, 1995 and
1996, respectively. At December 31, 1996, the Company had a backlog of 22,925
preneed funeral contracts to be delivered in the future.
Preneed funeral contracts are usually paid on an installment basis. The
performance of preneed funeral contracts is usually secured by placing the funds
collected in trust for the benefit of the customer or by the purchase of a life
insurance policy, the proceeds of which will pay for such services at the time
of need. Insurance policies intended to fund preneed funeral contracts cover the
original contract price and generally include built-in escalation clauses
designed to offset future inflationary cost increases.
In addition to preneed funeral contracts, the Company also offers
"preplanned" funeral arrangements whereby a client determines in advance
substantially all of the details of a funeral service without any financial
commitment or other obligation on the part of the client, until the actual time
of need. Preplanned funeral arrangements permit families to avoid the emotional
strain of making death care plans at the time of need and enable a funeral home
to establish relationships with clients that frequently lead to at need sales.
Preneed cemetery sales are usually financed by the Company through
installment sale contracts, generally with terms of five years. Preneed sales of
cemetery interment rights and other related services and merchandise are
recorded as revenues when the contract is signed, with concurrent recognition of
related costs. The Company typically receives an initial payment at the time the
contract is signed. Allowances for customer cancellations and refunds are
accrued at the date of sale based upon historical experience. Preneed cemetery
sales represented approximately 42% and 67% of the Company's net cemetery
revenues for the years ended December 31, 1995 and 1996, respectively.
COMPETITION
The acquisition environment in the death care industry is highly
competitive. The four major publicly held death care companies, Service
Corporation International ("SCI"), The Loewen Group, Inc., Stewart
Enterprises, Inc. and Equity Corporation International, are substantially larger
than the Company and have significantly greater financial and other resources
than the Company. In addition, a number of smaller companies are actively
acquiring funeral homes and cemeteries. Prices for funeral homes and cemeteries
have increased substantially in recent years, and, in some cases, competitors
have paid acquisition prices substantially in excess of the prices offered by
the Company. Accordingly, no assurance can be given that the Company will be
successful in expanding its operations through acquisitions or that funeral
homes and cemeteries will be available at reasonable prices or on reasonable
terms.
The Company's funeral home and cemetery operations generally face
competition in the markets that they serve. Market share for funeral homes and
cemeteries is largely a function of reputation and heritage, although
competitive pricing, professional service and attractive, well-maintained and
conveniently located facilities are also important. The sale of preneed funeral
services and cemetery property has increasingly been used by many companies as
an important marketing tool to build market share. Due to the importance of
reputation and heritage, market share increases are usually gained over a long
period of time.
TRUST FUNDS
GENERAL. The Company has established a variety of trusts in connection
with its funeral home and cemetery operations as required under applicable state
law. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery
merchandise and service trusts; and, (iii) perpetual care trusts. These trusts
are typically administered by independent financial institutions selected by the
Company. The Company also uses independent professional managers to advise the
Company on investment matters.
PRENEED FUNERAL TRUSTS. Preneed funeral sales are facilitated by deposits
to a trust or purchase of a third-party insurance product. All preneed funeral
sales are deferred until the service is performed. The trust income earned and
any increase in insurance benefits are also deferred until the service is
performed in order to offset possible inflation in cost when providing the
service in the future. Although direct marketing costs and commissions incurred
for the sale of preneed funeral contracts are a current use of cash, such costs
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are also deferred and amortized over 12 years, which approximates the expected
timing of the performance of the services related to the preneed funeral
contracts. Since the Company does not have access to the trust fund principal or
earnings, the related assets and liabilities are not reflected on the Company's
balance sheet. In most states, the Company is not permitted to withdraw
principal or investment income from such trusts until the funeral service is
performed. Some states, however, allow for the retention of percentage
(generally 10%) of the receipts to offset any administrative and selling
expenses, which the Company defers until the service is provided. The aggregate
balance of the Company's preneed funeral contracts held in trust was
approximately $36.4 million as of December 31, 1996.
PRENEED CEMETERY MERCHANDISE AND SERVICE TRUSTS. The Company is generally
required under applicable state laws to deposit a specified amount (which varies
from state to state, generally 110% of wholesale cost) into a merchandise and
service trust fund for cemetery merchandise and services sold on a preneed
basis. The related trust fund income is recognized in current revenues as trust
earnings. These earnings are offset by any current period inflation costs
accrued related to the merchandise that has not yet been purchased. Liabilities
for undelivered cemetery merchandise and services, including accruals for
inflation increases, are reflected in the balance sheet net of the merchandise
and service trust balance. The Company is permitted to withdraw the trust
principal and the accrued income when the merchandise is purchased or service is
provided by the Company or when the contract is canceled. The merchandise and
service trust fund balances, in the aggregate, were approximately $1.1 million
as of December 31, 1996.
PERPETUAL CARE TRUSTS. In certain states, regulations require a portion,
generally 10%, of the sale amount of cemetery property and memorials to be
placed in trust. These perpetual care trusts provide the funds necessary to
maintain cemetery property and memorials in perpetuity. The related trust fund
income is recognized in current revenues as trust earnings. While the Company is
entitled to withdraw the income from its perpetual care trust to provide for the
maintenance of the cemetery and memorials, they are not entitled to withdraw any
of the principal balance of the trust fund, and therefore, none of the principal
balances are reflected in the Company's balance sheet. The Company's perpetual
care trust balances were approximately $2.0 million as of December 31, 1996.
For additional information with respect to the Company's trusts, see Note 1
of the Consolidated Financial Statements.
REGULATION
The Company's funeral home operations are subject to substantial regulation
by the Federal Trade Commission (the "FTC"). Certain regulations contain
minimum standards for funeral industry practices, require extensive price and
other affirmative disclosures to the customer at the time of sale and impose
mandatory itemization requirements for the sale of funeral products and
services.
The Company is subject to the requirements of the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the United States Environmental Protection Agency
community right-to-know regulations under Title III of the federal Superfund
Amendment and Reauthorization Act and similar state statutes require the Company
to organize information about hazardous materials used or produced in its
operations. Certain of this information must be provided to employees, state and
local governmental authorities and local citizens. The Company is also subject
to the Federal Americans with Disabilities Act and similar laws which, among
other things, may require that the Company modify its facilities to comply with
minimum accessibility requirements for disabled persons.
The Company's operations, including its preneed sales and trust funds, are
also subject to extensive regulation, supervision and licensing under numerous
other Federal, state and local laws and regulations. See "-- Trust Funds."
The Company believes that it is in substantial compliance with all such
laws and regulations. Federal and state legislatures and regulatory agencies
frequently propose new laws, rules and regulations some of which, if enacted,
could have a material adverse effect on the Company's results of operations. The
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Company cannot predict the outcome of any proposed legislation or regulations or
the effect that any such legislation or regulations might have on the Company.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries employed 387
full-time employees, 392 part-time employees and 135 preneed sales counselors.
All of the Company's funeral directors and embalmers possess licenses required
by applicable regulatory agencies. Management believes that its relationship
with its employees is good. No employees of the Company or its subsidiaries are
members of a collective bargaining unit.
ITEM 2. PROPERTIES
At December 31, 1996, the Company operated 76 funeral homes and 10
cemeteries in 16 states. The Company owns the real estate and buildings of 54 of
its funeral homes and all of its cemeteries and leases facilities in connection
with 22 of its funeral homes. The 10 cemeteries operated by the Company cover a
total of approximately 370 acres. The Company's inventory of unsold developed
lots totaled approximately 44,000 at December 31, 1996. In addition,
approximately 175 acres, or approximately 47% of the total acreage, is available
for future development. The Company does not anticipate any shortage of
available space in any of its current cemeteries for the foreseeable future.
The following table sets forth certain information as of December 31, 1996
regarding the Company's funeral homes and cemeteries by state:
NUMBER OF
FUNERAL HOMES
------------------
STATE OWNED LEASED(1) CEMETERIES
- ------------------------------------- ----- --------- -----------
Texas................................ 9(2) 1 3
Kentucky............................. 6 4 1
Ohio................................. 9 2 0
Idaho................................ 5(3) 0 3
Georgia.............................. 3 3 0
South Carolina....................... 5 0 1
Michigan............................. 3 2 0
Florida.............................. 2 1 1
Illinois............................. 0 4 0
Tennessee............................ 3 1 0
Connecticut.......................... 2 1 0
Indiana.............................. 1 2 0
North Carolina....................... 1 1 1
Kansas............................... 2 0 0
Washington........................... 2 0 0
Alabama.............................. 1 0 0
----- -- --
Total(4)........................ 54 22 10
===== == ==
- ------------
(1) The leases, with respect to these funeral homes, have remaining terms
ranging from two to fifteen years, and the Company generally has a right of
first refusal on any proposed sale of the property where these funeral homes
are located.
(2) One of these funeral homes is located on property contiguous to and operated
in combination with a Company cemetery.
(3) Two of these funeral homes are located on property contiguous to and
operated in combination with Company cemeteries.
(4) From January 1, 1997 through March 10, 1997, the Company has acquired
ten funeral homes and one cemetery in California, four funeral homes
in Ohio, one funeral home in Tennessee, one funeral home in Rhode Island
and one cemetery in Indiana for an aggregate consideration of $55 million.
The Company's corporate headquarters occupy approximately 19,700 square
feet of leased office space in Houston, Texas.
8
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At December 31, 1996, the Company operated 309 vehicles, of which 234 were
owned and 75 were leased.
The specialized nature of the Company's business requires that its
facilities be well-maintained. Management believes that this standard is met.
ITEM 3. LEGAL PROCEEDINGS
The Company and certain of its subsidiaries are parties to a number of
legal proceedings that arise from time to time in the ordinary course of
business. While the outcome of these proceedings cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the Company.
The Company carries insurance with coverages and coverage limits that it
believes to be customary in the funeral home and cemetery industries. Although
there can be no assurance that such insurance will be sufficient to protect the
Company against all contingencies, management believes that its insurance
protection is reasonable in view of the nature and scope of the Company's
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is traded in the over-the-counter market
and quoted on the Nasdaq National Market under the symbol "CRSV". The
following table presents the quarterly high and low sale prices as reported by
the Nasdaq National Market since the shares became publicly traded on August 9,
1996 at an initial price of $13.50. These quotations reflect the inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
1996 HIGH LOW
--------- ---------
Third Quarter (beginning August 9,
1996)................................ $ 22.75 $ 14.25
Fourth Quarter....................... $ 23.50 $ 18.375
As of February 28, 1997, there were 4,274,495 shares of the Company's Class
A Common Stock and 5,566,650 shares of the Company's Class B Common Stock
outstanding. The holders of Class A Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of Common stockholders. The
holders of Class B Common Stock are entitled to ten votes for each share held on
all matters submitted to a vote of Common stockholders. The Class A Common Stock
shares outstanding are held by approximately 136 stockholders of record. The
Company believes there are approximately 2,000 beneficial owners of the Class A
Common Stock.
The Company has never paid a cash dividend on its Class A or Class B Common
Stock. The Company currently intends to retain earnings to finance the growth
and development of its business and does not anticipate paying any cash
dividends on its common stock in the foreseeable future. Any future change in
the Company's dividend policy will be made at the discretion of the Company's
Board of Directors in light of the financial condition, capital requirements,
earnings and prospects of the Company and any restrictions under credit
agreements, as well as other factors the Board of Directors may deem relevant.
RECENT SALES OF UNREGISTERED SECURITIES
On January 1, 1994, the Company sold an aggregate of 2,520,000 shares of
Common Stock to C. Byron Snyder, Melvin C. Payne, Mark W. Duffey and Reid A.
Millard in exchange for shares of capital stock of three entities. The Company
relied on an exemption under Section 4(2) of the Securities Act in effecting
these transactions.
On October 12, 1994, the Company sold one share of Common Stock for $8.00
to a former owner of an acquired funeral home. The Company relied on an
exemption under Section 4(2) of the Securities Act in effecting this
transaction.
On December 31, 1994, the Company sold one share of Common Stock in
exchange for one share of the capital stock of a subsidiary. The Company relied
on an exemption under Section 4(2) of the Securities Act in effecting this
transaction.
From January 18, 1994 to February 28, 1994, the Company sold in a private
placement an aggregate of 7,000,000 shares of Preferred Stock. The Company acted
as its own placement agent. Such shares were purchased for $1.00 per share. The
Company relied on an exemption under Section 4(2) of the Securities Act in
effecting this placement.
From October 28, 1994 to May 29, 1996, the Company sold an aggregate of
715,000 shares of Preferred Stock, valued at $1.00 per share, to the former
owners of acquired funeral homes. Consideration for such shares consisted of
ownership interests in funeral home businesses and contract rights. The Company
relied on an exemption under Section 4(2) of the Securities Act in effecting
these transactions.
On September 25, 1995, the Company sold in a private placement an aggregate
of 8,500,000 shares of Preferred Stock. The Chicago Corporation acted as
placement agent in connection with this
10
<PAGE>
offering. Such shares were purchased for $1.00 per share. The Company relied on
an exemption under Section 4(2) of the Securities Act in effecting the
placement.
From March 8, 1996 to September 6, 1996, the Company sold an aggregate of
17,775,616 shares of Series D Preferred Stock, valued at $1.00 per share, to the
former owners of acquired funeral homes. Consideration for such shares consisted
of ownership interests in funeral home businesses. The Company relied on an
exemption under Section 4(2) of the Securities Act in effecting these
transactions.
On May 28, 1996, an employee exercised options to purchase 1,000 shares of
Common Stock pursuant to the Company's 1995 Stock Incentive Plan at an exercise
price of $10.00 per share. The Company relied on an exemption under Section 4(2)
of the Securities Act in effecting this transaction.
From August 30, 1996 to February 28, 1997, the Company sold an aggregate of
225,857 shares of Class A Common Stock, valued at market prices, to the former
owners of acquired funeral homes. Consideration for such shares consisted of
ownership interests in funeral home businesses. The Company relied on an
exemption under Section 4(2) of the Securities Act in effecting these
transactions.
On January 7, 1997, the Company sold 19,999,992 shares of Series F
Preferred Stock, valued at $1.00 per share, to the former owners of acquired
funeral homes. Consideration for such shares consisted of
ownership interests in funeral home businesses. The Company relied on an
exemption under Section 4(2) of the Securities Act in effecting this
transaction.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues, net:
Funeral ..................................... $ 1,625 $ 10,651 $ 17,368 $ 22,661 $ 37,445
Cemetery .................................... 178 614 1,036 1,576 2,903
-------- -------- -------- -------- ---------
Total net revenues .......................... 1,803 11,265 18,404 24,237 40,348
-------- -------- -------- -------- ---------
Gross profit:
Funeral ..................................... (88) 917 2,856 3,740 6,804
Cemetery .................................... 113 143 158 250 362
-------- -------- -------- -------- ---------
Total gross profit .......................... 25 1,060 3,014 3,990 7,166
General and administrative
expenses .................................... 490 985 1,266 2,106 2,474
-------- -------- -------- -------- ---------
Operating income (loss) ..................... (465) 75 1,748 1,884 4,692
Interest expense, net ....................... 295 1,745 2,671 3,684 4,347
-------- -------- -------- -------- ---------
Income (loss) before income
taxes ....................................... (760) (1,670) (923) (1,800) 345
Provision for income taxes .................. -- (1) -- (1) 40 694 138
-------- -------- -------- -------- ---------
Income (loss) before extraordinary
item ........................................ (760) (1,670) (963) (2,494) 207
Extraordinary item, net ..................... -- -- -- -- (498)
-------- -------- -------- -------- ---------
Loss after extraordinary item ............. (760) (1,670) (963) (2,494) (291)
Preferred stock dividends ................... -- -- -- -- 622
-------- -------- -------- -------- ---------
Net loss attributable to common
stockholders ................................ $ (760) $ (1,670) $ (963) $ (2,494) $ (913)
======== ======== ======== ======== =========
Loss per common share
Continuing operations ....................... $ (.30)(1) $ (.66)(1) $ (.28) $ (.66) $ (.09)
Extraordinary item .......................... -- -- -- -- (.10)
-------- -------- -------- -------- ---------
Net loss per common share ................... $ (.30) $ (.66) $ (.28) $ (.66) $ (.19)
======== ======== ======== ======== =========
Weighted average number of common
and common equivalent shares
outstanding ................................. 2,543 (1) 2,543 (1) 3,406 3,781 4,869
======== ======== ======== ======== =========
OPERATING AND FINANCIAL DATA:
Funeral homes at end of period .............. 14 25 34 41 76
Funeral services performed during
period ...................................... 389 2,265 3,529 4,414 7,181
Preneed funeral contracts sold .............. 451 644 762 2,610 3,760
Backlog of preneed funeral
contracts ................................... 2,576 5,170 6,855 8,676 22,925
Depreciation and amortization ............... $ 261 $ 947 $ 1,476 $ 1,948 $ 3,629
BALANCE SHEET DATA:
Working capital ............................. $ 678 $ (142) $ 4,271 $ 6,472 $ 5,089
Total assets ................................ 13,089 28,784 44,165 61,746 131,308
Long-term debt, net of current
maturities .................................. 12,656 26,270 32,622 42,057 42,733
Redeemable preferred stock .................. -- -- -- -- 17,251
Stockholders' equity (deficit) .............. $ (958) $ (2,626) $ 3,429 $ 9,151 $ 57,043
</TABLE>
- ------------
(1) Prior to January 1, 1994, the Company consisted of three entities whose
owners contributed their equity in these entities in exchange for 2,520,000
shares of common stock of the Company effective January 1, 1994.
Accordingly, shares of common stock shown outstanding for these periods
assume the exchange had taken place at the beginning of the periods
presented. In 1992 and 1993, the entities were subchapter S corporations,
and taxes were the direct responsibility of the owners. Thus, the tax
provisions reflected above for these periods are based on assumptions about
what tax provisions (benefits) would have been if the Company had been a
taxable entity. In the opinion of management, no pro forma tax provision
(benefit) was appropriate for these periods because the Company followed a
policy of not recognizing the benefits associated with net operating losses
during such periods.
11
<PAGE>
ITEM 7. 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 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 early 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. Sixteen funeral homes and
two cemeteries were acquired in January and February 1997 for approximately $55
million. These acquisitions were funded through cash flow from operations,
additional borrowings under the Company's credit facilities and issuance of
preferred and common stock. In addition, as of February 28, 1997, the Company
had letters of intent to acquire eight funeral homes for an aggregate
consideration of approximately $10 million. The Company will continue to pursue
attractive acquisition candidates as further consolidation of the industry
occurs.
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.
In certain instances, a review of the marketing strategy of an acquired
business results in increased preneed funeral and cemetery sales efforts to
secure or gain future market share. Preneed funeral sales are affected by
deposits to a trust or purchases of third party insurance products. Since the
Company does not have access to these funds, the sale is not recorded until the
service is performed nor are the related assets and liabilities reflected on the
Company's consolidated balance sheet. The trust income earned and increases in
insurance benefits are also deferred until the service is performed in order to
offset possible inflation in cost to provide the service in the future. Unlike
preneed funeral sales, the Company has access to the funds related to preneed
cemetery sales. Therefore, preneed cemetery sales and the related estimated
costs are recorded at the time of sale. Trust fund requirements relate only to
the estimated costs of providing merchandise and service. Any income from the
merchandise and service trust funds is recorded as cemetery revenue in the
period earned. These earnings are offset by any inflation in the cost of
providing the merchandise and services in the future. These estimated costs are
reviewed at least annually, and any significant increase in estimated costs are
recorded at that time. Due to the Company's small number of cemetery operations,
the impact of these trust earnings and any inflation in estimated costs have not
historically been significant.
Certain matters discussed herein may contain 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 an increasing number of funeral homes and
cemeteries, 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.
12
<PAGE>
FACTORS AFFECTING HISTORICAL FINANCIAL RESULTS
Prior to 1995, the Company's corporate infrastructure required only modest
additions to support its disciplined approach to acquisitions. As a result,
general and administrative expenses declined as a percentage of revenues over
these years. In anticipation of accelerating its acquisition activity, the
Company began in 1995 to significantly expand its corporate infrastructure to
support more rapid growth. As a result, general and administrative expenses in
1995 increased as a percentage of revenues over 1994. Although general and
administrative expenses have continued to increase in response to the Company's
acceleration of its acquisition activities, in 1996 these expenses grew at a
lower rate relative to revenues compared to 1995 (6.1% of revenues in 1996 as
compared to 8.7% of revenues in 1995). Management anticipates that general and
administrative expenses as a percentage of revenues will continue to decline.
The Company achieved positive net income in the fourth quarter of 1996 due
to several factors, including the repayment of higher rate debt from proceeds of
the Company's initail public offering (the "IPO"), the improved performances of
existing and newly acquired businesses and the lower interest rates under its
credit facility used to fund the acquisitions. In response to the acceleration
of acquisition activity and the accompanying increase in the number of
operations to be managed, the Company further strengthened its corporate staff.
To support an operating style which continues to focus heavily on service and
careful integration of newly acquired operations, management additions were made
to the funeral home operations group, and financial and administrative personnel
were added. Additionally, near the end of 1996, the prearranged funeral and
cemetery sales organization was significantly restructured and expanded.
The Company believes its increased recognition in the death care industry
as an established purchaser of funeral homes and cemeteries has improved its
ability to finance its acquisitions with debt and equity, thereby reducing the
negotiated value of agreements not to compete. Since the Company's agreements
not to compete have generally been amortized over four to ten years, whereas any
purchase price allocated to names and reputations is amortized over 40 years,
any reduction in the non-competition agreement payments (assuming the same
purchase price) results in a reduction in operating expense during the
amortization period of the agreements not to compete. Since mid-1995, the
Company has experienced a reduction in the operating expenses for amortization
of agreements not to compete compared to prior years.
As a result of this significant increase in operating scale and
substantially improved capital structure, the Company believes that the
financial results prior to the fourth quarter of 1996 are not necessarily
comparable to those periods subsequent to its IPO. The Company's future results
of operations will depend in large part on the Company's ability to continue to
make acquisitions on attractive terms and to successfully integrate and manage
the acquired properties.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the
Company expressed as a percentage of net revenues for the periods presented:
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
Total revenues, net.................. 100.0% 100.0% 100.0%
Total gross profit................... 16.4 16.5 17.8
General and administrative
expenses........................... 6.9 8.7 6.1
Operating income..................... 9.5 7.8 11.6
Interest expense, net................ 14.5 15.2 10.8
Income (loss) before extraordinary
item............................... (5.2) (10.3) 0.5
13
<PAGE>
The following table sets forth the number of funeral homes and cemeteries
owned and operated by the Company for the periods presented:
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
---- ---- ----
Funeral homes at beginning of
period............................. 25 34 41
Acquisitions......................... 9 8 38
Divestitures......................... 0 1 3
---- ---- ----
Funeral homes at end of period....... 34 41 76
==== ==== ====
Cemeteries at beginning of period.... 2 3 3
Acquisitions......................... 1 0 7
Divestitures......................... 0 0 0
---- ---- ----
Cemeteries at end of period.......... 3 3 10
==== ==== ====
The following is a discussion of the Company's results of operations for
1994, 1995 and 1996. For purposes of this discussion, funeral homes and
cemeteries owned and operated for the entirety of each year being compared are
referred to as "existing operations." Operations acquired or opened during
either year being compared are referred to as "acquired operations."
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following table sets forth certain information regarding the net
revenues and gross profit of the Company from its operations during the years
ended December 31, 1995 and 1996:
YEAR ENDED
DECEMBER 31, CHANGE
-------------------- ------------------
1995 1996 AMOUNT PERCENT
--------- --------- ------- -------
(DOLLARS IN THOUSANDS)
Net revenues:
Existing operations....... $ 21,482 $ 20,921 $ (561) (2.6%)
Acquired operations....... 2,755 19,427 16,672 *
--------- --------- -------
Total net revenues... $ 24,237 $ 40,348 $16,111 66.5%
========= ========= =======
Gross profit:
Existing operations....... $ 3,451 $ 3,481 $ 30 0.9%
Acquired operations....... 539 3,685 3,146 *
--------- --------- -------
Total gross profit... $ 3,990 $ 7,166 $ 3,176 79.6%
========= ========= =======
- ------------
* Not meaningful.
Total net revenues for the year ended December 31, 1996 increased $16.1
million or 66.5% over 1995. The higher net revenues reflect an increase of $16.7
million in net revenues from acquired operations and a decrease in net revenues
of $561,000 or 2.6% from existing operations. The decrease in net revenues for
the existing operations primarily resulted from fewer funeral services being
performed, which was partially offset by a 3.9% increase in the average revenue
per funeral service. Fewer services were performed in 1996 due to the
divestiture of three funeral homes and a longer than normal seasonal decline in
the number of deaths in certain of the Company's markets. This seasonal decline
in the number of services ended in mid-November. At December 31, 1996, the
Company operated 10 cemeteries. The net revenues and gross profit of cemeteries
represented less than eight percent of the Company's total operations.
Total gross profit for the year ended December 31, 1996 increased $3.2
million or 79.6% over 1995. The higher total gross profit reflected an increase
of $3.1 million from acquired operations and an increase of $30,000 or 0.9% from
existing operations. Gross profit for existing operations increased due to the
efficiencies gained by consolidation and the increasing effectiveness of the
Company's merchandising
14
<PAGE>
strategy, which was partially offset by lower revenues. Total gross margin
increased from 16.5% for 1995 to 17.8% for 1996 due to these factors. As a
result of the acceleration of the Company's acquisition program in 1996, the
profit contribution from acquired properties exceeded that of existing
operations even though most were not owned for the entire year. The acquisition
and integration of these new properties received the majority of the corporate
operations group's management focus during the year. During the fourth quarter,
significant additional management resources were added to this group to provide
assistance in increasing revenue and profit margins from existing ongoing
operations and to more rapidly achieve targeted margins for acquired businesses.
General and administrative expenses for the year ended December 31, 1996
increased $368,000 or 17.5% over 1995 due primarily to the increased personnel
expense necessary to support a higher rate of growth and acquisition activity.
However, general and administrative expenses as a percentage of net revenues
decreased from 8.7% for 1995 to 6.1% for 1996, reflecting economies of scale
realized by the Company as the expenses were spread over a larger operations
revenue base.
Interest expense for the year ended December 31, 1996 increased $663,000
over 1995 principally due to increased borrowings for acquisitions. In August
1996, the Company utilized the net proceeds from the IPO and borrowings under a
new credit facility to repay the majority of its outstanding debts. In
connection with repayment of debt, the Company recognized an extraordinary
charge of approximately $498,000, net of income tax benefit of approximately
$332,000, to reflect the write-off of the deferred loan costs associated with
the early retirement of debt. The new credit facility reflects substantially
improved terms and reduced interest costs compared to the previous arrangements.
During 1996, the Company issued approximately $18 million of 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. Preferred dividends
of $622,000 were subtracted from the $207,000 of income before extraordinary
item in computing earnings attributable to common stockholders resulting in a
net loss of $415,000 for purposes of computing primary earnings per common
share. Approximately $16 million of redeemable preferred stock converted into
Common Stock subsequent to December 31, 1996.
For 1996, the Company provided for income taxes on net income before income
taxes and extraordinary item at a combined state and federal tax rate of 40%.
Prior to 1996, the Company experienced net operating losses. The tax benefits
associated with these net operating loss carryforwards were reserved. The
Company continues to analyze the benefits associated with these losses and will
adjust the recorded valuation allowance as appropriate in future periods.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The following table sets forth certain information regarding the net
revenues and gross profit of the Company from its operations during the years
ended December 31, 1994 and 1995:
YEAR ENDED
DECEMBER 31, CHANGE
-------------------- ------------------
1994 1995 AMOUNT PERCENT
--------- --------- ------- -------
(DOLLARS IN THOUSANDS)
Net revenues:
Existing operations............. $ 16,593 $ 16,838 $ 245 1.5%
Acquired operations............. 1,811 7,399 5,588 *
--------- --------- -------
Total net revenues......... $ 18,404 $ 24,237 $ 5,833 31.7%
========= ========= =======
Gross profit:
Existing operations............. $ 2,685 $ 2,792 $ 107 4.0%
Acquired operations............. 329 1,198 869 *
--------- --------- -------
Total gross profit......... $ 3,014 $ 3,990 $ 976 32.4%
========= ========= =======
- ------------
* Not meaningful.
15
<PAGE>
Total net revenues for the year ended December 31, 1995 increased $5.8
million or 31.7% over 1994. The higher net revenues were due primarily to an
increase of $5.6 million in net revenues from acquired operations. Net revenues
from existing operations increased $245,000 or 1.5% over 1994. The increase in
net revenues from existing operations resulted from a 4.4% increase in average
revenue per funeral service which was partially offset by fewer funeral services
being performed primarily as a result of the divestiture of one funeral home and
the planned divestiture of two additional funeral homes. At December 31, 1995,
the Company operated three cemeteries, the net revenues and gross profit of
which were not significant.
Total gross profit for the year ended December 31, 1995 increased $976,000
or 32.4% over 1994. The higher total gross profit reflects an increase of
$869,000 from acquired operations and an increase of $107,000 or 4.0% from
existing operations. The gross profit increase for the existing operations was
due to the efficiencies gained by consolidation and implementation of a new
merchandising strategy. Total gross margin remained relatively consistent
between years.
General and administrative expense for the year ended December 31, 1995
increased $840,000 over 1994 and increased as a percentage of net revenues to
8.7% for 1995 from 6.9% for 1994. These increases resulted primarily from
increased personnel expense necessary to support a higher rate of growth and
increased acquisition activity.
Interest expense for the year ended December 31, 1995 increased $1.0
million over 1994, principally due to increased borrowings for acquisitions.
Although the Company experienced net operating losses before tax, the
Company reserved the operating loss carryforwards creating a tax provision of
$40,000 in 1994 and $694,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1.7 million at December 31, 1996,
representing a decrease of $5.9 million from December 31, 1995. For the year
ended December 31, 1996, cash provided by operations was $314,000 as compared to
$997,000 for the year ended December 31, 1995. The decrease in cash provided by
operations was due in part to the payment of commissions on the sale of preneed
funeral contracts, which was offset by the positive cash flow from acquired
operations. Cash used in investing activities was $46 million for the year ended
December 31, 1996 compared to $12 million in 1995, due primarily to the
significant increase in acquisitions. In 1996, cash flow provided by financing
activities amounted to approximately $40 million, primarily due to the net
proceeds of approximately $48 million from the issuance of Class A Common Stock
in the Company's IPO.
Historically, the Company has financed its acquisitions with proceeds from
debt and the issuance of preferred stock. As of December 31, 1996, the Company
has 17,253,116 shares of Series D Preferred Stock issued and outstanding of
which 1,200,000 shares are convertible into Class A Common Stock and 16,053,116
shares are convertible into Class B Common Stock. The holders of Series D
Preferred Stock are entitled to receive cash dividends at an annual rate of
$.06-$.07 per share depending upon when such shares were issued. Commencing on
the second anniversary of the completion of the IPO (August 8, 1998), the
Company 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 A or 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. As of February 28, 1997, holders of 15,570,616 shares of Series D
Preferred Stock elected to convert their shares into 88,888 shares of Class A
and 1,064,481 shares of Class B Common Stock leaving 1,682,500 shares of Series
D Preferred Stock outstanding all which are convertible into the Class B Common
Stock.
In conjunction with the closing of the IPO, the Company entered into a new
credit facility (the "Credit Facility") which provides for a $75 million
revolving line of credit with both LIBOR and base rate interest options. The
facility is unsecured with a term of three years and contains customary
restrictive covenants, including a restriction on the payment of dividends on
common stock, and requires the Company to
16
<PAGE>
maintain certain financial ratios, which may effectively limit the Company's
borrowing capacity. At December 31, 1996, the Company believes that it was in
compliance with all financial covenants and ratios. As of December 31, 1996,
$36.5 million was outstanding under the Credit Facility with an average
effective interest rate of 7.17%.
In August 1996, the Company used the net proceeds from the IPO, along with
funding from the Credit Facility, to pay down all previously existing debt from
Provident Services, Inc., Texas Commerce Bank N.A., and C. Byron Snyder (one of
the Company's directors). In connection with the repayment of this debt, the
Company recognized an extraordinary charge of approximately $498,000, net of
income tax benefit of approximately $332,000, to reflect the write-off of the
deferred loan costs associated with the early retirement of debt.
The Company issued 188,413 shares of Class A Common Stock and approximately
20,000,000 shares of Series F Preferred Stock and paid $27 million in cash to
fund acquisitions in January and February 1997. The Series F Preferred Stock is
convertible into an aggregate of 1,272,450 shares of Class A Common Stock based
on exercise prices at February 28, 1997. 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 $.0486 per share. On December 31, 2007, the Company must redeem all
shares of Series F Preferred Stock, as discussed above, 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 prior to December 31, 2007.
The balance outstanding under the Credit Facility as of February 28, 1997
was $64 million. The Company has had discussions with various financial
institutions that lead it to believe that it has the ability to increase the
amount available under the Credit Facility. The Company intends to fund future
acquisitions through borrowings under the Credit Facility and additional
issuances of Class A Common Stock or additional preferred stock. As of February
28, 1997, the Company had letters of intent for acquisitions involving an
aggregate purchase price of $10 million. The Company has budgeted $125 million
for its acquisition program in 1997.
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 $5 million of capital expenditures during 1997,
primarily for upgrading funeral home facilities. The Company believes that cash
flow from operations, borrowings under the 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 financing may be required to maintain 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.
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 during the last three years.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item 8 are incorporated under
Item 14 in Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference to the
Registrant's definitive proxy statement relating to its 1997 annual meeting of
shareholders, which proxy statement will be filed pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") within
120 days after the end of the last fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the
Registrant's definitive proxy statement relating to its 1997 annual meeting of
shareholders, which proxy statement will be filed pursuant to Regulation 14A of
the Exchange Act within 120 days after the end of the last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
Registrant's definitive proxy statement relating to its 1997 annual meeting of
shareholders, which proxy statement will be filed pursuant to Regulation 14A of
the Exchange Act within 120 days after the end of the last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to the
Registrant's definitive proxy statement relating to its 1997 annual meeting of
shareholders, which proxy statement will be filed pursuant to Regulation 14A of
the Exchange Act within 120 days after the end of the last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)1 FINANCIAL STATEMENTS
The following financial statements and the Report of Independent Public
Accountants are filed as a part of this report on the pages indicated:
PAGE
----
Report of Independent Public Accountants........................ 24
Consolidated Balance Sheets as of December 31, 1995 and 1996.... 25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996.............................. 26
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1995 and 1996.......... 27
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996.............................. 28
Notes to Consolidated Financial Statements...................... 29
18
<PAGE>
(A)2 FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedule and the Report of Independent
Accountants on Financial Statement Schedule are included in this report on the
pages indicated:
PAGE
----
Report of Independent Public Accountants on Financial
Statement Schedule........................................... 42
Financial Statement Schedule II -- Valuation and
Qualifying Accounts.......................................... 43
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
(A)3 EXHIBITS
The exhibits to this report have been included only with the copies of this
report filed with the Securities and Exchange Commission. Copies of individual
exhibits will be furnished to stockholders upon written request to the Company
and payment of a reasonable fee.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C>
*3.1 -- Amended and Restated Certificate of Incorporation, as amended, of the Company
3.2 -- Amended and Restated Bylaws of the Company, incorporated by reference herein by reference
to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.1 -- 1995 Stock Incentive Plan, as amended, incorporated herein by reference to Exhibit 10.1 to
the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.2 -- 1996 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-1 (File No. 333-05545)
10.3 -- 1996 Nonemployee Directors' Stock Option Plan, incorporated herein by reference to Exhibit
10.3 to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.4 -- Asset Purchase Agreement dated May 10, 1995 among Carriage Funeral Holdings, Inc., West
End Funeral Home, Inc., and James C. Hirsch and Cynthia Hirsch, incorporated herein by
reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (File No.
333-05545)
10.5 -- Agreement and Plan of Merger dated March 8, 1996 among Carriage Funeral Services, Inc.,
Hennessy-Bagnoli Funeral Home, Inc., Hennessy Funeral Home, Inc., Terrance P. Hennessy and
Lawrence Bagnoli, incorporated herein by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (File No. 333-05545)
10.6 -- Real Property Purchase Agreement dated the Closing Date among Hennessy-Bagnoli Funeral
Home, Inc., Hennessy and Patricia Hennessy, and Bagnoli and Brenda Bagnoli, incorporated
herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1
(File No. 333-05545)
10.7 -- Stock Purchase Agreement dated January 4, 1996 among Carriage Funeral Holdings, Inc., The
Lusk Funeral Home, Incorporated and Gerald T. McFarland, Jr., incorporated herein by
reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 (File No.
333-05545)
10.8 -- Stock Purchase Agreement dated February 29, 1996 among Carriage Funeral Holdings, Inc.,
James E. Drake Funeral Home, Inc., and James E. Drake and Patricia A. Drake, incorporated
herein by reference to Exhibit 10.12 to the Company's registration Statement on Form S-1
(File No. 333-05545)
10.9 -- Asset Purchase Agreement dated April 10, 1996 between CFS Funeral Services, Inc. and SCI
Texas Funeral Services, Inc., incorporated herein by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 (File No. 333-05545)
10.10 -- Asset Purchase Agreement dated April 10, 1996 between CFS Funeral Services, Inc. and SCI
Funeral Services of Florida, Inc., incorporated herein by reference to Exhibit 10.14 to
the Company's Registration Statement on Form S-1 (File No. 333-05545)
19
<PAGE>
10.11 -- Asset Purchase Agreement dated April 10, 1996 between CFS Funeral Services, Inc. and Fort
Myers Memorial Gardens, Inc., incorporated herein by reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-1 (File No. 333-05545)
10.12 -- Asset Purchase Agreement dated April 10, 1996 between CFS Funeral Services, Inc. and SCI
Funeral Services of Florida, Inc., incorporated herein by reference to Exhibit 10.16 to
the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.13 -- Stock and Real Property Purchase Agreement dated March 29, 1996 among Carriage Funeral
Holdings, Inc., Dwayne R. Spence Funeral Home, Inc., Dwayne R. Spence, Patricia Spence and
James H. Sheridan, incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (File No. 333-05545)
10.14 -- Merger Agreement dated March 22, 1996 among Carriage Funeral Services, Inc., Carriage
Funeral Services of Idaho, Inc., Merchant Funeral Home, Inc., Coeur d'Alene Memorial
Gardens, Inc., Lewis Clark Memorial Park, Inc., Robert D. Larrabee, I. Renee Larrabee and
Larrabee Land Company, Inc., incorporated herein by reference to Exhibit 10.18 to the
Company's Registration Statement on Form S-1 (File No. 333-05545)
10.15 -- Real Property Purchase Agreement dated March 22, 1996 among Carriage Funeral Services,
Inc. and Larrabee Investments, L.L.C., incorporated herein by reference to Exhibit 10.19
to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.16 -- Merger Agreement dated July 3, 1996 among Carriage Services, Inc., CSI Funeral Services of
Connecticut, Inc., C. Funk & Son Funeral Home, Incorporated and Ronald F. Duhaime and
Christopher J. Duhaime, incorporated herein by reference to Exhibit 10.20 to the Company's
Registration Statement on Form S-1 (File No. 333-05545)
10.17 -- Merger Agreement dated July 3, 1996 among Carriage Services, Inc., CFS Funeral Services of
Connecticut, Inc., O'Brien Funeral Home, Incorporated and Thomas P. O'Brien, incorporated
herein by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1
(File No. 333-05545)
10.18 -- Merger Agreement dated June 26, 1996 among Carriage Services, Inc., Carriage Funeral
Services of South Carolina, Inc., Forest Lawn of Chesnee Inc. and shareholders,
incorporated herein by reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-1 (File No. 333-05545)
10.19 -- Employment Agreement with Melvin C. Payne, incorporated herein by reference to Exhibit
10.23 to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.20 -- Employment Agreement with Mark W. Duffey, incorporated herein by reference to Exhibit
10.24 to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.21 -- Employment Agreement with Russell W. Allen, incorporated herein by reference to Exhibit
10.25 to the Company's Registration Statement on Form S-1 (File No. 333-05545)
10.22 -- Merger Agreement dated October 17, 1996 among Carriage Services, Inc., Carriage Funeral
Services of California, Inc., CNM and the shareholders of CNM, incorporated by reference
to Exhibit 10.22 to the Company's Current Report on Form 8-K/A dated January 7, 1997.
*10.23 -- Amended and Restated 1995 Stock Incentive Plan
*10.24 -- Amended and Restated 1996 Stock Option Plan
*10.25 -- Amended and Restated 1996 Directors' Stock Option Plan
*10.26 -- Employment Agreement with Gary O'Sullivan
*10.27 -- Employment Agreement with Thomas C. Livengood
20
<PAGE>
*21.1 -- Subsidiaries of the Company
*27.1 -- Financial Data Schedule
</TABLE>
- ------------
(*) Filed herewith.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the three months ended
December 31, 1996.
21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON MARCH 17, 1997.
CARRIAGE SERVICES, INC.
By: /s/ MELVIN C. PAYNE
MELVIN C. PAYNE
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- ------------------------- -------------------------------- ---------------
/s/ MELVIN C. PAYNE Chairman of the Board, Chief March 17, 1997
MELVIN C. PAYNE Executive Officer and Director
(Principal Executive Officer)
/s/ MARK W. DUFFAY President and Director March 17, 1997
MARK W. DUFFEY
/s/ THOMAS C. LIVENGOOD Executive Vice President, Chief March 17, 1997
THOMAS C. LIVENGOOD Financial Officer and Secretary
(Principal Financial and
Accounting Officer)
_________________________ Director
C. BYRON SNYDER
/s/ ROBERT D. LARRABEE Director March 17, 1997
ROBERT D. LARRABEE
/s/ BARRY K. FINGERHUT Director March 17, 1997
BARRY K. FINGERHUT
/s/ STUART W. STEDMAN Director March 17, 1997
STUART W. STEDMAN
/s/ RONALD A. ERICKSON Director March 17, 1997
RONALD A. ERICKSON
/s/ MARK F. WILSON Director March 17, 1997
MARK F. WILSON
22
<PAGE>
CARRIAGE SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL
STATEMENTS:
Report of Independent Public Accountants.................... 24
Consolidated Balance Sheets as of December 31, 1995
and 1996................................................... 25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996........................... 26
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1995 and 1996....... 27
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996........................... 28
Notes to Consolidated Financial Statements.................. 29
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Carriage Services, Inc.:
We have audited the accompanying consolidated balance sheets of Carriage
Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1996 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Carriage
Services, Inc., and subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 28, 1997
24
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
---------------------
1995 1996
--------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 7,573 $ 1,712
Accounts receivable --
Trade, net of allowance for
doubtful accounts of $305
in 1995 and $530 in
1996...................... 2,637 5,665
Other...................... 505 673
--------- ----------
3,142 6,338
Marketable securities, available
for sale....................... 864 53
Inventories and other current
assets......................... 2,106 3,297
--------- ----------
Total current
assets............... 13,685 11,400
--------- ----------
PROPERTY, PLANT AND EQUIPMENT, at
cost:
Land............................ 4,416 9,640
Buildings and improvements...... 14,200 31,750
Furniture and equipment......... 5,365 8,817
--------- ----------
23,981 50,207
Less -- accumulated
depreciation................... (2,311) (4,095)
--------- ----------
21,670 46,112
CEMETERY PROPERTY, at cost........... 496 4,061
NAMES AND REPUTATIONS, net of
accumulated amortization of $959 in
1995 and $2,007 in 1996............ 22,559 62,568
DEFERRED CHARGES AND OTHER NONCURRENT
ASSETS............................. 3,336 7,167
--------- ----------
$ 61,746 $ 131,308
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................ $ 1,041 $ 2,192
Accrued liabilities............. 2,957 3,033
Current portion of long-term
debt and obligations under
capital leases................. 3,215 1,086
--------- ----------
Total current
liabilities.......... 7,213 6,311
PRENEED LIABILITIES, net............. 709 3,664
LONG-TERM DEBT, net of current
portion............................ 42,057 42,733
OBLIGATIONS UNDER CAPITAL LEASES, net
of current portion................. 716 557
DEFERRED INCOME TAXES................ 1,900 3,749
--------- ----------
Total liabilities..... 52,595 57,014
--------- ----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK........... -- 17,251
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value,
50,000,000 shares authorized;
15,660,000 and none issued and
outstanding in 1995 and 1996,
respectively................... 157 --
Class A Common Stock, $.01 par
value; 15,000,000 shares
authorized; none and 3,990,000
issued and outstanding in 1995
and 1996, respectively......... -- 40
Class B Common Stock; $.01 par
value; 15,000,000 shares
authorized; 2,520,000 and
4,502,000 issued and
outstanding in 1995 and 1996,
respectively................... 25 45
Contributed capital............. 15,100 63,966
Unrealized loss on marketable
securities, available for
sale........................... (36) --
Retained deficit................ (6,095) (7,008)
--------- ----------
Total stockholders'
equity............... 9,151 57,043
--------- ----------
$ 61,746 $ 131,308
========= ==========
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
REVENUES, net
Funeral......................... $ 17,368 $ 22,661 $ 37,445
Cemetery........................ 1,036 1,576 2,903
--------- --------- ---------
18,404 24,237 40,348
COSTS AND EXPENSES
Funeral......................... 14,512 18,921 30,641
Cemetery........................ 878 1,326 2,541
--------- --------- ---------
15,390 20,247 33,182
--------- --------- ---------
Gross profit.................... 3,014 3,990 7,166
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,266 2,106 2,474
--------- --------- ---------
Operating income................ 1,748 1,884 4,692
INTEREST EXPENSE, net................ 2,671 3,684 4,347
--------- --------- ---------
Income (loss) before income
taxes and extraordinary
item.......................... (923) (1,800) 345
PROVISION FOR INCOME TAXES........... 40 694 138
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM............................... (963) (2,494) 207
Extraordinary item -- loss on early
extinguishment of debt, net of
income tax benefit of $332......... -- -- (498)
--------- --------- ---------
NET (LOSS)........................... (963) (2,494) (291)
Preferred stock dividend
requirements....................... -- -- 622
--------- --------- ---------
NET (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS....................... $ (963) $ (2,494) $ (913)
========= ========= =========
(LOSS) PER SHARE:
(Loss) per common and common
equivalent share before
extraordinary item
attributable to common
stockholders.................. $ (.28) $ (.66) $ (.09)
Extraordinary item.............. -- -- (.10)
--------- --------- ---------
Net (loss) per common and common
equivalent share attributable
to common stockholders........ $ (.28) $ (.66) $ (.19)
========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding............ 3,406 3,781 4,869
========= ========= =========
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONTRIBUTED
NUMBER PREFERRED NUMBER COMMON CAPITAL UNREALIZED RETAINED
OF SHARES STOCK OF SHARES STOCK (DEFICIT) GAIN (LOSS) DEFICIT TOTAL
--------- --------- --------- ------ ----------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1993......... -- $ -- 2,520 $ 25 $ (13) $-- $ (2,638) $(2,626)
Net loss -- 1994..................... -- -- -- -- -- -- (963) (963)
Issuance of preferred stock.......... 7,160 72 -- -- 7,005 -- -- 7,077
Unrealized net loss -- available for
sale securities.................... -- -- -- -- -- (59) -- (59)
--------- --------- --------- ------ ----------- ----------- -------- -------
BALANCE -- DECEMBER 31, 1994......... 7,160 72 2,520 25 6,992 (59) (3,601) 3,429
Net loss -- 1995..................... -- -- -- -- -- -- (2,494) (2,494)
Issuance of preferred stock.......... 8,500 85 -- -- 8,108 -- -- 8,193
Unrealized net gain -- available for
sale securities.................... -- -- -- -- -- 23 -- 23
--------- --------- --------- ------ ----------- ----------- -------- -------
BALANCE -- DECEMBER 31, 1995......... 15,660 157 2,520 25 15,100 (36) (6,095) 9,151
Net loss -- 1996..................... -- -- -- -- -- -- (291) (291)
Issuance of preferred stock.......... 555 5 -- -- 540 -- -- 545
Issuance of common stock............. -- -- 3,947 40 47,942 -- -- 47,982
Conversion of preferred stock to
common stock....................... (16,045) (160) 1,980 20 140 -- -- --
Conversion of redeemable preferred
stock to common stock.............. -- -- 39 -- 522 -- -- 522
Unrealized net gain -- available for
sale securities.................... -- -- -- -- -- 36 -- 36
Purchase of treasury stock........... (170) (2) -- -- (339) -- -- (341)
Exercise of stock options............ -- -- 6 -- 61 -- -- 61
Preferred dividends.................. -- -- -- -- -- -- (622) (622)
--------- --------- --------- ------ ----------- ----------- -------- -------
BALANCE -- DECEMBER 31, 1996......... -- $ -- 8,492 $ 85 $63,966 $-- $ (7,008) $57,043
========= ========= ========= ====== =========== =========== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)...................... $ (963) $ (2,494) $ (291)
Adjustments to reconcile net
(loss) to net cash provided by
operating activities --
Depreciation and
amortization............ 1,476 1,948 3,629
Provision for losses on
accounts receivable..... 510 488 683
Loss on early
extinguishment of debt,
net of income taxes..... -- -- 498
Deferred income taxes...... (27) 659 54
Changes in assets and
liabilities net of effects from
acquisitions:
Increase in accounts
receivable.............. (708) (1,125) (3,440)
Decrease (increase) in
inventories and other
current assets.......... (91) 115 (465)
Increase in other deferred
charges................. -- (144) (1,146)
Increase (decrease) in
accounts payable........ (214) 45 1,151
Increase (decrease) in
accrued liabilities..... 1,098 1,461 (403)
Increase (decrease) in
preneed liabilities..... (4) 44 44
---------- ---------- ----------
Net cash provided by
operating
activities........ 1,077 997 314
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash
acquired....................... (9,073) (12,191) (42,707)
Disposition of businesses
formerly owned................. -- -- 393
Purchase of marketable
securities available for
sale........................... (4,417) (1,795) --
Disposal of marketable
securities available for
sale........................... -- 5,312 976
Purchase of property, plant and
equipment...................... (1,179) (3,019) (4,630)
---------- ---------- ----------
Net cash used in
investing
activities........ (14,669) (11,693) (45,968)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.... 7,781 11,563 59,849
Payments on long-term debt and
obligations under capital
leases......................... (1,705) (2,273) (65,925)
Proceeds from subordinated
notes.......................... 390 -- --
Proceeds from sale of preferred
stock.......................... 6,992 8,192 --
Proceeds from issuance of common
stock.......................... -- -- 47,694
Preferred stock dividends....... -- -- (622)
Exercise of stock options....... -- -- 61
Purchase of treasury stock...... -- -- (341)
Payment of deferred debt
charges........................ (45) (49) (923)
---------- ---------- ----------
Net cash provided by
financing
activities........ 13,413 17,433 39,793
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (179) 6,737 (5,861)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 1,015 836 7,573
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 836 $ 7,573 $ 1,712
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid through issuance
of new debt.................... $ 231 $ 644 $ --
========== ========== ==========
Retirement of debt through
issuance of stock.............. $ -- $ 500 $ --
========== ========== ==========
Cash interest paid.............. $ 2,038 $ 3,127 $ 4,466
========== ========== ==========
Retirement of debt through
disposition of business........ $ -- $ -- $ 2,642
========== ========== ==========
Non-cash consideration for
acquisitions................... $ -- $ -- $ 25,474
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
BUSINESS
Carriage Services, Inc. (the "Company") was organized under the laws of
the State of Delaware on December 29, 1993. The Company owns and operates
funeral homes and cemeteries throughout the United States. The Company provides
professional services related to funerals and interments at its funeral homes
and cemeteries. Prearranged funerals and preneed cemetery property are marketed
in the geographic markets served by the Company's locations.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The financial statements include the consolidated financial statements of
Carriage Services, Inc. and its subsidiaries. In consolidation, all significant
intercompany balances and transactions have been eliminated. The consolidated
financial statements have been restated as of the earliest period presented to
reflect a one for two reverse stock split as further discussed in Note 7.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with current year presentation.
FUNERAL AND CEMETERY OPERATIONS
The Company records the sale of funeral merchandise and services upon
performance of the funeral service. The Company records the sale of the right of
cemetery interment or mausoleum entombment and related merchandise at the time
of sale. The cost for cemetery merchandise and services sold, but not yet
provided, is accrued as an expense at the same time the cemetery revenue is
recognized. Allowances for customer cancellations, refunds and bad debts are
provided at the date of sale based on the historical experience of the Company.
Accounts receivable-trade, net consists of approximately $2,546,000 and
$4,977,000 of funeral receivables and approximately $91,000 and $688,000 of
current cemetery receivables at December 31, 1995 and 1996, respectively.
Noncurrent cemetery receivables, those payable after one year, are included in
Deferred Charges and Other Noncurrent Assets on the Consolidated Balance Sheets
(see Note 3).
PRENEED FUNERAL ARRANGEMENTS
Preneed funeral sales are effected by deposits to a trust or purchase of a
third-party insurance product. Since the Company does not have access to these
funds, the sale is not recorded until the service is performed, nor generally,
are the related assets and liabilities reflected on the Consolidated Balance
Sheets. The trust income earned and the increases in insurance benefits on the
insurance products are also deferred until the service is performed in order to
offset inflation in cost to provide the service in the future. The preneed
funeral trust assets were approximately $14,934,000 and $36,523,000 at December
31, 1995 and 1996, respectively, which in the opinion of management, exceed the
future obligations under such arrangements.
29
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summary reflects the composition of the assets held in trust
to satisfy the Company's future obligations under preneed funeral arrangements:
HISTORICAL UNREALIZED
COST BASIS GAIN (LOSS) FAIR VALUE
----------- ----------- ----------
(IN THOUSANDS)
As of December 31, 1995 --
Cash and cash equivalents...... $10,275 $ -- $10,275
Fixed income investment
contracts.................... 1,396 -- 1,396
Mutual funds, corporate bonds
and stocks................... 3,206 57 3,263
----------- ----------- ----------
Total..................... $14,877 $ 57 $14,934
As of December 31, 1996
Cash and cash equivalents...... $16,022 $ -- $16,022
Fixed income investment
contracts.................... 8,434 -- 8,434
Mutual funds, corporate bonds
and stocks................... 11,965 102 12,067
----------- ----------- ----------
Total..................... $36,421 $ 102 $36,523
CEMETERY MERCHANDISE AND SERVICE TRUST
The Company is also generally required by certain states to deposit a
specified amount into a merchandise and service trust fund for cemetery
merchandise and service contracts sold on a preneed basis. The principal and
accumulated earnings of the trust may be withdrawn by the Company upon maturity
(generally, the death of the purchaser) or cancellation of the contracts. Trust
fund investment income is recognized in current revenues as trust earnings
accrue, net of current period inflation costs recognized related to the
merchandise that has not yet been purchased. Merchandise and service trust fund
balances, in the aggregate, were approximately $60,000 and $1,134,000 at
December 31, 1995, and 1996, respectively, and are included in Preneed
Liabilities, net on the accompanying Consolidated Balance Sheets.
PERPETUAL AND MEMORIAL CARE TRUST
In accordance with respective state laws, the Company is required to
deposit a specified amount into perpetual and memorial care trust funds for each
interment/entombment right and memorial sold. Income from the trust fund is used
to provide care and maintenance for the cemeteries and mausoleums and is
periodically distributed to the Company and recognized as revenue upon
distribution. The perpetual and memorial care trust assets were approximately
$599,000 and $2,002,000 at December 31, 1995 and 1996, respectively, which, in
the opinion of management, will cover future obligations to provide care and
maintenance for the Company's cemeteries and mausoleums. The Company does not
have the right to withdraw any of the principal balances of these funds and,
accordingly, these trust fund balances are not reflected in the accompanying
Consolidated Balance Sheets.
DEFERRED OBTAINING COSTS
Deferred obtaining costs consist of sales commissions and other net direct
marketing costs applicable to preneed funeral sales. These costs are deferred
and amortized in funeral costs and expenses over 12 years which approximates the
expected timing of the performance of the services covered by the preneed
funeral contracts. These amounts were not significant prior to 1995 (see Note
3).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
30
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 115, and all of the Company's
investment securities are classified as available for sale securities. At
December 31, 1995 and 1996, the Company had gross unrealized gains of
approximately $4,000 and $0 and gross unrealized losses of approximately $40,000
and $0, respectively. The Company does not use derivative financial instruments
or participate in hedging activities.
INVENTORY
Inventory is recorded at the lower of its cost basis (determined by the
specific identification method) or net realizable value.
NAMES AND REPUTATIONS
The excess of the purchase price over the fair value of net identifiable
assets acquired, as determined by management in transactions accounted for as
purchases, is recorded as Names and Reputations. Such amounts are amortized over
40 years. Many of the Company's acquired funeral homes have provided high
quality service to families for generations. The resulting loyalty often
represents a substantial portion of the value of a funeral business. The Company
reviews the carrying value of Names and Reputations at least quarterly on a
location-by-location basis to determine if facts and circumstances exist which
would suggest that this intangible asset may be impaired or that the
amortization period needs to be modified. If indicators are present which
indicate impairment is probable, the Company will prepare a projection of the
undiscounted cash flows of the location and determine if the intangible assets
are recoverable based on these undiscounted cash flows. If impairment is
indicated, then an adjustment will be made to reduce the carrying amount of the
intangible asset to its fair value. At December 31, 1996, no impairment was
deemed to have occurred.
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of," as of January 1, 1996, and such adoption
did not have a material impact on the Company's consolidated financial position
or results of operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The costs of ordinary
maintenance and repairs are charged to operations as incurred, while renewals
and betterments are capitalized. Capitalized interest was minimal in 1994 and
1995 and $162,000 in 1996. Depreciation of property, plant and equipment is
computed based on the straight-line method over the following estimated useful
lives of the assets:
YEARS
---------
Buildings and improvements........... 15 to 40
Furniture and fixtures............... 5 to 10
Machinery and equipment.............. 5 to 10
Automobiles.......................... 5
INCOME TAXES
The Company files a consolidated U.S. federal income tax return. The
Company records deferred taxes for temporary differences between the tax basis
and financial reporting basis of assets and liabilities.
LOSS PER COMMON SHARE
For 1994 and 1995, the loss per common share is computed by dividing net
loss by the weighted average number of common and common equivalent shares
outstanding during each period, as calculated pursuant to various SEC
pronouncements for companies contemplating an initial public offering (see
31
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 9). For 1996, loss per share is computed by dividing the net loss after
deduction of preferred stock dividends by the weighted average number of common
and common equivalent shares outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes that carrying value approximates fair value for cash
and cash equivalents and marketable equity securities which are designated as
available-for-sale. Additionally, the carrying amount of its floating rate
credit facility approximates its fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS:
During 1996, the Company acquired 38 funeral homes and seven cemeteries
through the purchase of stock and assets. In 1995, the Company acquired eight
funeral homes through the purchase of stock and assets. These transactions have
been accounted for utilizing the purchase method of accounting, and the results
of operations of the acquired businesses have been included in the results of
the Company from the respective dates of acquisition.
In accordance with APB Opinion 16, purchase prices were allocated to the
net assets acquired based on management's estimate of the fair value of the
acquired assets and liabilities at the date of acquisition. Many of the
Company's acquired funeral homes have provided high quality service to families
for generations. The resulting loyalty often represents a substantial portion of
the value of a funeral business. As a result, the excess of the consideration
paid over the fair value of net tangible and other identifiable intangible
assets is allocated to Names and Reputations. Future adjustments to the
allocation of the purchase price may be made during the 12 months following the
date of acquisition due to resolution of uncertainties existing at the
acquisition date, which may include obtaining additional information regarding
asset and liability valuations. There were no material purchase price allocation
adjustments made during 1994, 1995 or 1996.
32
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of the above acquisitions on the Consolidated Balance Sheets at
December 31, 1995 and 1996 was as follows:
1995 1996
--------- ---------
(IN THOUSANDS)
Current Assets....................... $ 291 $ 3,532
Cemetery Property.................... -- 3,610
Property, Plant and Equipment........ 2,727 22,574
Deferred Charges and Other Noncurrent
Assets............................. 210 1,542
Names and Reputations................ 9,349 43,139
Current Liabilities.................. (67) (1,025)
Debt................................. (87) --
Other Liabilities.................... (232) (5,191)
--------- ---------
12,191 68,181
Consideration:
Redeemable preferred stock issued.... -- (17,775)
Debt................................. -- (6,582)
Preferred stock issued............... -- (555)
Cash acquired in acquisitions........ -- (274)
Common Stock issued.................. -- (288)
--------- ---------
Cash used for acquisitions...... $ 12,191 $ 42,707
========= =========
The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and the businesses acquired during 1995 and 1996 as if
such acquisitions had taken place at the beginning of 1995. Appropriate
adjustments have been made to reflect the accounting basis used in recording
these acquisitions. 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 combination been in effect on the date
indicated, that have resulted since the respective dates of acquisition or that
may result in the future.
1995 1996
--------- ---------
(UNAUDITED AND
IN THOUSANDS)
Revenues, net........................ $ 49,696 $ 51,868
(Loss) before income taxes........... (4,419) (1,160)
Net (loss) attributable to common
stockholders....................... (3,739) (2,282)
Net (loss) per common and common
equivalent share................... (.99) (.47)
33
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEFERRED CHARGES AND OTHER NONCURRENT ASSETS:
Deferred charges and other noncurrent assets at December 31, 1995 and 1996
were as follows (in thousands):
1995 1996
--------- ---------
Agreements not to compete, net of
accumulated amortization of $1,198
and $1,722 respectively............ $ 2,269 $ 3,297
Deferred debt expense, net of
accumulated amortization of $337
and $78, respectively.............. 492 511
Noncurrent cemetery and notes
receivable......................... 443 2,114
Deferred obtaining costs, net of
accumulated amortization of $12 and
$44, respectively.................. 132 1,245
--------- ---------
$ 3,336 $ 7,167
========= =========
The cost of agreements not to compete with former owners of businesses
acquired is amortized over the term of the respective agreements, ranging from
four to 10 years. Deferred debt expense is being amortized over the term of the
related debt. Noncurrent cemetery receivables result from the multi-year payment
terms in the underlying contracts. These cemetery receivables are recorded net
of allowances for customer cancellations, refunds and bad debts.
4. LONG-TERM DEBT:
The Company's long-term debt consisted of the following at December 31 (in
thousands):
1995 1996
--------- ---------
Credit Facility, unsecured floating
rate $75 million line, interest is
due on a quarterly basis at prime
to prime plus .25% or at the
applicable eurodollar rate plus
.75% to 2.0% (weighted average
interest rate was 7.17% at December
31, 1996), matures in September,
1999............................... $ -- $ 36,500
Notes payable, secured by deeds of
trust and security agreements
covering certain real property,
bearing interest rates of 7.31% to
9.75%. Notes were repaid on August
14, 1996........................... 36,316 --
Subordinated notes payable to
stockholder, with interest at a
predetermined rate plus 3% which is
subject to adjustment under certain
conditions. Interest is payable in
the form of cash if certain
conditions are met, otherwise
interest is paid in the form of
additional subordinated notes
issued annually. Notes were repaid
on August 14, 1996................. 7,016 --
Acquisition debt..................... -- 6,395
Other................................ 1,542 574
Less -- Current portion.............. (2,817) (736)
--------- ---------
$ 42,057 $ 42,733
========= =========
In conjunction with the closing of the initial public offering (the
"IPO") in August 1996, the Company entered into a new floating rate $75
million credit facility (the "Credit Facility") with a group of financial
institutions. The Credit Facility contains provisions regarding minimum net
worth and cash flow leverage ratio (as defined), as well as other financial
covenants. The Credit Facility also contains restrictions regarding other
borrowings, payment of dividends, capital expenditures and acquisitions. The
Company was in compliance with all covenants at December 31, 1996. In August
1996, the Company repaid a majority of the Company's outstanding indebtedness
with the proceeds from the issuance of its Class A Common Stock in connection
with the Company's IPO (see Note 7) and utilization of the Credit Facility. In
connection with repayment of debt, the Company recognized an extraordinary loss
of approximately $498,000, net of
34
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income tax benefit of approximately $332,000 for the write-off of the deferred
loan costs associated with the early retirement of debt. At February 28, 1997,
approximately $64 million was outstanding under the Credit Facility.
Acquisition debt primarily consists of deferred purchase price, seller held
debt and subordinated notes bearing interest at 0%, discounted at imputed
interest rates ranging from 6% to 8%, with maturities from 10 to 15 years.
The aggregate maturities of long-term debt for the year ended December 31,
1997 and for the subsequent four years, are approximately $736,000, $463,000,
$37,758,000, $477,000, $507,000, respectively and $3,528,000 thereafter.
5. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain office facilities, vehicles and equipment under
operating leases for terms ranging from one to fifteen years. Certain of these
leases provide for an annual adjustment. Rent expense was approximately
$734,000, $951,000 and $924,000 for 1994, 1995 and 1996, respectively.
Assets acquired under capital leases are included in property, plant and
equipment on the accompanying Consolidated Balance Sheets.
At December 31, 1996 minimum lease payments were as follows:
MINIMUM LEASE PAYMENTS
-----------------------
OPERATING CAPITAL
LEASES LEASES
--------- --------
(IN THOUSANDS)
Years ended December 31,
1997............................ $ 1,038 $ 402
1998............................ 994 281
1999............................ 933 155
2000............................ 702 63
2001............................ 646 39
Thereafter...................... 2,282 64
--------- --------
Total minimum lease payments......... $ 6,595 1,004
=========
Less: amount representing interest... 96
--------
Long-term obligations under capital
leases............................. $ 908
========
AGREEMENTS AND EMPLOYEE BENEFITS
The Company has entered into various employment and agreements not to
compete with key employees and former owners of businesses acquired. Payments
for such agreements are not made in advance. These agreements are generally for
one to ten years and provide for future payments annually, quarterly or monthly.
The aggregate payments due under these agreements for the subsequent five years,
are approximately $1,118,000, $1,112,000, $1,099,000, $858,000 and $711,000,
respectively and $2,277,000 thereafter. In conformity with industry practice,
these agreements are not included in the accompanying Consolidated Balance
Sheets.
The Company sponsors one defined contribution plan for the benefit of its
employees. The expense for this plan has not been significant for the periods
presented. In addition, the Company does not offer any other post-retirement or
post-employment benefits.
35
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LITIGATION
The Company is, from time to time, subject to routine litigation arising in
the normal course of its business. Management, with the advice of legal counsel,
believes that the results of any litigation or other pending legal proceedings
will not have a material effect on the Company's consolidated financial position
or results of operations.
6. INCOME TAXES:
Prior to January 1, 1994, the Company was an S corporation, was not subject
to federal income taxes, and instead, the owners were taxed on the Company's
income in a manner similar to partnerships. On January 1, 1994, the Company
became a C corporation and adopted SFAS No. 109. Accordingly, a charge to income
taxes in 1994 for approximately $57,000 was made to establish deferred taxes
payable. The Company did not pay any federal taxes in 1994, 1995 or 1996. The
provision (benefit) for income taxes for 1994, 1995 and 1996 consisted of:
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS)
Current:
U. S. Federal................... $ -- $ -- $ --
State........................... 10 35 84
--------- --------- ---------
Total current provision.... 10 35 84
--------- --------- ---------
Deferred:
U. S. Federal................... (35) 585 48
State........................... 8 74 6
--------- --------- ---------
Total deferred (benefit)
provision............... (27) 659 54
--------- --------- ---------
Provision resulting from change in
tax status......................... 57 -- --
--------- --------- ---------
Total income tax provision........... $ 40 $ 694 $ 138
========= ========= =========
A reconciliation of taxes to the U.S. federal statutory rate to those
reflected in the Consolidated Statements of Operations for 1994, 1995 and 1996
is as follows:
1994 1995 1996
--------- --------- ---------
Federal statutory rate............... (34.0)% (34.0)% 34.0%
Effect of state income taxes......... (2.6) (6.0) 4.0
Effect of nondeductible expenses..... 6.2 3.9 57.3
Effect of valuation allowance........ 30.3 74.7 (55.3)
Effect of change in tax status....... 4.4 -- --
--------- --------- ---------
4.3% 38.6% 40.0%
========= ========= =========
36
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
deferred tax assets and liabilities at December 31, 1995 and 1996 were as
follows:
1995 1996
--------- ---------
(IN THOUSANDS)
Deferred tax assets:
Net operating loss
carryforwards.................. $ 1,536 $ 2,369
Reserves not currently
deductible..................... 117 200
Accrued liabilities and other... 130 104
Amortization of non-compete
agreements..................... 292 387
Accrued interest not currently
deductible..................... 190 --
--------- ---------
2,265 3,060
Valuation allowance.................. (1,517) (1,442)
--------- ---------
Total deferred tax assets....... $ 748 $ 1,618
========= =========
Deferred tax liability:
Amortization and depreciation... (2,229) (5,063)
--------- ---------
Total deferred tax
liabilities............. (2,229) (5,063)
========= =========
Net deferred tax liability........... (1,481) (3,445)
========= =========
Current net deferred asset........... 419 304
Noncurrent net deferred liability.... (1,900) (3,749)
--------- ---------
$ (1,481) $ (3,445)
========= =========
The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets for which realization is uncertain. At December
31, 1996, the Company has approximately $5,723,000 of federal net operating loss
("NOL") carryforwards which will expire between 2009 and 2011, if not
utilized, and $8,700,000 of state NOL carryforwards which will expire between
the years 2000 and 2011, if not utilized. As a result of the IPO (see Note 7),
there may be a limitation placed on the Company's utilization of its NOL's by
Section 382 of the Internal Revenue Code. The Company reviews the valuation
allowance at the end of each quarter and makes adjustments if it is determined
that it is more likely than not that the NOL's will be realized.
7. STOCKHOLDERS' EQUITY:
INITIAL PUBLIC OFFERING
On August 8, 1996, the Company completed its IPO of 3,910,000 shares of its
Class A Common Stock at $13.50 per share for net proceeds of approximately $48
million, after selling commissions and related expenses of approximately $5
million. The net proceeds of the IPO were used to repay outstanding indebtedness
of the Company. In connection with the IPO, the Company performed a
recapitalization of its common stock into two classes of common stock (Class A
and Class B), provided separate voting rights to each class and converted
existing common stock to Class B Common Stock. The holders of Class A Common
Stock are entitled to one vote for each share held on all matters submitted to a
vote of common stockholders. The holders of Class B Common Stock are entitled to
ten votes for each share held on all matters submitted to a vote of common
stockholders. The Series A, B and C Preferred Stocks automatically converted
into Class B Common Stock upon the closing of the IPO. Series D Preferred Stock
remained outstanding after the IPO (see Note 8).
37
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PREFERRED STOCK
Prior to the IPO, the Company had four classes of preferred stock
outstanding, Series A, B, C and D. The Series A, B and C preferred stocks
automatically converted into shares of Class B Common Stock at the effective
date of the IPO (August 8, 1996). The Series D preferred stock remains
outstanding at December 31, 1996 (see Note 8).
TREASURY STOCK
During 1996, the Company purchased 170,000 shares of Series B Preferred
Stock for total cash consideration of $341,000. Such shares have been canceled.
STOCK OPTION PLANS
The Company has three stock option plans currently in effect under which
future grants may be issued: the 1995 Stock Incentive Plan (the "1995 Plan"),
the 1996 Stock Option Plan (the "1996 Plan") and the 1996 Nonemployee Director
Stock Option Plan (the "Directors' Plan").
Options granted under the 1995 Plan have a ten-year term. All options
granted under the 1995 Plan prior to the IPO vest immediately, while those
issued in conjunction with and after the IPO vest over a four-year period at 25%
per year. Options issued under this plan prior to the Company's IPO are
satisfied with shares of Class B Common Stock, but options issued after that
date are satisfied with shares of Class A Common Stock. A total of 400,000
shares are reserved for issuance under the 1995 Plan of which 194,500 were
outstanding at December 31, 1996.
Options granted under the 1996 Plan and the Directors' Plan have ten-year
terms and vest 8.33% per year on the first through fourth anniversary dates of
the grant date and 16.66% per year on the fifth through eighth anniversary dates
of the grant date; provided, however, the options scheduled to vest in years 5-8
from the grant date (i.e., 66 2/3 of the total grant) vest immediately if the
average of the daily high and low prices of the Class A Common Stock for 20
consecutive trading days exceeds $27.99 prior to the fourth anniversary of the
grant date. A total of 600,000 shares of Class A Common Stock are reserved for
issuance under the 1996 Plan and 200,000 shares of Class A Common Stock are
reserved for issuance under the Directors' Plan. Options to purchase a total of
560,000 and 95,000 shares of Class A Common Stock were outstanding under the
1996 Plan and Directors' Plan, respectively.
The Company accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with SFAS No. 123, the Company's net loss and loss
per share would have been the following pro forma amounts:
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS,
EXCEPT
PER SHARE DATA)
Net (loss) attributable to common
stockholders
As reported..................... $ (2,494) $ (913)
Pro forma....................... (2,721) (1,122)
Net (loss) per common and common
equivalent share attributable to
common stockholders:
As reported..................... (.66) (.19)
Pro forma....................... (.72) (.23)
Each of the plans is administered by a stock option committee appointed by
the Board of Directors. The plans allow for options to be granted as
non-qualified options, incentive stock options, reload options, alternative
appreciation rights and stock bonus options. As of December 31, 1996, only
non-qualified
38
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options and incentive stock options have been issued. The options are granted
with an exercise price equal to the then fair market value of the Company's
common stock as determined by the Board of Directors.
A summary of the status of the plans at December 31, 1995 and 1996 and
changes during the year ended is presented in the table and narrative below:
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996
------------------ ------------------
SHARES WTD AVG. SHARES WTD AVG.
(000) EX PRICE (000) EX PRICE
------ -------- ------ --------
Outstanding at beginning of period. -- $-- 50 $ 9.80
Granted............................ 50 9.80 818 13.90
Exercised.......................... -- -- (5) 10.43
Canceled........................... -- -- (13) 10.11
------ ------
Outstanding at end of year......... 50 9.80 850 13.74
------ ------
Exercisable at end of year......... 50 9.80 74 10.34
------ ------
Weighted average fair value of
options granted.................. $ 4.57 $ 8.00
All of the options outstanding at December 31, 1996 have exercise prices
between $8.00 and $20.875, with a weighted average exercise price of $13.74 and
a weighted average remaining contractual life of 9.7 years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively: risk-free interest
rates of 6.27% and 6.67%; expected dividend yields of 0% and 0%; expected lives
of ten years and ten years; expected volatility of 0% and 30.45%.
During 1996, in fulfillment of a previous contractual obligation, the
Company repurchased 106,470 shares of Class B Common Stock from an executive
officer of the Company. Concurrently therewith, the Company sold such shares to
several members of management at the same price, which price approximated the
fair market value of the Company's common stock at the date of contract.
REVERSE STOCK SPLIT
On July 18, 1996, the Company's Board of Directors and stockholders
approved an amendment to the Company's Certificate of Incorporation which
authorized a one for two reverse stock split. The Consolidated Financial
Statements have been restated as if the reverse stock split had occurred at the
beginning of the earliest period presented. For each two shares of Class B
Common Stock at $.01 par, the stockholder received one share of Class B Common
Stock at $.01 par. Upon completion of the IPO, the Series A, B and C Preferred
Stocks automatically converted into Class B Common Stock. The number of shares
held by each Series A, B and C Preferred stockholder remained the same; however,
the conversion prices for Class B Common Stock on those preferred shares doubled
in conjunction with the above-mentioned reverse stock split. In addition, the
exercise prices on outstanding stock options also doubled related to this
reverse stock split, and the number of shares of Class B Common Stock covered by
such options decreased by 50%.
8. REDEEMABLE PREFERRED STOCK:
The Company has 20,000,000 authorized shares of Series D Preferred Stock
with a par value of $.01 per share, of which approximately 17,253,000 shares
were issued and outstanding at December 31, 1996. The Series D Preferred Stock
is convertible at any time into common stock at an initial conversion base price
of $13.50 per share through February 28, 1997. Thereafter, the conversion price
increases every six months by $1.00 until February 28, 1998 whereupon the
conversion price is the average market price for the ten days preceding the date
of delivery of notice of conversion on the principal securities market on which
the Class A Common Stock is then traded. The holders of Series D Preferred Stock
are entitled to receive preferential dividends at an annual rate ranging from
$0.06 to $0.07 per share, payable quarterly. Dividends are payable quarterly as
long as the stock is outstanding. The Series D Preferred Stock is redeemable, in
whole or in part, at the option of the Company, at any time during the period
commencing with the second anniversary of the
39
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's IPO (August 8, 1998) and ending December 31, 2001. 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.
Concurrent with every issuance of Series D Preferred Stock, an irrevocable
standby letter of credit, issued by a financial institution and guaranteed by
the Company, was given to the holder (or a designated beneficiary) and can be
drawn upon if certain events occur, including the following: the Company has
failed to pay preferred stock dividends, the Company has failed to redeem the
preferred stock shares on the designated mandatory redemption date or a
liquidation, dissolution or winding up of affairs of the Company occurs. As of
December 31, 1996, letters of credit of approximately $10.0 million were
outstanding relative to Series D Preferred Stock. This stock is classified as
Redeemable Preferred Stock on the Consolidated Balance Sheets of the Company.
9. LOSS PER SHARE:
For 1994 and 1995, the loss per share is calculated based on the weighted
average number of common and common equivalent shares outstanding during each
year using guidance provided by the SEC for companies that are contemplating an
initial public offering. For 1996, loss per share is computed by dividing the
net loss, after deduction of preferred stock dividends, by the weighted average
number of common and common equivalent shares outstanding. Loss per common and
common equivalent share for 1994, 1995 and 1996 was as follows:
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
Net (loss)........................... $ (963) $ (2,494) $ (291)
Preferred stock dividend
requirements......................... -- -- 622
--------- --------- ---------
Net (loss) attributable to common
stockholders......................... $ (963) $ (2,494) $ (913)
========= ========= =========
Common shares outstanding............ 2,520 2,520 4,869
Common equivalent shares:
Stock options, treasury stock
method(a)..................... 23 23 --
Assumed conversion of preferred
stock(b)...................... 863 1,238 --
--------- --------- ---------
Total weighted average common and
common equivalent shares
outstanding........................ 3,406 3,781 4,869
========= ========= =========
(Loss) per common and common
equivalent share before
extraordinary item attributable to
common stockholders................ $ (.28) $ (.66) $ (.09)
Extraordinary item.............. -- -- (.10)
--------- --------- ---------
Net (loss) per common and common
equivalent share attributable
to common stockholders........ $ (.28) $ (.66) $ (.19)
========= ========= =========
Weighted average number of common and
common equivalent shares
outstanding (in thousands)......... 3,406 3,781 4,869
========= ========= =========
- ------------
(a) In accordance with the SEC's Staff Accounting Bulletin No. 83, the loss per
share presented assumes that all stock options granted by the Company within
one year prior to the Company's IPO were outstanding for 1994 and 1995. The
effect of such stock options was calculated using the "treasury stock"
method, using the IPO price of $13.50 per share and was included in the
calculation of common equivalent shares outstanding despite the fact that
the effect of the assumed exercise of such options is anti-dilutive.
(b) Pursuant to the terms of their respective agreements, the Company's Series
A, B and C Preferred Stock automatically converted to common stock upon the
Company's IPO. Therefore, in accordance with the SEC's position relative to
securities with these conversion characteristics, the effect of such
conversions was reflected from the respective dates of issuance of the
preferred stocks in common equivalent shares outstanding, despite the fact
that the effect of the assumed exercise of stock options is anti-dilutive.
40
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. EVENTS SUBSEQUENT TO DECEMBER 31, 1996:
ACQUISITIONS
The Company closed six transactions in January and February of 1997 which
included 16 funeral homes and two cemeteries, for total consideration of
approximately $55 million. These include CNM, a California corporation which
through its subsidiaries owns and operates the ten Wilson & Kratzer funeral
homes located in Alameda and Contra Costa Counties, California and the Rolling
Hills Memorial Park Cemetery located in Richmond, California. The combined
operations of CNM perform 2,100 funerals and 1,470 interments annually.
The Company issued 19,999,992 shares of Series F Preferred Stock in
conjunction with the merger with CNM. These shares are convertible into an
aggregate of 1,272,450 shares of Class A Common Stock. Of the issued and
outstanding shares, 5,388,315 shares are "designated" meaning they are
convertible at $15.00 per share through March 31, 1997. The remaining 14,611,677
shares are convertible at $16.00 per share until January 1, 1998 at which time
the conversion price increases to $17.00 per share and increases by $1.00 per
share each January 1 thereafter until January 1, 2002 at which time the
conversion base price will be equal to the market price of the Class A Common
Stock.
The holders of
Series F Preferred Stock are entitled to receive preferential dividends at an
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 $.0486 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 prior to December 31, 2007.
SERIES D PREFERRED CONVERSION
As of February 28, 1997, holders of 15,570,616 shares of Series D Preferred
Stock have elected to convert their shares into shares of the Company's common
stock, leaving 1,682,500 shares of Series D Preferred Stock outstanding.
11. QUARTERLY FINANCIAL DATA (UNAUDITED):
The table below sets forth consolidated operating results by fiscal quarter
for the years ended December 31, 1995 and 1996 (in thousands, except per share
data):
FIRST SECOND THIRD FOURTH
------ ------ ------- -------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
1995(1)
Revenues, net....................... $5,715 $5,786 $ 6,028 $ 6,708
Gross profit........................ 1,250 922 862 956
Net (loss).......................... (331) (367) (859) (937)
Net (loss) per common share......... $(0.09) $(0.10) $ (0.24) $ (0.21)
1996(1)
Revenues, net....................... $7,635 $9,290 $10,145 $13,278
Gross profit........................ 1,670 1,719 994 2,783
Income (loss) before extraordinary
item.............................. (193) (468) (414) 1,282
Extraordinary item.................. -- -- (498) --
Preferred stock dividend
requirements...................... 10 91 250 271
Net income (loss)................... (203) (559) (1,162) 1,011
Net income (loss) per common share:
Continuing operations.......... $(0.08) $(0.22) $ (0.11) $ 0.12
Extraordinary item............. -- -- (0.09) --
------ ------ ------- -------
Net income (loss) per
common share........... $(0.08) $(0.22) $ (0.20) $ 0.12
- ------------
(1) Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly per share amounts does not
equal the total computed for the year due to stock transactions which
occurred during the periods presented.
41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Carriage Services, Inc.:
We have audited in accordance with generally accepted auditing standards,
the Consolidated Financial Statements of Carriage Services, Inc. and
subsidiaries included in this Form 10-K, and have issued our report thereon
dated February 28, 1997. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in Part IV, Item 14 (a)(2) for Carriage Services, Inc. and subsidiaries is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 28, 1997
42
<PAGE>
CARRIAGE SERVICES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
==============================================================================================
BALANCE CHARGED TO BALANCE
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for bad debts and
contract cancellations........... $ 196 $ 510 $ 501 $ 205
Year ended December 31, 1995:
Allowance for bad debts and
contract cancellations........... $ 205 $ 488 $ 388 $ 305
Year ended December 31, 1996:
Allowance for bad debts and
contract cancellations........... $ 305 $ 683 $ 458 $ 530
</TABLE>
43
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CARRIAGE SERVICES, INC.
(Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware)
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 as follows:
1. The name of the Corporation is Carriage Services, Inc. and the name
under which the Corporation was originally incorporated was Carriage Funeral
Services, Inc. The date of filing of the Corporation's original Certificate of
Incorporation was December 29, 1993.
2. This Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") restates and integrates and further amends the
Certificate of Incorporation of the Corporation.
3. The text of the Certificate of Incorporation as amended or supplemented
heretofore is further amended hereby to read in full as set forth herein and in
Exhibits A, B, C and D hereto containing the Amended and Restated Certificates
of Designation, Preferences, Rights and Limitations of the Corporation's Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock, respectively:
ARTICLE I.
The name of the Corporation is Carriage Services, Inc.
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
ARTICLE III
The purpose for which the Corporation is organized is to engage in any and
all lawful acts and activity for which corporations may be organized under the
General Corporation Law of Delaware. The Corporation will have perpetual
existence.
ARTICLE IV.
<PAGE>
The total number of shares of stock that the Corporation shall have
authority to issue is, 80,000,000 shares of capital stock, consisting of (i)
50,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"); (ii)15,000,000 shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"); and (iii) 15,000,000 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 "Common Stock").
Effective upon filing of this Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, 1996, each
issued and outstanding share of previously authorized common stock of the
Corporation ("Old Common Stock") shall represent one validly issued, fully paid
and non-assessable share of Class B Common Stock. Each certificate which
theretofore represented shares of Old Common Stock shall thereafter represent
that number of shares of Class B Common Stock; PROVIDED, HOWEVER, that each
person holding of record a stock certificate or certificates which represented
shares of Old Common Stock shall receive, upon surrender of such certificate or
certificates, a new certificate or certificates evidencing and representing the
number of shares of Class B Common Stock to which such person is entitled.
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Common Stock and the Preferred Stock are as
follows:
1. Provisions Relating to the Common Stock.
(a) DIVIDENDS. Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any class or series thereof, each
share of Common Stock shall entitle the holder of record thereof to receive
dividends out of funds legally available therefor, when, as and if declared by
the board of directors of the Corporation with respect to any of such class of
stock. No dividend shall be declared or paid in respect of any Common Stock
unless the holders of both the Class A Common Stock and the Class B Common Stock
receive the same per share dividend, payable in the same amount and type of
consideration, as if such classes constituted a single class, except that if any
dividend is declared that is payable in shares of Class A Common Stock or Class
B Common Stock, such dividend shall be declared and paid at the same rate per
share with respect to the Class A Common Stock and the Class B Common Stock, and
the dividend payable on shares of Class A Common Stock shall be payable only in
shares of Class A Common Stock and the dividend payable on shares of Class B
Common Stock shall be payable only in shares of Class B Common Stock.
(b) LIQUIDATION RIGHTS. The holders of Common Stock shall be entitled to
participate in the net assets of the Corporation remaining after any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, and after payment or provision for the payment
of the debts and liabilities of the Corporation and payment of the liquidation
preference of any shares of capital stock of the Corporation having such a
preference, distributing such proceeds pro-rata among the holders of Common
Stock. The holders of the Class A Common Stock and the Class B Common Stock
shall participate in such assets as if such classes constituted a single class
of stock. A dissolution, liquidation or winding-up of the Corporation, as such
terms are used in this paragraph (b), shall not be deemed to be occasioned by or
to include any consolidation or merger of the Corporation with or into any other
corporation or
2
<PAGE>
corporations or other entity or a sale, lease, exchange, or conveyance of all or
a part of the assets of the Corporation.
(c) VOTING RIGHTS.
(i) Except as may otherwise be expressly required by the General
Corporation Law of Delaware, the holders of shares of Class A Common Stock and
the holders of shares of Class B Common Stock shall vote together as a single
class, provided, however, that with respect to each matter properly brought
before the shareholders for their consideration and vote, each share of Class A
Common Stock shall entitle the registered holder thereof to one vote on all
matters brought before the common stockholders of the Corporation for a vote and
each share of Class B Common Stock shall entitle the registered holder thereof
to ten votes on all matters brought before the common stockholders of the
Corporation for a vote.
(ii) In the case of each share of Class B Common Stock held of
record by a bank, voting trustee, broker, dealer, clearing agency, or any
nominee thereof, or by any other nominee of the beneficial owner of such share,
the registered holder of such share will be entitled, notwithstanding the
foregoing limitation, to cast ten votes with respect to such share if such
holder shall establish to the satisfaction of the Corporation that such share
has been beneficially owned continuously from the date of issuance by the
original beneficial owner (whose name and address must be specified to the
Corporation), or by a Permitted Transferee (as defined in paragraph 1(e) of
Article IV hereof) of such original beneficial owner. Any such registered holder
who wishes to cast ten votes per share shall file with the transfer agent for
the Class B Common Stock a certificate, on a form that will be mailed to such
holder by such transfer agent on request, certifying as to the information
specified in the preceding sentence and specifying the date on which such holder
desires to exercise voting rights (the "Voting Date"). Any such certificate
shall be deemed filed only if received by the transfer agent not less than ten
nor more than 30 days prior the Voting Date. If such certificate shall not
establish to the satisfaction of the Corporation that the registered holder is
entitled to cast ten votes per share, then, within five business days after the
receipt thereof by the transfer agent, the Corporation shall mail to the person
filing such certificate a notice that describes the deficiency and, unless the
Corporation determines that such person shall have a reasonable opportunity to
cure such deficiency prior to the Voting Date, notifies such person that such
person shall be entitled to only one vote per share on the Voting Date.
(d) CONVERSION BY REGISTERED HOLDER.
(i) Each share of Class B Common Stock shall be convertible at any
time, at the option of the registered holder thereof, into one fully paid and
nonassessable share of Class A Common Stock of the Corporation.
(ii) No fractional shares of Class A Common Stock shall be issued
upon such conversion, but in lieu thereof the Corporation shall pay to the
holder an amount in cash equal to the fair market value of such fractional
share.
(iii) To convert shares of Class B Common Stock under this paragraph
1(d), the registered holder thereof shall surrender the certificate or
certificates representing such shares,
3
<PAGE>
duly endorsed to the Corporation or in blank (which endorsement shall correspond
exactly with the name or names of the registered holder or holders set forth on
the face of the certificates and on the stock transfer records of the
Corporation), at the office of the transfer agent for the shares of Class B
Common Stock (which may be either the Corporation or any third party retained by
it for such purpose), and shall give written notice to the transfer agent and
the Corporation that such holder elects to convert all or part of the shares
represented thereby, stating therein the names or names (with the address or
addresses) in which the certificate or certificates for shares of Class A Common
Stock are to be issued.
(iv) If the registered holder fully complies with paragraph (iii),
the Corporation shall, as soon as practicable thereafter, instruct the transfer
agent to deliver to such holder, or to such holder's nominee or nominees, a
certificate or certificates for the number of shares of Class A Common Stock to
which such holder shall be entitled, rounded to the nearest whole number of
shares, and a check for any amount payable hereunder in lieu of a fractional
share, along with a certificate representing any shares of Class B Common Stock
that the holder has not elected to convert hereunder but which constituted part
of the shares of Class B Common Stock represented by the certificate or
certificates surrendered.
(v) Shares of Class B Common Stock shall be deemed to have been
converted as of the close of business on the date of the due surrender of the
certificates representing the shares to be converted as provided above, and the
person or persons entitled to receive the shares of Class A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common Stock at such time.
(vi) If the Corporation shall in any manner split or subdivide the
outstanding shares of Class A Common Stock or Class B Common Stock, the
outstanding shares of the other such class of Common Stock shall be split or
subdivided in the same manner, proportionately and on the same basis per share.
(vii) When shares of Class B Common Stock have been converted
pursuant to this paragraph (d), they shall be irrevocably canceled and not
reissued.
(e) AUTOMATIC CONVERSION. Any shares of Class B Common Stock outstanding
on December 31, 2001, without further action of the holder thereof, shall be
automatically converted into shares of Class A Common Stock and certificates
formerly representing outstanding shares of Class B Common Stock shall thereupon
and thereafter represent the like number of shares of Class A Common Stock.
(f) TRANSFERS OF CLASS B COMMON STOCK. No person holding any share of
Class B Common Stock shall transfer, and the Corporation shall not register (nor
permit the transfer agent for the Class B Common Stock to register) the transfer
of, any shares of Class B Common Stock or any interest therein, whether by sale,
assignment, gift, bequest, pledge, hypothecation, encumbrance, or any other
disposition, except to a "Permitted Transferee" of such person (as defined below
in this paragraph). If a holder of shares of Class B Common Stock transfers any
such shares to any person or entity other than a "Permitted Transferee," such
transfer, without any further action of the parties or the Corporation, shall
automatically and irrevocably convert
4
<PAGE>
such shares into an equal number of shares of Class A Common Stock from the date
of such transfer. The term "Permitted Transferee" shall mean only:
(i) the spouse and any lineal descendant (including adopted
children) of any person duly holding shares of Class A Common Stock (a
"Qualified Holder"), and any spouse of any such lineal descendant (all
such spouses and lineal descendants being hereinafter referred to as
"Family Members");
(ii) the trustee of a trust for the sole benefit of a Qualified
Holder or Family Members;
(iii) a partnership made up exclusively of Qualified Holders or
Family Members or a corporation or limited liability company wholly owned
by Qualified Holders or Family Members, provided, however, that as of the
date that such partnership, corporation or company no longer comprised of
or owned exclusively by Qualified Holders or Family Members, such
partnership, corporation or company will no longer be a Permitted
Transferee and any Class B Common Stock held by it shall automatically and
irrevocably be converted into Class A Common Stock without any further
action of the parties or the Corporation; or
(iv) the executor, administrator or personal representative of the
estate of a qualified holder or of any Family Member, or the guardian or
conservator of a Qualified Holder or any Family Member who has been
adjudged disabled by a court of competent jurisdiction.
2. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have any designations
and powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof as are stated and expressed in this Article IV and in the
resolution or resolutions providing for the issue of such class or series
adopted by the board of directors of the Corporation as hereafter prescribed.
(b) Authority is hereby expressly granted to and vested in the board of
directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more classes or series, and with respect to each
class or series of the Preferred Stock, to state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have voting rights,
special, or limited, or is to be without voting rights, and whether or not such
class or series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or series of stock;
(ii) the number of shares to constitute the class or series and the
designations thereof;
5
<PAGE>
(iii) the preferences and relative, participating, optional, or
other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash, notes, securities, or other
property), and the time or times at which, and the terms and conditions upon
which, such shares shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be subject
to the operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the periodic amount thereof, and the terms
and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, stock
of the Corporation, or other property, the conditions upon which and the times
when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the
holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;
(viii) whether or not the shares of any class or series, at the
option of the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for the shares of any
other class or classes or of any other series of the same or any other class or
classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which such
conversion or exchange may be made, with such adjustments, if any, as shall be
stated and expressed or provided for in such resolution or resolutions; and
(ix) any other special rights and protective provisions with respect
to any class or series as may to the board of directors of the Corporation seem
advisable.
(c) The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects and in any other manner. The board of directors of the
Corporation may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class or
series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
6
<PAGE>
3. General.
(a) Subject to the foregoing provisions of this Restated Certificate of
Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (not less than the par
value thereof) as may be fixed by the board of directors of the Corporation,
which is expressly authorized to fix the same in its absolute discretion subject
to the foregoing conditions. Shares so issued for which the consideration shall
have been paid or delivered to the Corporation shall be deemed fully paid stock
and shall not be liable to any further call or assessment thereon, and the
holders of such shares shall not be liable for any further payments in respect
of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the board of
directors of the Corporation. The board of directors of the Corporation shall be
empowered to set the exercise price, duration, times for exercise, and other
terms of such rights or options; PROVIDED, HOWEVER, that the consideration to be
received for any shares of capital stock subject thereto shall not be less than
the par value thereof.
ARTICLE V.
The number, classification, and terms of the board of directors of the
Corporation and the procedures to elect directors, to remove directors, and to
fill vacancies in the board of directors shall be as follows:
(a) The number of directors that shall constitute the whole board of
directors shall from time to time be fixed exclusively by the board of directors
by a resolution adopted by a majority of the whole board of directors serving at
the time of that vote. In no event shall the number of directors that constitute
the whole board of directors be fewer than three. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Directors of the Corporation need not be elected by written ballot
unless the by-laws of the Corporation otherwise provide.
(b) The board of directors of the Corporation shall be divided into three
classes designated Class I, Class II, and Class III, respectively, all as nearly
equal in number as possible, with each director then in office receiving the
classification that at least a majority of the board of directors designates.
The initial term of office of directors of Class I shall expire at the annual
meeting of stockholders of the Corporation in 1997, of Class II shall expire at
the annual meeting of stockholders of the Corporation in 1998, and of Class III
shall expire at the annual meeting of stockholders of the Corporation in 1999,
and in all cases as to each director until his successor is elected and
qualified or until his earlier death, resignation or removal. At each annual
meeting of stockholders beginning with the annual meeting of stockholders in
1997, each director elected to succeed a director whose term is then expiring
shall hold his office until the third annual meeting of stockholders after his
election and until his successor is elected and qualified or until his earlier
death, resignation or removal. If the number of directors that constitutes the
whole board of directors is changed as permitted by this Article V, the majority
of the whole board of directors that adopts the change shall also fix and
determine the number of directors comprising
7
<PAGE>
each class; provided, however, that any increase or decrease in the number of
directors shall be apportioned among the classes as equally as possible.
(c) Vacancies in the board of directors resulting from death, resignation,
retirement, disqualification, removal from office, or other cause and
newly-created directorships resulting from any increase in the authorized number
of directors may be filled by no less than a majority vote of the remaining
directors then in office, though less than a quorum, who are designated to
represent the same class or classes of stockholders that the vacant position,
when filled, is to represent or by the sole remaining director (but not by the
stockholders except as required by law), and each director so chosen shall
receive the classification of the vacant directorship to which he has been
appointed or, if it is a newly-created directorship, shall receive the
classification that at least a majority of the board of directors designates and
shall hold office until the first meeting of stockholders held after his
election for the purpose of electing directors of that classification and until
his successor is elected and qualified or until his earlier death, resignation,
or removal from office.
(d) A director of any class of directors of the Corporation may be removed
before the expiration date of that director's term of office, only for cause, by
an affirmative vote of the holders of not less than eighty percent (80%) of the
votes of the outstanding shares of the class or classes or series of stock then
entitled to be voted at an election of directors of that class or series, voting
together as a single class, cast at the annual meeting of stockholders or at any
special meeting of stockholders called by a majority of the whole board of
directors for this purpose.
(e) Notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law or by
this Restated Certificate of Incorporation, the affirmative vote of the holders
of not less than eighty percent (80%) of the votes of the outstanding shares of
the Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with, this Article V.
ARTICLE VI.
All of the power of the Corporation, insofar as it may be lawfully vested
by this Restated Certificate of Incorporation in the board of directors, is
hereby conferred upon the board of directors of the Corporation. In furtherance
of and not in limitation of that power or the powers conferred by law, (1) a
majority of directors then in office (or such higher percentage as may be
specified in the by-laws with respect to any provision thereof) shall have the
power to adopt, amend, and repeal the by-laws of the Corporation; (2) the
stockholders of the Corporation shall have no power to appoint or remove
directors as members of committees of the board of directors, nor to abrogate
the power of the board of directors to establish any such committees or the
power of any such committee to exercise the powers and authority of the board of
directors; (3) the stockholders of the Corporation shall have no power to elect
or remove officers of the Corporation nor to abrogate the power of the board of
directors to elect and remove officers of the Corporation; and (4)
notwithstanding any other provision of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or no
8
<PAGE>
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law or by
this Restated Certificate of Incorporation, the by-laws of the Corporation shall
not be adopted, altered, amended or repealed by the stockholders of the
Corporation except in accordance with the provisions of the by-laws and by the
vote of the holders of not less than a majority of the outstanding shares of
stock then entitled to vote upon the election of directors, voting together as a
single class, or such higher vote as is set forth in the by-laws. In the event
of a direct conflict between the by-laws of the Corporation and this Restated
Certificate of Incorporation, the provisions of this Restated Certificate of
Incorporation shall be controlling. Notwithstanding any other provisions of this
Restated Certificate of Incorporation or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any affirmative vote of
the holders of any particular class or series of the capital stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of not less than eighty percent (80%) of the
votes of the shares of the Corporation then entitled to be voted in an election
of directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article VI.
ARTICLE VII.
Any action required or permitted to be taken by the stockholders of the
Corporation may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
ARTICLE VIII.
Special meetings of the stockholders of the Corporation, and any proposals
to be considered at such meetings, may be called and proposed exclusively by the
board of directors, pursuant to a resolution approved by a majority of the
members of the board of directors at the time in office, and no stockholder of
the Corporation shall require the board of directors to call a special meeting
of common stockholders or to propose business at a special meeting of
stockholders. Except as otherwise required by law or regulation, no business
proposed by a stockholder to be considered at an annual meeting of the
stockholders (including the nomination of any person to be elected as a director
of the Corporation) shall be considered by the stockholders at that meeting
unless, no later than sixty (60) days before the annual meeting of stockholders
or (if later) ten days after the first public notice of that meeting is sent to
stockholders, the Corporation receives from the stockholder proposing that
business a written notice that sets forth (1) the nature of the proposed
business with reasonable particularity, including the exact text of any proposal
to be presented for adoption, and the reasons for conducting that business at
the annual meeting; (2) with respect to each such stockholder, that
stockholder's name and address (as they appear on the records of the
Corporation), business address and telephone number, residence address and
telephone number, and the number of shares of each class of stock of the
Corporation beneficially owned by that stockholder; (3) any interest of the
stockholder in the proposed business; (4) the name or names of each person
nominated by the stockholder to be elected or re-elected as a director, if any;
and (5) with respect to each nominee, that nominee's name, business address and
telephone number, and residence address and
9
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telephone number, the number of shares, if any, of each class of stock of the
Corporation owned directly and beneficially by that nominee, and all information
relating to that nominee that is required to be disclosed in solicitations of
proxies for elections of directors, or is otherwise required, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (or any provision of law subsequently replacing Regulation 14A),
together with a duly acknowledged letter signed by the nominee stating his or
her acceptance of the nomination by that stockholder, stating his or her
intention to serve as director if elected, and consenting to being named as a
nominee for director in any proxy statement relating to such election. The
person presiding at the annual meeting shall determine whether business
(including the nomination of any person as a director) has been properly brought
before the meeting and, if the facts so warrant, shall not permit any business
(or voting with respect to any particular nominee) to be transacted that has not
been properly brought before the meeting. Notwithstanding any other provisions
of this Restated Certificate of Incorporation or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any affirmative vote of
the holders of any particular class or series of the capital stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of not less than eighty percent (80%) of the
shares of the Corporation then entitled to be voted in an election of directors,
voting together as a single class, shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article VIII.
ARTICLE IX.
No contract or transaction between the Corporation and one or more of its
directors, officers, or stockholders or between the Corporation and any person
(as used herein "person" means any corporation, partnership, association, firm,
trust, joint venture, political subdivision, or instrumentality) or other
organization in which one or more of its directors, officers, or stockholders
are directors, officers, or stockholders, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board or any
committee thereof which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or the committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by majority vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee
thereof, or the stockholders. Interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or of a
committee which authorizes the contract or transaction.
ARTICLE X
The Corporation shall indemnify and hold harmless any person who was, is,
or is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer
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of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Such right
shall be a contract right and as such shall run to the benefit of any director
or officer who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article X is in effect. Any repeal or amendment of this
Article X shall be prospective only and shall not limit the rights of any such
director or officer or the obligations of the Corporation with respect to any
claim arising from or related to the services of such director or officer in any
of the foregoing capacities prior to any such repeal or amendment to this
Article X. Such right shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Delaware General Corporation Law, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
board of directors, independent legal counsel, or stockholders) to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
ARTICLE XI
Elections of directors need not be by written ballot unless the by-laws of
the Corporation shall so provide.
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ARTICLE XII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or amendment of this Article XI by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation arising
from an act or omission occurring prior to the time of such repeal or amendment.
In addition to the circumstances in which a director of the Corporation is not
personally liable as set forth in the foregoing provisions of this Article XI, a
director shall not be liable to the Corporation or its stockholders to such
further extent as permitted by any law hereafter enacted, including, without
limitation, any subsequent amendment to the Delaware General Corporation Law.
4. This Amended and Restated Certificate of Incorporation was duly adopted
by vote of the stockholders in accordance with Sections 228, 242 and 245 of the
General Corporation Law of the state of Delaware.
IN WITNESS WHEREOF, said Carriage Services, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by Melvin C. Payne, its
President, this day of July, 1996.
Carriage Services, Inc.
By: ___________________________________
Melvin C. Payne, President
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CERTIFICATE OF CORRECTION
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CARRIAGE SERVICES, INC.
Carriage Services, Inc., a Delaware corporation organized and
existing under and by virtue of The General Corporation Law of the State of
Delaware, and originally incorporated under the name of Carriage Funeral
Services, Inc., DOES HEREBY CERTIFY:
1. The name of the corporation is Carriage Services, Inc.
2. An Amended and Restated Certificate of Incorporation was filed with
the Secretary of State of Delaware on July 3, 1996, and said Amended
and Restated Certificate of Incorporation requires correction as
permitted by subsection (f) of Section 103 of The General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of the Amended and Restated Certificate of
Incorporation to be corrected is as follows: (i) the letter "A"
following the word Class contained in the second line of Section
1(f)(i) of Article IV should be deleted and the letter "B" inserted
in lieu thereof.
4. Section 1(f)(i) of Article IV of the Amended and Restated
Certificate of Incorporation is corrected to read as follows:
"(i) the spouse and any lineal descendant (including adopted
children) of any person duly holding shares of Class B Common
Stock (a "Qualified Holder"), and any spouse of any such
lineal descendant (all such spouses and lineal descendants
being hereinafter referred to as "Family Members");"
IN WITNESS WHEREOF, the undersigned authorized officer has executed this
Certificate of Correction the ________ day of September, 1996.
CARRIAGE SERVICES, INC.
By:_________________________________________
Melvin C. Payne, President
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Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151(g) of the General Corporation Law of Delaware, such Board of
Directors by written unanimous consent dated January 14, 1994, duly adopted a
resolution providing for the issuance of a series of Seven Million (7,000,000)
shares of the Corporation's Preferred Stock, $.01 par value per share, to be
designated "Series A Preferred Stock", and fixing the voting powers, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof. The following is a restatement of the
original Certificate of Designation, Preferences, Rights and Limitations to
reflect amendments to the original resolution that were adopted by the
stockholders of the Corporation, including the holders of the Series A Preferred
Stock, by written consent pursuant to Section 228 of the General Corporation Law
of Delaware:
There shall be established and authorized for issuance a series of
the Corporation's Preferred Stock, $.01 par value per share, designated
"Series A Preferred Stock" (herein referred to as "Series A Preferred
Stock"), consisting of Seven Million (7,000,000) shares, each of the par
value of $.01 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the
qualifications, limitations or restrictions set forth below:
1. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
(a) "Act" means the General Corporation Law of Delaware, as
amended, or any successor state statute.
<PAGE>
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Common Stock" means (i) shares of Class A Common Stock,
or (ii) shares of Class B Common Stock, as applicable. "Class A
Common Stock" means the Corporation's Class A Common Stock, par
value $.01 per share. "Class B Common Stock" means the Corporation's
Class B Common Stock, par value $.01 per share.
(d) "Fiscal Year" means the fiscal year of the Corporation
determined from time to time by the Board of Directors for financial
reporting purposes.
(e) "Initial Public Offering" means an underwritten public
offering of either Class A Common Stock or Class B Common Stock
pursuant to a registration statement filed under the Securities Act
(other than any registration statement relating to warrants, options
or shares of capital stock of the Corporation granted or to be
granted or sold primarily to employees, directors, or officers of
the Corporation, a registration statement filed pursuant to Rule 145
under the Securities Act or any successor rule, a registration
statement relating to employee benefit plans or interests therein or
any registration statement covering securities issued in connection
with any debt financing of the Corporation).
(f) "Major Transaction" means a single transaction involving,
or a series of transactions having the cumulative effect of, the
sale of all or substantially all of the assets or the outstanding
capital stock of the Corporation, or a merger or consolidation of
the Corporation with or into another corporation or other entity in
which the Corporation is not the survivor, or any combination of the
foregoing involving the Corporation or one or more of its
subsidiaries.
(g) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(h) "Preferred Stock" means shares of any series of the Corpo-
ration's Preferred Stock, $.01 par value per share.
(i) "Return Amount" means an amount expressed in dollars
computed by multiplying the Return Percentage times $1.00 (in the
case of Series A Preferred Stock) or the initial Conversion Price
under Section 5(c) below (in the case of Class B Common Stock), as
the case may be.
(j) "Return Percentage" means, for any given period of time,
the aggregate percentage computed at the rate of five percent (5%)
per annum from the date of issuance of the Series A Preferred Stock
through the date in question.
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<PAGE>
(k) "Securities Act" means the Securities Act of 1933, as
amended.
(l) "Series A Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series A Preferred Stock,
$.01 par value per share.
(m) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
(n) Whenever any reference is made herein to the outstanding
shares of Common Stock determined "on a fully diluted basis," such
reference shall mean the total number of shares of Common Stock
which would be outstanding after giving effect to the full
conversion, exercise or exchange of all capital stock, convertible
notes, warrants, options and other securities convertible or
exercisable into or exchangeable with the Common Stock, including
(without limitation) the Series A Preferred Stock, without regard to
vesting rights and other similar contingencies.
2. DIVIDENDS. The holders of shares of Series A Preferred Stock shall
be entitled to receive dividends on account of such shares only when
and as declared by the Board of Directors.
3. REDEMPTION.
(a) MANDATORY REDEMPTION. On December 31, 2003, the
Corporation shall redeem all of the shares of Series A Preferred
Stock then outstanding (subject, however, to the right of the
holders of the Series A Preferred Stock to convert their shares
pursuant to Section 5), at a redemption price of $1.50 per share.
(b) GENERAL. From and after the setting aside of the funds
necessary for redemption, notwithstanding that any certificate for
shares of Series A Preferred Stock so called for redemption shall
not have been surrendered for cancellation, the shares to be
redeemed shall no longer be deemed outstanding, and the holders of
certificates representing such shares shall have with respect to
such shares no rights in or with respect to the Corporation except
the right to receive, upon the surrender of such certificates, the
redemption price therefor. Shares of Series A Preferred Stock
redeemed by the Corporation pursuant to this Section 3, or shares of
Series A Preferred Stock otherwise purchased by the Corporation,
shall not be reissued and shall be cancelled and retired in the
manner provided by the laws of the State of Delaware, and no shares
of Series A Preferred Stock shall be issued in lieu thereof.
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<PAGE>
4. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 4, unless pursuant to such event or
transaction the Corporation is permanently or indefinitely ceasing
its business activities in the funeral service industry.
(b) SERIES A PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series A
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of the outstanding Common Stock, an amount in cash for each
share of Series A Preferred Stock equal to (i) $1.25, if such
proceedings occur on or before December 31, 1998, or (ii) $1.00 plus
the Return Amount, if such proceedings occur after December 31, 1998
(in either event the "Liquidation Preference"), or funds necessary
for such payment shall have been set aside in trust for the account
of the holders of the outstanding Series A Preferred Stock so as to
be and continue available therefor. If upon such liquidation,
dissolution or winding up, the assets distributable to the holders
of the Series A Preferred Stock shall be insufficient to permit the
payment to them of such Liquidation Preference per share, the assets
of the Corporation shall be distributed to the holders of the Series
A Preferred Stock ratably until they shall have received the full
amount to which they would otherwise be entitled. If the assets of
the Corporation are sufficient to permit the payment of such amounts
to the holders of the Series A Preferred Stock, the remainder of the
assets of the Corporation, if any, after the distributions as
aforesaid shall be distributed and divided ratably among the holders
of the Common Stock then outstanding according to their respective
shares.
5. CONVERSION. The Series A Preferred Stock shall be convertible into
Class B Common Stock in accordance with the following provisions of
this Section 5.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 5, each holder of shares of Series A
Preferred Stock shall have the right at such holder's option, at any
time prior to December 31, 2003, to convert all or any portion of
such holder's shares of Series A Preferred Stock into fully paid and
nonassessable shares of Class B Common Stock, at the Conversion
Price (hereafter defined) in effect on the Conversion Date
(hereafter defined), upon the terms hereinafter set forth. In the
event of any mandatory redemption of Series A Preferred Stock under
Section 3, each holder of Series A Preferred Stock may elect to
convert all or any portion of such holder's shares into Class B
Common Stock pursuant to this Section 5, in which case the
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<PAGE>
provisions of this Section 5 shall govern and control as to the
shares so converted.
(b) AUTOMATIC CONVERSION. On the date that either (i) a
registration statement that has been filed with the Securities and
Exchange Commission with respect to an Initial Public Offering shall
become effective under the Securities Act, in which the public
offering price per share is at least equal to one hundred
twenty-five percent (125%) of the Conversion Price then in effect,
or (ii) a Major Transaction has occurred, in which the net proceeds
that the Board of Directors in good faith determines will be paid to
a holder of Common Stock therefrom is anticipated to be at least
equal to one hundred twenty-five percent (125%) of the Conversion
Price then in effect, then in either such event each share of Series
A Preferred Stock then outstanding shall be automatically converted
into shares of Class B Common Stock in accordance with the following
provisions of this Section 5. In the case of net proceeds from a
Major Transaction other than in cash, the value of such proceeds
shall be determined by the Board of Directors, and for purposes of
this paragraph (b) and paragraph (f)(vii) below, the good faith
determination of the Board of Directors shall be conclusive.
Notwithstanding that any certificates for shares of Series A
Preferred Stock shall not have been surrendered for cancellation,
the shares of Series A Preferred Stock so converted shall no longer
be deemed outstanding, and the holders of certificates representing
such shares of Series A Preferred Stock shall have, from and after
the date referred to above, the same rights in or with respect to
the Corporation has holders of shares of the number of shares of
Class B Common Stock into which such shares of Series A Preferred
Stock have been so converted. Each such holder shall have the right,
upon surrender of such certificates, to receive from the Corporation
a certificate or certificates representing the number of shares of
Class B Common Stock calculated in accordance with the following
provisions of this Section 5 registered in the name of such holder.
Within 30 days following the effective date of such registration
statement or the consummation of such Major Transaction, the
Corporation shall deliver to each holder whose shares of Series A
Preferred Stock have been converted into Class B Common Stock as
provided hereunder a written notice setting forth the fact and
effective date of such conversion, the number of shares of Class B
Common Stock into which such holder's shares of Series A Preferred
Stock were converted, and a statement that such holder is entitled
to receive a new certificate representing such number of shares of
Class B Common Stock in exchange for the certificates representing
such holder's shares of Series A Preferred Stock; provided, however,
that the failure of the Corporation to provide such notice to any
holder or any deficiency in any such notice shall not impair or
affect the automatic conversion of such holder's Series A Preferred
Stock into Class B Common Stock as provided herein.
(c) CONVERSION PRICE. The shares of Series A Preferred Stock
to be converted shall be convertible into the number of shares of
Class B
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<PAGE>
Common Stock as is determined by multiplying the number of shares of
Series A Preferred Stock to be converted by a fraction, the
numerator of which is $1.00 and the denominator of which is the
Conversion Price in effect on the Conversion Date. The Conversion
Price at which shares of Class B Common Stock shall initially be
issuable upon conversion of shares of Series A Preferred Stock shall
be $3.57-1/7 per share (subject to adjustment for certain events
including subdivisions and combinations of the Common Stock and as
provided below, hereafter the "Conversion Price").
(d) MECHANICS OF CONVERSION. The holder of any shares of
Series A Preferred Stock may exercise the conversion right specified
in paragraph (a) above by surrendering to the Corporation or any
transfer agent of the Corporation the certificate or certificates
for the shares to be converted, accompanied by written notice
stating that the holder elects to convert all or a specified portion
of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered, and automatic conversion under
paragraph (b) shall be deemed to have been effected as therein
provided; any such date is referred to herein as the "Conversion
Date". As promptly as practicable thereafter the Corporation shall
issue and deliver to or upon the written order of such holders a
certificate or certificates for the number of full shares of Class B
Common Stock to which such holders are entitled rounded down to the
next whole share as provided in paragraph (e) below. The person in
whose name the certificate or certificates of Class B Common Stock
are to be issued shall be deemed to have become a holder of record
of such Class B Common Stock on the Conversion Date.
(e) FRACTIONAL SHARES. No fractional shares of Class B Common
Stock or scrip shall be issued upon conversion of shares of Series A
Preferred Stock. Instead of any fractional shares of Class B Common
Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the number of full shares of
Class B Common Stock issuable upon conversion thereof shall be
reduced to the next lowest number of whole shares, and the
Corporation will pay a cash adjustment in respect of any surrendered
shares of Series A Preferred Stock not converted into Class B Common
Stock in an amount equal to $1.00 per share of Series A Preferred
Stock.
(f) CONVERSION PRICE ADJUSTMENTS. The Conversion Price and the
number of shares of Class B Common Stock issuable upon conversion
("Conversion Shares") shall be subject to adjustment from time to
time as follows:
(i) CERTAIN ISSUANCES OF EQUITY STOCK. If, at any time
following issuance of any Series A Preferred Stock, the
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<PAGE>
Corporation issues any Common Stock, or any security or
evidence of indebtedness which is convertible into or
exchangeable for Common Stock, or any warrant, option or other
right to subscribe for or purchase Common Stock or any
security or evidence of indebtedness which is convertible or
exchangeable for Common Stock (hereinafter, "Equity Stock"),
other than Excluded Stock (as defined in clause (D) below),
for a consideration per share less than the Conversion Price
in effect immediately prior to such issuance, then the
Conversion Price shall immediately be reduced to a price per
share determined by dividing (x) an amount equal to the sum of
(i) the number of shares of Equity Stock of the Corporation
outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price and (ii) the
consideration, if any, received by the Corporation upon such
issue or sale, by (y) the total number of shares of Equity
Stock of the Corporation outstanding immediately after such
issue or sale. The number of shares of Equity Stock
outstanding at any given time for the purposes of the
foregoing computation means the shares of Common Stock
outstanding together with all shares of Common Stock issuable
upon conversion or exercise of any such Equity Stock,
excluding any shares of Common Stock previously outstanding
that have been reacquired by the Corporation and constitute
treasury shares.
For purposes of any adjustment of the Conversion Price
pursuant to this subparagraph (i) of this Section 5(f), the
following provisions shall be applicable:
(A) CASH. In the case of the issuance of Equity
Stock for cash, the amount of the consideration received
by the Corporation shall be deemed to be the amount of
the cash proceeds received by the Corporation for such
Equity Stock before deducting therefrom any discounts,
commissions, taxes, legal and accounting fees or other
expenses allowed, paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of
the issuance of Equity Stock (other than as described in
clause (C) below) for a consideration in whole or in
part other than cash, including securities acquired in
exchange therefor (other than securities by their terms
so exchangeable), the consideration other than cash
shall be deemed to be the fair market value thereof as
reasonably determined by the Board of Directors in good
faith.
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(C) OPTIONS AND CONVERTIBLE SECURITIES, ETC. In
the case of the issuance of (i) options, warrants or
other rights to purchase or acquire Common Stock or
other Equity Stock (whether or not at the time
exercisable), (ii) securities by their terms convertible
into or exchangeable for Common Stock or other Equity
Stock (whether or not at the time so convertible or
exercisable) or (iii) options, warrants or rights to
purchase such convertible or exchangeable securities
(whether or not at the time exer- cisable):
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or
rights were issued and for a consideration equal
to the aggregate consideration (determined in the
manner provided in clauses (A) and (B) above), if
any, received by the Corporation upon the issuance
of such options, warrants or rights plus the
aggregate minimum purchase price provided in such
options, warrants or rights for the Common Stock
covered thereby;
(2) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or
in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable
securities and the subsequent conversion or
exchange thereof, shall be deemed to have been
issued at the time such securities were issued or
such options, warrants or rights were issued and
for a consideration equal to the consideration, if
any, received by the Corporation for any such
securities and related options, warrants or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the
additional consideration, if any, to be received
by the Corporation upon the conversion or exchange
of such securities and the exercise of any related
options, warrants or rights (the consideration in
each case to be determined in the manner provided
in clauses (A) and (B) above);
(3) on any change in the number of
shares of Common Stock deliverable upon exercise
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of any such options, warrants or rights or
conversion of or exchange for such convertible or
exchangeable securities or any change in the
consideration to be received by the Corporation
upon such exercise, conversion or exchange,
including, but not limited to, a change resulting
from the anti-dilution provisions thereof, the
Conversion Price as then in effect shall forthwith
be readjusted to such Conversion Price as would
have been obtained had an adjustment been made
upon the issuance of such options, warrants or
rights not exercised prior to such change, or
securities not converted or exchanged prior to
such change, on the basis of the terms of such
options, warrants, rights or convertible or
exchangeable securities as so changed;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the
termination of the right to convert or exchange
such convertible or exchangeable securities, if
the Conversion Price shall have been adjusted upon
the issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion Price
as would have been obtained had an adjustment been
made upon the issuance of such options, warrants,
rights or securities on the basis of the issuance
of only the number of shares of Common Stock
actually issued upon the exercise of such options,
warrants or rights, or upon the conversion or
exchange of such securities; and
(5) regardless of whether the Conversion
Price shall have been adjusted upon the issuance
of any such options, warrants, rights or
convertible or exchangeable securities, no further
adjustment of the Conversion Price shall be made
for the actual issuance of Common Stock upon the
exercise, conversion or exchange thereof;
PROVIDED, HOWEVER, that no adjustment pursuant to
this clause (C) shall have the effect of increasing the
Conversion Price above the initial Conversion Price.
(D) EXCLUDED STOCK. For purposes hereof, "Excluded
Stock" means shares of Common Stock issued or reserved
for issuance by the Corporation (i) upon conversion of
the Series A Preferred Stock, (ii) pursuant to a stock
dividend, subdivision or split-up covered by paragraph
(ii)
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of this Section 5(f), (iii) to any one or more
unaffiliated persons with whom the Corporation or one or
more of its subsidiaries effect a business combination
(however structured), whether issued in shares of Common
Stock or other securities convertible into or
exchangeable with the Common Stock, and (iv) upon
exercise of options issued to employees of the
Corporation or its subsidiaries (other than employees
who were the record holders of any Common Stock on
December 31, 1993) entitling them to acquire Common
Stock at a price per share less than the Conversion
Price, provided that such exercise price per share is
not less than the fair market value per share of Common
Stock determined in good faith by the Board of Directors
at the time such options are granted.
(ii) STOCK DIVIDENDS. If the number of shares of Class B
Common Stock outstanding at any time after the issuance of any
Series A Preferred Stock is increased by a stock dividend
payable in shares of Class B Common Stock or by a subdivision
or split-up of shares of Class B Common Stock, then
immediately after the record date fixed for the determination
of holders of Class B Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Conversion Price shall be
appropriately decreased and the number of Conversion Shares
proportionately increased so that the holders of any shares of
Series A Preferred Stock shall be entitled to receive the
number of shares of Class B Common Stock of the Corporation
which they would have owned immediately following such action
had such shares of Series A Preferred Stock been converted
immediately prior thereto.
(iii) COMBINATION OF STOCK. If the number of shares of
Class B Common Stock outstanding at any time after issuance of
any class of Series A Preferred Stock is decreased by a
combination of the outstanding shares of Class B Common Stock,
then, immediately after the effective date of such
combination, the Conversion Price shall be appropriately
increased and the number of Conversion Shares proportionately
decreased so that the holders of any shares of Series A
Preferred Stock shall be entitled to receive the number of
shares of Class B Common Stock of the Corporation which they
would have owned immediately following such action had such
shares of Series A Preferred Stock been converted immediately
prior thereto.
(iv) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Common Stock, or in case of the consolidation of the
Corporation with or the merger of the Corporation with or into
any other
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corporation, partnership or other business entity in which the
Corporation is not the survivor, or of the sale, lease or
other transfer of all or substantially all of the assets of
the Corporation to any other corporation, partnership or other
business entity, or in the case of any distribution of cash
(other than dividends not exceeding net income earned in the
current fiscal year to the date on which such dividend is
declared) or other assets or of notes or other indebtedness of
the Corporation or any other securities of the Corporation
(except Common Stock) to the holders of its Common Stock, each
share of Series A Preferred Stock shall, after such capital
reorganization, reclassification, consolidation, merger, sale,
lease or other transfer or such distribution, be convertible
into the number of shares of stock or other securities or
property to which the Class B Common Stock issuable (at the
time of such capital reorganization, reclassification,
consolidation, merger, sale, lease or other transfer or such
distribution) upon conversion of such share of Series A
Preferred Stock would have been entitled upon such capital
reorganization, reclassification, consolidation, merger, sale,
lease or other transfer or such distribution in place of (or
in addition to, in the case of any such event after which
Class B Common Stock remains outstanding) the shares of Class
B Common Stock into which such share of Series A Preferred
Stock would otherwise have been convertible; and in any such
case, if necessary, the provisions set forth herein with
respect to the rights and interests thereafter of the holders
of the shares of Series A Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any share of stock or other securities
or property thereafter deliverable on the conversion of the
shares of Series A Preferred Stock. The subdivision or
combination of shares of Class B Common Stock issuable upon
conversion of shares of Series A Preferred Stock at any time
outstanding into a greater or lesser number of shares of Class
B Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Class B Common Stock
of the Corporation for the purposes of this subparagraph
(iii).
(v) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (f) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (f)
to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such
adjustment would be less than $0.10, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and
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any other amount or amounts so carried forward, shall
aggregate $0.10 or more.
(vi) TIMING OF ISSUANCE OF ADDITIONAL CLASS B COMMON
STOCK UPON CERTAIN ADJUSTMENTS. In any case in which the
provisions of this paragraph (f) requires that an adjustment
shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such
event issuing to the holder of any shares of Series A
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class B
Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event
over and above the shares of Class B Common Stock or other
property issuable or deliverable upon such conversion before
giving effect to such adjustment; PROVIDED, HOWEVER that the
Corporation upon request shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's
right to receive such additional shares or other property, and
such cash, upon the occurrence of the event requiring such
adjustment.
(vii) ADJUSTMENT IF NO INITIAL PUBLIC OFFERING OR MAJOR
TRANSACTION. If on or before December 31, 2000 there has not
occurred an Initial Public Offering or a Major Transaction in
which the public offering price per share in the Initial
Public Offering, or the net proceeds that the Board of
Directors in good faith determines will be paid to a holder of
Common Stock from the Major Transaction, as the case may be,
is at least equal to the Conversion Price then in effect plus
the Return Amount, then the Conversion Price then in effect
for the Series A Preferred Stock shall be automatically
reduced effective as of such date to a price per share
determined by reducing the initial Conversion Price under
paragraph (c) above to $2.65 per share, and then adjusting the
initial Conversion Price (as so reduced) to give effect to any
other adjustments to the Conversion Price under this paragraph
(f) which have occurred after the date of issuance of the
Series A Preferred Stock and prior to the date of adjustment
under this subparagraph (vii).
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion
Price shall be adjusted as provided in paragraph (f), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series A Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment, and the Corporation shall also cause a
copy of such statement to be sent by mail, first class postage
prepaid, to each holder of the Series A Preferred Stock at his or
its address appearing on the Corporation's records. Each such
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<PAGE>
statement shall be signed by the Corporation's chief financial
officer. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the
provisions of subparagraph (g) below.
(h) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii)
or (iii) of paragraph (f) above, the Corporation shall give notice
to each holder of the Series A Preferred Stock in the manner set
forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion of
the Series A Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 15 days prior to the
taking of such proposed action.
(i) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Class B Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series
A Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series A Preferred Stock in respect of which such
shares are being issued.
(j) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series A Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock
or its authorized but unissued shares of Class B Common Stock, or
both, solely for the purpose of effecting the conversion of shares
of Series A Preferred Stock, sufficient shares of Class B Common
Stock to provide for the conversion of all outstanding shares of
Series A Preferred Stock and set aside and keep available any other
property deliverable upon conversion of all outstanding shares of
Series A Preferred Stock.
(k) APPROVALS. If any shares of Class B Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series A Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before
such shares or other securities may be validly issued or delivered
upon conversion,
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<PAGE>
then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the
case may be.
(l) VALID ISSUANCE. All shares of Class B Common Stock or
other securities which may be issued upon conversion of the shares
of Series A Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
6. VOTING RIGHTS.
(a) GENERAL. Except as otherwise provided by law and as
provided in paragraph (b) below, the holders of Series A Preferred
Stock shall have no right or power to vote on the election of
directors or on any other question or in any proceedings involving
the Corporation.
(b) SPECIAL VOTING REQUIREMENTS. Without the consent of the
holders of at least a majority of the outstanding shares of Series A
Preferred Stock, voting together as a single class, the Corporation
shall not (i) amend, alter or repeal any provision of this
Certificate of Designation so as to adversely affect the rights or
powers of any of the Series A Preferred Stock, or (ii) issue any
additional shares of another class or series of Preferred Stock that
has a liquidation preference which is superior to the preference
given to Series A Preferred Stock under Section 4 herein.
(c) NOTICE OF CERTAIN STOCKHOLDER ACTIONS. If any action is
taken by the written consent of less than all of the stockholders of
the Corporation based upon any proposal submitted for consideration
by the Board of Directors, then the Corporation shall, prior to the
time such action by written consent is to become effective, send a
written notice, by mail, first class postage prepaid, to each holder
of the Series A Preferred Stock, at his or its address appearing on
the Corporation's records, setting forth a description of the action
to be so taken. The failure of the Corporation to give the foregoing
notice shall not affect or impair the validity of the action so
taken. The foregoing notice requirement shall not confer upon any
holder of the Series A Preferred Stock any voting rights that are
not otherwise expressly granted herein.
7. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, neither
the shares of Series A Preferred Stock nor the shares of Common
Stock shall have any voting powers, preferences or relative,
participating, optional or other special rights other than those
specifically set forth herein.
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<PAGE>
Exhibit B
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151(g) of the General Corporation Law of Delaware, such Board of
Directors by written unanimous consent dated October 26, 1994, duly adopted a
resolution providing for the issuance of a series of One Million (1,000,000)
shares of the Corporation's Preferred Stock, $.01 par value per share, to be
designated "Series B Preferred Stock", and fixing the voting powers, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof. The following is a restatement of the
original Certificate of Designation, Preferences, Rights and Limitations to
reflect amendments to the original resolution that were adopted by the
stockholders of the Corporation, including the holders of the Series B Preferred
Stock, by written consent pursuant to Section 228 of the General Corporation Law
of Delaware:
There shall be established and authorized for issuance a series of
the Corporation's Preferred Stock, $.01 par value per share, designated
"Series B Preferred Stock" (herein referred to as "Series B Preferred
Stock"), consisting of One Million (1,000,000) shares, each of the par
value of $.01 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the
qualifications, limitations or restrictions set forth below:
8. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
<PAGE>
(a) "Act" means the General Corporation Law of Delaware, as
amended, or any successor state statute.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Common Stock" means (i) shares of Class A Common Stock,
or (ii) shares of Class B Common Stock, as applicable. "Class A
Common Stock" means the Corporation's Class A Common Stock, par
value $.01 per share. "Class B Common Stock" means the Corporation's
Class B Common Stock, par value $.01 per share.
(d) "Fiscal Year" means the fiscal year of the Corporation
determined from time to time by the Board of Directors for financial
reporting purposes.
(e) "Initial Public Offering" means an underwritten public
offering of either Class A Common Stock or Class B Common Stock
pursuant to a registration statement filed under the Securities Act
(other than any registration statement relating to warrants, options
or shares of capital stock of the Corporation granted or to be
granted or sold primarily to employees, directors, or officers of
the Corporation, a registration statement filed pursuant to Rule 145
under the Securities Act or any successor rule, a registration
statement relating to employee benefit plans or interests therein or
any registration statement covering securities issued in connection
with any debt financing of the Corporation).
(f) "Major Transaction" means a single transaction involving,
or a series of transactions having the cumulative effect of, the
sale of all or substantially all of the assets or the outstanding
capital stock of the Corporation, or a merger or consolidation of
the Corporation with or into another corporation or other entity in
which the Corporation is not the survivor, or any combination of the
foregoing involving the Corporation.
(g) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(h) "Preferred Stock" means shares of any series of the Corpo-
ration's Preferred Stock, $.01 par value per share.
(i) "Securities Act" means the Securities Act of 1933, as
amended.
(j) "Senior Stock" means the series of Preferred Stock
designated by the Corporation as its Series A Preferred Stock, $.01
par value per share, and the series of Preferred Stock designated by
the Corporation as its Series C Preferred Stock, $.01 par value per
share.
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<PAGE>
(k) "Series B Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series B Preferred Stock,
$.01 par value per share.
(l) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
9. DIVIDENDS. The holders of shares of Series B Preferred Stock shall
be entitled to receive dividends on account of such shares only when
and as declared by the Board of Directors out of funds legally
available therefor. The declaration or payment of dividends in
respect of any other class or series of the Corporation's stock by
authority of the Board of Directors shall not confer upon the
holders of the Series B Preferred Stock any right or preference to
receive any dividend in respect of such shares.
10. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 3.
(b) SERIES B PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series B
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of the outstanding Common Stock, but subject to any
distribution to the holders of the Senior Stock in respect of such
shares and any other preferential class or series of capital stock
of the Corporation, an amount in cash for each share of Series B
Preferred Stock equal to $1.00, or funds necessary for such payment
shall have been set aside in trust for the account of the holders of
the outstanding Series B Preferred Stock so as to be and continue
available therefor. If upon such liquidation, dissolution or winding
up, the assets distributable to the holders of the Series B
Preferred Stock as aforesaid shall be insufficient to permit the
payment to them (together with any distributions to the holders of
any other class or series of the Corporation's stock which ranks
pari passe with the Series B Preferred Stock) of $1.00 per share,
the assets of the Corporation shall be distributed to the holders of
the Series B Preferred Stock ratably until they shall have received
the full amount to which they would otherwise be entitled but
subject to any distribution of the assets of the Corporation in
respect of the Senior Stock and any other preferential class or
series of capital stock of the Corporation. If the assets of the
Corporation are sufficient to permit the payment of such amounts to
the holders of the Series B Preferred Stock, the remainder of the
assets of the
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<PAGE>
Corporation, if any, after the distributions as aforesaid shall be
distributed and divided ratably among the holders of the Common
Stock (and any other shares of the Corporation's stock which rank
inferior to the Series B Preferred Stock) then outstanding according
to their respective shares.
11. CONVERSION. The Series B Preferred Stock shall be convertible into
Class B Common Stock in accordance with the following provisions of
this Section 4.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 4, each holder of shares of Series B
Preferred Stock shall have the right at such holder's option, at any
time or from time to time, from and after the date of original
issuance to convert all or any part of his shares of Series B
Preferred Stock into fully paid and nonassessable shares of Class B
Common Stock, at the Conversion Price (hereafter defined) in effect
on the Conversion Date (hereafter defined), upon the terms
hereinafter set forth.
(b) AUTOMATIC CONVERSION. On the date that either (i) a
registration statement that has been filed with the Securities and
Exchange Commission with respect to an Initial Public Offering shall
become effective under the Securities Act, or (ii) a Major
Transaction has occurred, then in either such event each share of
Series B Preferred Stock then outstanding shall be automatically
converted into shares of Class B Common Stock in accordance with the
following provisions of this Section 4. Notwithstanding that any
certificates for shares of Series B Preferred Stock shall not have
been surrendered for cancellation, the shares of Series B Preferred
Stock so converted shall no longer be deemed outstanding, and the
holders of certificates representing such shares of Series B
Preferred Stock shall have, from and after the date referred to
above, the same rights in or with respect to the Corporation as
holders of shares of the number of shares of Class B Common Stock
into which such shares of Series B Preferred Stock have been so
converted. Each such holder shall have the right, upon surrender of
such certificates, to receive from the Corporation a certificate or
certificates representing the number of shares of Class B Common
Stock calculated in accordance with the following provisions of this
Section 4 registered in the name of such holder. Within 30 days
following the effective date of such registration statement or the
consummation of such Major Transaction, the Corporation shall
deliver to each holder whose shares of Series B Preferred Stock have
been converted into Class B Common Stock as provided hereunder a
written notice setting forth the fact and effective date of such
conversion, the number of shares of Class B Common Stock into which
such holder's shares of Series B Preferred Stock were converted, and
a statement that such holder is entitled to receive a new
certificate representing such number of shares of Class B Common
Stock in exchange for the certificates representing such holder's
shares of Series B Preferred Stock; provided, however, that the
failure of the Corporation to provide such notice to any holder or
any deficiency in any such notice shall not impair or affect the
automatic conversion of such
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holder's Series B Preferred Stock into Class B Common Stock as
provided herein.
(c) CONVERSION PRICE. The shares of Series B Preferred Stock
to be converted shall be convertible into the number of shares of
Class B Common Stock as is determined by multiplying the number of
shares of Series B Preferred Stock to be converted by a fraction,
the numerator of which is $1.00 and the denominator of which is the
Conversion Price in effect on the Conversion Date. The Conversion
Price at which shares of Class B Common Stock shall initially be
issuable upon conversion of shares of Series B Preferred Stock shall
be an amount per share determined from time to time by the Board of
Directors at the time of issuance of any shares of Series B
Preferred Stock (subject to adjustment as provided below, hereafter
the "Conversion Price"). The initial Conversion Price upon issuance
of any given shares of Series B Preferred Stock shall be recorded in
the minutes of the Board of Directors at which such shares were
authorized to be issued, and the Conversion Price for such shares
shall be conclusively evidenced (absent manifest error) by a
notation to such effect on the face of each certificate representing
such shares.
(d) MECHANICS OF CONVERSION. The holder of any shares of
Series B Preferred Stock may exercise the conversion right specified
in paragraph (a) above by surrendering to the Corporation or any
transfer agent of the Corporation the certificate or certificates
for the shares to be converted, accompanied by written notice
stating that the holder elects to convert all or a specified portion
of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered, and automatic conversion under
paragraph (b) shall be deemed to have been effected as therein
provided; any such date is referred to herein as the "Conversion
Date". As promptly as practicable thereafter the Corporation shall
issue and deliver to or upon the written order of such holders a
certificate or certificates for the number of full shares of Class B
Common Stock to which such holders are entitled rounded down to the
next whole share as provided in paragraph (e) below. The person in
whose name the certificate or certificates of Class B Common Stock
are to be issued shall be deemed to have become a holder of record
of such Class B Common Stock on the Conversion Date.
(e) FRACTIONAL SHARES. No fractional shares of Class B Common
Stock or scrip shall be issued upon conversion of shares of Series B
Preferred Stock. Instead of any fractional shares of Class B Common
Stock which would otherwise be issuable upon conversion of any
shares of Series B Preferred Stock, the number of full shares of
Class B Common Stock issuable upon conversion thereof shall be
reduced to the next lowest number of whole shares, and the
Corporation will pay a cash adjustment in respect of any surrendered
shares of Series B Preferred Stock not con-
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<PAGE>
verted into Class B Common Stock in an amount equal to $1.00 per
share of Series B Preferred Stock.
(f) CONVERSION PRICE ADJUSTMENTS. The Conversion Price and the
number of shares of Class B Common Stock issuable upon conversion of
the Series B Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) STOCK DIVIDENDS. If the number of shares of Class
B Common Stock outstanding at any time after the issuance of
any Series B Preferred Stock is increased by a stock dividend
payable in shares of Class B Common Stock or by a subdivision
or split-up of shares of Class B Common Stock, then
immediately after the record date fixed for the determination
of holders of Class B Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Conversion Price shall be
appropriately decreased and the number of shares of Class B
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be proportionately increased so that the
holders of any shares of Series B Preferred Stock shall be
entitled to receive the number of shares of Class B Common
Stock of the Corporation which they would have owned
immediately following such action had such shares of Series B
Preferred Stock been converted immediately prior thereto.
(ii) COMBINATION OF STOCK. If the number of shares of
Common Stock outstanding at any time after issuance of any
class of Series B Preferred Stock is decreased by a
combination of the outstanding shares of Class B Common Stock,
then, immediately after the effective date of such
combination, the Conversion Price shall be appropriately
increased and the number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock shall be
proportionately decreased so that the holders of any shares of
Series B Preferred Stock shall be entitled to receive the
number of shares of Class B Common Stock of the Corporation
which they would have owned immediately following such action
had such shares of Series B Preferred Stock been converted
immediately prior thereto.
(iii) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Class B Common Stock, or in case of the consolidation
of the Corporation with or the merger of the Corporation with
or into any other corporation, partnership or other business
entity in which the Corporation is not the survivor, or of the
sale, lease or other transfer of all or substantially all of
the assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series B
Preferred Stock shall, after such capital reorganization,
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reclassification, consolidation, merger, sale or lease, be
convertible into the number of shares of stock or other
securities or property to which the Class B Common Stock
issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale or lease) upon
conversion of such share of Series B Preferred Stock would
have been entitled upon such capital reorganization,
reclassification, consolidation, merger, sale or lease in
place of (or in addition to, in the case of any such event
after which Class B Common Stock remains outstanding) the
shares of Class B Common Stock into which such share of Series
B Preferred Stock would otherwise have been convertible; and
in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of
the holders of the shares of Series B Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any share of stock or other securities
or property thereafter deliverable on the conversion of the
shares of Series B Preferred Stock. The subdivision or
combination of shares of Class B Common Stock issuable upon
conversion of shares of Series B Preferred Stock at any time
outstanding into a greater or lesser number of shares of Class
B Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Class B Common Stock
of the Corporation for the purposes of this subparagraph
(iii).
(iv) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (f) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (f)
to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or
more.
(v) TIMING OF ISSUANCE OF ADDITIONAL CLASS B COMMON
STOCK UPON CERTAIN ADJUSTMENTS. In any case in which the
provisions of this paragraph (f) requires that an adjustment
shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such
event issuing to the holder of any shares of Series B
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class B
Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event
over and above the shares of Class B Common Stock or other
property issuable or deliverable upon such conversion before
giving effect to such adjustment; PROVIDED,
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HOWEVER that the Corporation upon request shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares or other property, and such cash, upon the occurrence
of the event requiring such adjustment.
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion
Price shall be adjusted as provided in paragraph (f), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series B Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment, and the Corporation shall also cause a
copy of such statement to be sent by mail, first class postage
prepaid, to each holder of the Series B Preferred Stock at his or
its address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's chief financial
officer. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the
provisions of subparagraph (h) below.
(h) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii)
or (iii) of paragraph (f) above, the Corporation shall give notice
to each holder of the Series B Preferred Stock in the manner set
forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion of
the Series B Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 15 days prior to the
taking of such proposed action.
(i) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Class B Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series
B Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series B Preferred Stock in respect of which such
shares are being issued.
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<PAGE>
(j) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series B Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock
or its authorized but unissued shares of Class B Common Stock, or
both, solely for the purpose of effecting the conversion of shares
of Series B Preferred Stock, sufficient shares of Class B Common
Stock to provide for the conversion of all outstanding shares of
Series B Preferred Stock and set aside and keep available any other
property deliverable upon conversion of all outstanding shares of
Series B Preferred Stock.
(k) APPROVALS. If any shares of Class B Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series B Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before
such shares or other securities may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as
expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
(l) VALID ISSUANCE. All shares of Class B Common Stock or
other securities which may be issued upon conversion of the shares
of Series B Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
12. VOTING RIGHTS. Except as provided by law, the holders of Series B
Preferred Stock shall have no right or power to vote on the election
of directors or on any other question or in any proceedings
involving the Corporation.
13. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, neither
the shares of Series B Preferred Stock nor the shares of Common
Stock shall have any voting powers, preferences or relative,
participating, optional or other special rights other than those
specifically set forth herein.
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<PAGE>
Exhibit C
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151(g) of the General Corporation Law of Delaware, such Board of
Directors by written unanimous consent dated October 26, 1994, duly adopted a
resolution providing for the issuance of a series of One Million (1,000,000)
shares of the Corporation's Preferred Stock, $.01 par value per share, to be
designated "Series B Preferred Stock", and fixing the voting powers, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof. The following is a restatement of the
original Certificate of Designation, Preferences, Rights and Limitations to
reflect amendments to the original resolution that were adopted by the
stockholders of the Corporation, including the holders of the Series B Preferred
Stock, by written consent pursuant to Section 228 of the General Corporation Law
of Delaware:
There shall be established and authorized for issuance a series of
the Corporation's Preferred Stock, $.01 par value per share, designated
"Series B Preferred Stock" (herein referred to as "Series B Preferred
Stock"), consisting of One Million (1,000,000) shares, each of the par
value of $.01 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the
qualifications, limitations or restrictions set forth below:
14. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
<PAGE>
(a) "Act" means the General Corporation Law of Delaware, as
amended, or any successor state statute.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Common Stock" means (i) shares of Class A Common Stock,
or (ii) shares of Class B Common Stock, as applicable. "Class A
Common Stock" means the Corporation's Class A Common Stock, par
value $.01 per share. "Class B Common Stock" means the Corporation's
Class B Common Stock, par value $.01 per share.
(d) "Fiscal Year" means the fiscal year of the Corporation
determined from time to time by the Board of Directors for financial
reporting purposes.
(e) "Initial Public Offering" means an underwritten public
offering of either Class A Common Stock or Class B Common Stock
pursuant to a registration statement filed under the Securities Act
(other than any registration statement relating to warrants, options
or shares of capital stock of the Corporation granted or to be
granted or sold primarily to employees, directors, or officers of
the Corporation, a registration statement filed pursuant to Rule 145
under the Securities Act or any successor rule, a registration
statement relating to employee benefit plans or interests therein or
any registration statement covering securities issued in connection
with any debt financing of the Corporation).
(f) "Major Transaction" means a single transaction involving,
or a series of transactions having the cumulative effect of, the
sale of all or substantially all of the assets or the outstanding
capital stock of the Corporation, or a merger or consolidation of
the Corporation with or into another corporation or other entity in
which the Corporation is not the survivor, or any combination of the
foregoing involving the Corporation.
(g) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(h) "Preferred Stock" means shares of any series of the Corpo-
ration's Preferred Stock, $.01 par value per share.
(i) "Securities Act" means the Securities Act of 1933, as
amended.
(j) "Senior Stock" means the series of Preferred Stock
designated by the Corporation as its Series A Preferred Stock, $.01
par value per share, and the series of Preferred Stock designated by
the Corporation as its Series C Preferred Stock, $.01 par value per
share.
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<PAGE>
(k) "Series B Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series B Preferred Stock,
$.01 par value per share.
(l) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
15. DIVIDENDS. The holders of shares of Series B Preferred Stock shall
be entitled to receive dividends on account of such shares only when
and as declared by the Board of Directors out of funds legally
available therefor. The declaration or payment of dividends in
respect of any other class or series of the Corporation's stock by
authority of the Board of Directors shall not confer upon the
holders of the Series B Preferred Stock any right or preference to
receive any dividend in respect of such shares.
16. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 3.
(b) SERIES B PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series B
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of the outstanding Common Stock, but subject to any
distribution to the holders of the Senior Stock in respect of such
shares and any other preferential class or series of capital stock
of the Corporation, an amount in cash for each share of Series B
Preferred Stock equal to $1.00, or funds necessary for such payment
shall have been set aside in trust for the account of the holders of
the outstanding Series B Preferred Stock so as to be and continue
available therefor. If upon such liquidation, dissolution or winding
up, the assets distributable to the holders of the Series B
Preferred Stock as aforesaid shall be insufficient to permit the
payment to them (together with any distributions to the holders of
any other class or series of the Corporation's stock which ranks
pari passe with the Series B Preferred Stock) of $1.00 per share,
the assets of the Corporation shall be distributed to the holders of
the Series B Preferred Stock ratably until they shall have received
the full amount to which they would otherwise be entitled but
subject to any distribution of the assets of the Corporation in
respect of the Senior Stock and any other preferential class or
series of capital stock of the Corporation. If the assets of the
Corporation are sufficient to permit the payment of such amounts to
the holders of the Series B Preferred Stock, the remainder of the
assets of the
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<PAGE>
Corporation, if any, after the distributions as aforesaid shall be
distributed and divided ratably among the holders of the Common
Stock (and any other shares of the Corporation's stock which rank
inferior to the Series B Preferred Stock) then outstanding according
to their respective shares.
17. CONVERSION. The Series B Preferred Stock shall be convertible into
Class B Common Stock in accordance with the following provisions of
this Section 4.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 4, each holder of shares of Series B
Preferred Stock shall have the right at such holder's option, at any
time or from time to time, from and after the date of original
issuance to convert all or any part of his shares of Series B
Preferred Stock into fully paid and nonassessable shares of Class B
Common Stock, at the Conversion Price (hereafter defined) in effect
on the Conversion Date (hereafter defined), upon the terms
hereinafter set forth.
(b) AUTOMATIC CONVERSION. On the date that either (i) a
registration statement that has been filed with the Securities and
Exchange Commission with respect to an Initial Public Offering shall
become effective under the Securities Act, or (ii) a Major
Transaction has occurred, then in either such event each share of
Series B Preferred Stock then outstanding shall be automatically
converted into shares of Class B Common Stock in accordance with the
following provisions of this Section 4. Notwithstanding that any
certificates for shares of Series B Preferred Stock shall not have
been surrendered for cancellation, the shares of Series B Preferred
Stock so converted shall no longer be deemed outstanding, and the
holders of certificates representing such shares of Series B
Preferred Stock shall have, from and after the date referred to
above, the same rights in or with respect to the Corporation as
holders of shares of the number of shares of Class B Common Stock
into which such shares of Series B Preferred Stock have been so
converted. Each such holder shall have the right, upon surrender of
such certificates, to receive from the Corporation a certificate or
certificates representing the number of shares of Class B Common
Stock calculated in accordance with the following provisions of this
Section 4 registered in the name of such holder. Within 30 days
following the effective date of such registration statement or the
consummation of such Major Transaction, the Corporation shall
deliver to each holder whose shares of Series B Preferred Stock have
been converted into Class B Common Stock as provided hereunder a
written notice setting forth the fact and effective date of such
conversion, the number of shares of Class B Common Stock into which
such holder's shares of Series B Preferred Stock were converted, and
a statement that such holder is entitled to receive a new
certificate representing such number of shares of Class B Common
Stock in exchange for the certificates representing such holder's
shares of Series B Preferred Stock; provided, however, that the
failure of the Corporation to provide such notice to any holder or
any deficiency in any such notice shall not impair or affect the
automatic conversion of such
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<PAGE>
holder's Series B Preferred Stock into Class B Common Stock as
provided herein.
(c) CONVERSION PRICE. The shares of Series B Preferred Stock
to be converted shall be convertible into the number of shares of
Class B Common Stock as is determined by multiplying the number of
shares of Series B Preferred Stock to be converted by a fraction,
the numerator of which is $1.00 and the denominator of which is the
Conversion Price in effect on the Conversion Date. The Conversion
Price at which shares of Class B Common Stock shall initially be
issuable upon conversion of shares of Series B Preferred Stock shall
be an amount per share determined from time to time by the Board of
Directors at the time of issuance of any shares of Series B
Preferred Stock (subject to adjustment as provided below, hereafter
the "Conversion Price"). The initial Conversion Price upon issuance
of any given shares of Series B Preferred Stock shall be recorded in
the minutes of the Board of Directors at which such shares were
authorized to be issued, and the Conversion Price for such shares
shall be conclusively evidenced (absent manifest error) by a
notation to such effect on the face of each certificate representing
such shares.
(d) MECHANICS OF CONVERSION. The holder of any shares of
Series B Preferred Stock may exercise the conversion right specified
in paragraph (a) above by surrendering to the Corporation or any
transfer agent of the Corporation the certificate or certificates
for the shares to be converted, accompanied by written notice
stating that the holder elects to convert all or a specified portion
of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered, and automatic conversion under
paragraph (b) shall be deemed to have been effected as therein
provided; any such date is referred to herein as the "Conversion
Date". As promptly as practicable thereafter the Corporation shall
issue and deliver to or upon the written order of such holders a
certificate or certificates for the number of full shares of Class B
Common Stock to which such holders are entitled rounded down to the
next whole share as provided in paragraph (e) below. The person in
whose name the certificate or certificates of Class B Common Stock
are to be issued shall be deemed to have become a holder of record
of such Class B Common Stock on the Conversion Date.
(e) FRACTIONAL SHARES. No fractional shares of Class B Common
Stock or scrip shall be issued upon conversion of shares of Series B
Preferred Stock. Instead of any fractional shares of Class B Common
Stock which would otherwise be issuable upon conversion of any
shares of Series B Preferred Stock, the number of full shares of
Class B Common Stock issuable upon conversion thereof shall be
reduced to the next lowest number of whole shares, and the
Corporation will pay a cash adjustment in respect of any surrendered
shares of Series B Preferred Stock not con-
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<PAGE>
verted into Class B Common Stock in an amount equal to $1.00 per
share of Series B Preferred Stock.
(f) CONVERSION PRICE ADJUSTMENTS. The Conversion Price and the
number of shares of Class B Common Stock issuable upon conversion of
the Series B Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) STOCK DIVIDENDS. If the number of shares of Class
B Common Stock outstanding at any time after the issuance of
any Series B Preferred Stock is increased by a stock dividend
payable in shares of Class B Common Stock or by a subdivision
or split-up of shares of Class B Common Stock, then
immediately after the record date fixed for the determination
of holders of Class B Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Conversion Price shall be
appropriately decreased and the number of shares of Class B
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be proportionately increased so that the
holders of any shares of Series B Preferred Stock shall be
entitled to receive the number of shares of Class B Common
Stock of the Corporation which they would have owned
immediately following such action had such shares of Series B
Preferred Stock been converted immediately prior thereto.
(ii) COMBINATION OF STOCK. If the number of shares of
Common Stock outstanding at any time after issuance of any
class of Series B Preferred Stock is decreased by a
combination of the outstanding shares of Class B Common Stock,
then, immediately after the effective date of such
combination, the Conversion Price shall be appropriately
increased and the number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock shall be
proportionately decreased so that the holders of any shares of
Series B Preferred Stock shall be entitled to receive the
number of shares of Class B Common Stock of the Corporation
which they would have owned immediately following such action
had such shares of Series B Preferred Stock been converted
immediately prior thereto.
(iii) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Class B Common Stock, or in case of the consolidation
of the Corporation with or the merger of the Corporation with
or into any other corporation, partnership or other business
entity in which the Corporation is not the survivor, or of the
sale, lease or other transfer of all or substantially all of
the assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series B
Preferred Stock shall, after such capital reorganization,
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<PAGE>
reclassification, consolidation, merger, sale or lease, be
convertible into the number of shares of stock or other
securities or property to which the Class B Common Stock
issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale or lease) upon
conversion of such share of Series B Preferred Stock would
have been entitled upon such capital reorganization,
reclassification, consolidation, merger, sale or lease in
place of (or in addition to, in the case of any such event
after which Class B Common Stock remains outstanding) the
shares of Class B Common Stock into which such share of Series
B Preferred Stock would otherwise have been convertible; and
in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of
the holders of the shares of Series B Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any share of stock or other securities
or property thereafter deliverable on the conversion of the
shares of Series B Preferred Stock. The subdivision or
combination of shares of Class B Common Stock issuable upon
conversion of shares of Series B Preferred Stock at any time
outstanding into a greater or lesser number of shares of Class
B Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Class B Common Stock
of the Corporation for the purposes of this subparagraph
(iii).
(iv) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (f) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (f)
to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or
more.
(v) TIMING OF ISSUANCE OF ADDITIONAL CLASS B COMMON
STOCK UPON CERTAIN ADJUSTMENTS. In any case in which the
provisions of this paragraph (f) requires that an adjustment
shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such
event issuing to the holder of any shares of Series B
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class B
Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event
over and above the shares of Class B Common Stock or other
property issuable or deliverable upon such conversion before
giving effect to such adjustment; PROVIDED,
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<PAGE>
HOWEVER that the Corporation upon request shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares or other property, and such cash, upon the occurrence
of the event requiring such adjustment.
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion
Price shall be adjusted as provided in paragraph (f), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series B Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment, and the Corporation shall also cause a
copy of such statement to be sent by mail, first class postage
prepaid, to each holder of the Series B Preferred Stock at his or
its address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's chief financial
officer. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the
provisions of subparagraph (h) below.
(h) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii)
or (iii) of paragraph (f) above, the Corporation shall give notice
to each holder of the Series B Preferred Stock in the manner set
forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion of
the Series B Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 15 days prior to the
taking of such proposed action.
(i) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Class B Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series
B Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series B Preferred Stock in respect of which such
shares are being issued.
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<PAGE>
(j) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series B Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock
or its authorized but unissued shares of Class B Common Stock, or
both, solely for the purpose of effecting the conversion of shares
of Series B Preferred Stock, sufficient shares of Class B Common
Stock to provide for the conversion of all outstanding shares of
Series B Preferred Stock and set aside and keep available any other
property deliverable upon conversion of all outstanding shares of
Series B Preferred Stock.
(k) APPROVALS. If any shares of Class B Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series B Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before
such shares or other securities may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as
expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
(l) VALID ISSUANCE. All shares of Class B Common Stock or
other securities which may be issued upon conversion of the shares
of Series B Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
18. VOTING RIGHTS. Except as provided by law, the holders of Series B
Preferred Stock shall have no right or power to vote on the election
of directors or on any other question or in any proceedings
involving the Corporation.
19. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, neither
the shares of Series B Preferred Stock nor the shares of Common
Stock shall have any voting powers, preferences or relative,
participating, optional or other special rights other than those
specifically set forth herein.
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<PAGE>
Exhibit D
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
Pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151(g) of the General Corporation Law of Delaware, such Board of
Directors by written unanimous consent dated March 4, 1996, duly adopted a
resolution providing for the issuance of a series of Twenty Million (20,000,000)
shares of the Corporation's Preferred Stock, $.01 par value per share, to be
designated "Series D Preferred Stock", and fixing the voting powers, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof. The following is a restatement of the
original Certificate of Designation, Preferences, Rights and Limitations to
reflect amendments to the original resolution that were adopted by the
stockholders of the Corporation, including the holders of the Series D Preferred
Stock, by written consent pursuant to Section 228 of the General Corporation Law
of Delaware:
There shall be established and authorized for issuance a series of
the Corporation's Preferred Stock, $.01 par value per share, designated
"Series D Preferred Stock" (herein referred to as "Series D Preferred
Stock"), consisting of Twenty Million (20,000,000) shares, each of the par
value of $.01 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the
qualifications, limitations or restrictions set forth below:
20. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
(a) "Affiliate" of any person shall mean (a) any member of the
immediate family of such person, including parents, siblings, spouse
and lineal
<PAGE>
descendants (including those by adoption); the parents, siblings,
spouse, or lineal descendants (including those by adoption) of such
immediate family member; and in any such case any trust whose
primary beneficiary is such person or one or more members of such
immediate family and/or such person's lineal descendants; (b) the
legal representative or guardian of such person or of any such
immediate family members in the event such person or any such
immediate family members becomes mentally incompetent; and (c) any
person, corporation or other entity controlling, controlled by or
under common control with such person. As used in this definition,
the term "control", including the correlative terms "controlling",
"controlled by" and "under common control with" shall mean
possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership
of securities or any partnership or other ownership interest, by
contract or otherwise) of a person, corporation or other entity.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Common Stock" means (i) shares of Class A Common Stock,
or (ii) shares of Class B Common Stock. "Class A Common Stock" means
the Corporation's Class A Common Stock, par value $.01 per share.
"Class B Common Stock" means the Corporation's Class B Common Stock,
par value $.01 per share.
(d) "Conversion Base Price" means:
(i) Until consummation of an Initial Public Offering,
the Initial Conversion Base Price;
(ii) From the date of consummation of an Initial Public
Offering until the date which is the last day of the sixth
full calendar month thereafter, the LESSER of (x) Initial
Conversion Base Price per share of Common Stock, or (y) the
Initial Public Offering Price.
(iii) From the first day of the seventh full calendar
month following consummation of an Initial Public Offering
until the last day of the twelfth full calendar month after
such consummation, the price calculated under subparagraph
(ii) above PLUS $.50.
(iv) From the first day of the thirteenth full calendar
month following consummation of an Initial Public Offering
until the last day of the eighteenth full calendar month after
such consummation, the price calculated under subparagraph
(ii) above PLUS $1.00.
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(e) "Conversion Price" means:
(i) From the date of original issuance of the Series D
Preferred Stock until the last day of the eighteenth full
calendar month following consummation of an Initial Public
Offering, the Conversion Base Price.
(ii) From and after the first day of the nineteenth
full calendar month following consummation of an Initial
Public Offering, the Market Price.
(f) "Dividend Rate" shall mean an annual rate (expressed in
dollars or portions thereof) as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares
of Series D Preferred Stock. The Dividend Rate applicable to any
shares of Series D Preferred Stock shall be recorded in the minutes
of the Board of Directors at which such shares are authorized to be
issued, and shall be conclusively evidenced (absent manifest error)
by a notation to such effect on the face of each certificate
representing such shares.
(g) "Initial Conversion Base Price" means an amount (expressed
in dollars or portions thereof) as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares
of Series D Preferred Stock. The Initial Conversion Base Price
applicable to any shares of Series D Preferred Stock shall be
recorded in the minutes of the Board of Directors at which such
shares are authorized to be issued, and shall be conclusively
evidenced (absent manifest error) by a notation to such effect on
the face of each certificate representing such shares.
(h) "Initial Public Offering" means (i) an underwritten public
offering of either Class A Common Stock or Class B Common Stock by
the Corporation for cash pursuant to a registration statement filed
under the Securities Act (other than any registration statement
relating solely to warrants, options or shares of capital stock of
the Corporation granted or to be granted or sold primarily to
employees, directors, or officers of the Corporation, a registration
statement filed pursuant to Rule 145 under the Securities Act or any
successor rule, a registration statement relating solely to employee
benefit plans or interests therein or any registration statement
covering only securities issued in connection with any debt
financing of the Corporation, or any combination of the foregoing),
or (ii) the consummation of a consolidation of the Corporation with
or the merger of the Corporation with or into any other corporation
or other business entity, as a consequence of which the holders of
the Common Stock immediately prior thereto receive shares of common
stock of the survivor that are covered by a registration statement
filed under the Securities Act.
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(i) "Initial Public Offering Price" means the gross price per
share of Common Stock offered by the Corporation to the public in an
Initial Public Offering, or in the case of a merger or consolidation
the price per share at which the Corporation's Common Stock is
valued in accordance with the applicable plan or agreement of merger
or consolidation, in either event without regard to underwriters
discounts or commissions, or other expenses of the Initial Public
Offering.
(j) "Market Price" means the average Trading Price of a share
of Common Stock for the ten trading days of the Common Stock
preceding the date of delivery of a written conversion notice under
Section 5(c).
(k) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(l) "Parity Stock" means the Corporation's Series B Preferred
Stock, $.01 par value, the Corporation's Series E Preferred Stock,
$.01 par value, and any other class or series of the Corporation's
stock (other than Common Stock) which by its terms is neither
subordinate nor superior to or in preference of the Series D
Preferred Stock in any distribution of the Corporation's assets in
connection with the liquidation, dissolution or winding up of the
affairs of the Corporation.
(m) "Preferred Stock" means shares of any series of the
Corporation's Preferred Stock, $.01 par value per share.
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Senior Stock" means the Corporation's Series A Preferred
Stock, $.01 par value, Series C Preferred Stock, $.01 par value, or
any other class or series of the Corporation's capital stock which
by its terms is in preference to the Series D Preferred Stock in any
distribution of the Corporation's assets in connection with the
liquidation, dissolution or winding up of the affairs of the
Corporation.
(p) "Series D Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series D Preferred Stock,
$.01 par value per share.
(q) "Trading Price" means, on any trading day for the Common
Stock, (i) if the Common Stock is traded on a national securities
exchange on such trading day, then the closing price on such trading
day as reflected in the consolidated trading tables of the WALL
STREET JOURNAL or any other appropriate publication, (ii) if the
Common Stock is traded over-the-counter and reported on
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the NASDAQ National Market System, then the average of the high and
low sales prices on such trading day as reported in such publication
or, if not so published, then as reported by the NASDAQ National
Market System, or (iii) if the Common Stock is not traded on a
national securities exchange or in the NASDAQ National Market System
on such trading day, then the representative bid and asked prices at
the end of such trading day in such market as reported by NASDAQ.
(r) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
21. DIVIDENDS.
(a) SERIES D PREFERRED STOCK. The holders of Series D
Preferred Stock, in preference to the holders of Common Stock, shall
be entitled to receive, but only out of any funds legally available
for the declaration of dividends, cumulative, preferential dividends
in cash at an annual rate equal to the Dividend Rate, payable
quarter-annually on or before the last calendar day of each March,
June, September and December in each year in which the Series D
Preferred Stock is outstanding. Such dividends shall commence to
accrue on the shares of Series D Preferred Stock and be cumulative
from and after the date of issuance of such shares of Series D
Preferred Stock and shall be deemed to accumulate and accrue from
day to day thereafter. So long as any shares of Series D Preferred
Stock remain outstanding, no dividends or distributions (other than
dividends or distributions on Common Stock payable in Common Stock)
shall be paid upon, or declared or set apart for, the Common Stock,
nor shall any Common Stock (other than Common Stock acquired in
exchange for, or out of cash proceeds of, the issue of other Common
Stock or out of cash contributions to the capital of the
Corporation) be purchased, redeemed, retired or otherwise acquired
by the Corporation, unless and until in either case all past due,
cumulative dividends on the then outstanding shares of Series D
Preferred Stock for all past dividend periods shall have been or
concurrently shall be paid.
(b) OTHER STOCK. Subject to paragraph (a) above, (i) dividends
may be declared and paid on the Common Stock and any other class or
series of the Corporation's capital stock, and (ii) Common Stock or
such other capital stock may be purchased, retired or otherwise
acquired, when and as determined by the Board of Directors, out of
any funds legally available for such purposes.
22. REDEMPTION.
(a) MANDATORY REDEMPTION. On December 31, 2001, the
Corporation shall redeem all of the shares of Series D Preferred
Stock then outstanding (subject, however, to the right of the
holders of the Series D Preferred Stock to
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convert their shares pursuant to Section 5 by providing the written
conversion notice referred to in Section 5(c) below on or before
November 30, 2001), at a redemption price of $1.00 per share,
together with all accrued and unpaid dividends through the effective
date of redemption.
(b) OPTIONAL REDEMPTION. At any time during the period
commencing on the second anniversary of the date of consummation of
an Initial Public Offering and ending on December 31, 2001 (the
"Optional Redemption Period"), the Corporation, at the option of the
Board of Directors, may redeem from the holders of Series D
Preferred Stock, at a redemption price of $1.00 per share, together
with accrued and unpaid dividends thereon to the date fixed for
redemption, all or any portion of the shares of Series D Preferred
Stock outstanding on such date. Written notice of such redemption of
the shares of Series D Preferred Stock to be so redeemed, which
shall include a certification of an executive officer of the
Corporation that the Corporation is ready, willing and able
(financially and otherwise) to effect such redemption, shall be
mailed, postage prepaid, to the holders of record of the shares to
be so redeemed at their respective addresses then appearing on the
books of the Corporation, not less than 45 nor more than 75 days
prior to the date designated for such redemption, which shall occur
during the Optional Redemption Period. In case less than all of the
outstanding shares of Series D Preferred Stock are to be redeemed,
the Corporation's notice shall so state and such redemption shall be
made on or pro rata basis in accordance with each holder's
respective holdings of Series D Preferred Stock. Such redemption by
the Corporation shall be subject, however, to the right of each such
holder to convert such holder's shares of Series D Preferred Stock
into Class B Common Stock or Class A Common Stock (as the case may
be) pursuant to Section 5 by delivering the written conversion
notice referred to in Section 5(c) at least 15 days prior to the
date fixed for redemption.
(c) GENERAL. From and after the effective date of redemption
and the setting aside of the funds necessary for redemption,
notwithstanding that any certificate for shares of Series D
Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the shares to be redeemed shall no
longer be deemed outstanding, and the holders of certificates
representing such shares shall have with respect to such shares no
rights in or with respect to the Corporation except the right to
receive, upon the surrender of such certificates, the redemption
price therefor. Shares of Series D Preferred Stock redeemed by the
Corporation pursuant to this Section 3, or shares of Series D
Preferred Stock otherwise purchased by the Corporation, shall not be
reissued and shall be cancelled and retired in the manner provided
by the laws of the State of Delaware, and no other shares of Series
D Preferred Stock shall be issued in lieu thereof.
23. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
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(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 4.
(b) SERIES D PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series D
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of the outstanding Common Stock, PARI PASSU with any
distribution of assets to the holders of outstanding Parity Stock
but subject to any distribution to the holders of the Senior Stock,
an amount in cash for each share of Series D Preferred Stock equal
to $1.00 together with all accrued and unpaid dividend through the
effective date of such liquidation, dissolution or winding up, or
funds necessary for such payment shall have been set aside in trust
for the account of the holders of the outstanding Series D Preferred
Stock so as to be and continue available therefor. If upon such
liquidation, dissolution or winding up, the assets distributable to
the holders of the Series D Preferred Stock as aforesaid shall be
insufficient to permit the payment to them (together with any
distributions to the holders of Parity Stock) of $1.00 per share
(plus such accrued and unpaid dividends), the assets of the
Corporation shall be distributed to the holders of the Series D
Preferred Stock and the Parity Stock ratably until they shall have
received the full amount to which they would otherwise be entitled
but subject to any distribution of the assets of the Corporation in
respect of the Senior Stock. If the assets of the Corporation are
sufficient to permit the payment of such amounts to the holders of
the Series D Preferred Stock and the Parity Stock, the remainder of
the assets of the Corporation, if any, after the distributions as
aforesaid shall be distributed and divided ratably among the holders
of the Common Stock then outstanding according to their respective
shares. In calculating any amount distributable to the holders of
the Series D Preferred Stock as aforesaid, there shall be credited
against such amount any sums distributed or payable to such holders
other than pursuant to the terms hereof, whether under any letter of
credit, security or other similar right or interest.
24. CONVERSION. The Series D Preferred Stock shall be convertible into
Common Stock in accordance with the following provisions of this
Section 5.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 5, each holder of shares of Series D
Preferred Stock shall have the right at such holder's option, at any
time or from time to time, from and after the date of original
issuance to convert all or any part of his shares of Series D
Preferred Stock into fully paid and nonassessable shares of Class B
Common Stock, provided however, that shares of Series D Preferred
Stock issued
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after the effective date of the Registration Statement filed in
connection with an Initial Public Offering shall be convertible only
into shares of Class A Common Stock, at the Conversion Price in
effect on the Conversion Date, upon the terms hereinafter set forth.
In any event, after December 31, 2001, shares of Series D Preferred
Stock will be convertible only into shares of Class A Common Stock.
(b) CONVERSION PRICE. The shares of Series D Preferred Stock
to be converted shall be convertible into the number of shares of
Common Stock as is determined by multiplying the number of shares of
Series D Preferred Stock to be converted by a fraction, the
numerator of which is $1.00 and the denominator of which is the
Conversion Price in effect on the Conversion Date.
(c) MECHANICS OF CONVERSION. The holder of any shares of
Series D Preferred Stock may exercise the optional conversion right
specified in paragraph (a) above by surrendering to the Corporation
or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written
notice stating that the holder elects to convert all or a specified
portion of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered; any such date is referred to herein
as the "Conversion Date". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order of
such holders a certificate or certificates for the number of full
shares of Common Stock to which such holders are entitled rounded
down to the next whole share as provided in paragraph (d) below. The
person in whose name the certificate or certificates of Common Stock
are to be issued shall be deemed to have become a holder of record
of such Common Stock on the Conversion Date.
(d) FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series D
Preferred Stock. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Series D Preferred Stock, the number of full shares of Common Stock
issuable upon conversion thereof shall be reduced to the next lowest
number of whole shares, and the Corporation will pay a cash
adjustment in respect of any surrendered shares of Series D
Preferred Stock not converted into Common Stock in an amount equal
to $1.00 per share of Series D Preferred Stock.
(e) CONVERSION BASE PRICE ADJUSTMENTS. The Conversion Base
Price shall be subject to adjustment from time to time as follows:
(i) CERTAIN ISSUANCES OF EQUITY STOCK. If, at any time
following issuance of any Series D Preferred Stock, the
Corporation issues any Common Stock, or any security or
evidence of indebtedness which is convertible or exercisable
into or exchangeable for Common Stock, or any
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warrant, option or other right to subscribe for or purchase
Common Stock or any security or evidence of indebtedness which
is convertible or exchangeable for Common Stock (hereinafter,
"Equity Stock"), other than Excluded Stock (as defined in
clause (D) below), for a consideration per share less than
$4.50 per share, subject to adjustment for certain events
including subdivisions and combinations of the Common Stock, (
the "Base Price"), and if the Conversion Price is then based
upon the Conversion Base Price, then the Conversion Base Price
shall immediately be reduced to a price per share determined
by multiplying the Conversion Base Price then in effect by a
fraction, the numerator of which is an amount equal to the sum
of (x) the number of shares of Equity Stock of the Corporation
outstanding immediately prior to such issue or sale multiplied
by the Base Price plus (y) the consideration, if any, received
by the Corporation upon such issue or sale, and the
denominator of which is the total number of shares of Equity
Stock of the Corporation outstanding immediately after such
issue or sale multiplied by the Base Price. The number of
shares of Equity Stock outstanding at any given time for the
purposes of the foregoing computation means the shares of
Common Stock outstanding together with all shares of Common
Stock issuable upon conversion or exercise of any such Equity
Stock, excluding any shares of Common Stock previously
outstanding that have been reacquired by the Corporation and
constitute treasury shares.
For purposes of any adjustment of the Conversion Base
Price pursuant to this subparagraph (i) of this Section 5(e),
the following provisions shall be applicable:
(A) CASH. In the case of the issuance of Equity
Stock for cash, the amount of the consideration received
by the Corporation shall be deemed to be the amount of
the cash proceeds received by the Corporation for such
Equity Stock before deducting therefrom any discounts,
commissions, taxes, legal and accounting fees or other
expenses allowed, paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of
the issuance of Equity Stock (other than as described in
clause (C) below) for a consideration in whole or in
part other than cash, including securities acquired in
exchange therefor (other than securities by their terms
so exchangeable), the consideration other than cash
shall be deemed to be the fair market value thereof as
reasonably determined by the Board of Directors in good
faith.
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(C) OPTIONS AND CONVERTIBLE SECURITIES, ETC. In
the case of the issuance of (i) options, warrants or
other rights to purchase or acquire Common Stock or
other Equity Stock (whether or not at the time
exercisable), (ii) securities which by their terms are
convertible or exercisable into or exchangeable for
Common Stock or other Equity Stock (whether or not at
the time so convertible, exercisable or exchangeable) or
(iii) options, warrants or rights to purchase such
convertible or exchangeable securities (whether or not
at the time exercisable):
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or
rights were issued and for a consideration equal
to the aggregate consideration (determined in the
manner provided in clauses (A) and (B) above), if
any, received by the Corporation upon the issuance
of such options, warrants or rights plus the
aggregate minimum purchase price provided in such
options, warrants or rights for the Common Stock
covered thereby;
(2) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or
in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable
securities and the subsequent conversion or
exchange thereof, shall be deemed to have been
issued at the time such securities were issued or
such options, warrants or rights were issued and
for a consideration equal to the consideration, if
any, received by the Corporation for any such
securities and related options, warrants or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the
additional consideration, if any, to be received
by the Corporation upon the conversion or exchange
of such securities and the exercise of any related
options, warrants or rights (the consideration in
each case to be determined in the manner provided
in clauses (A) and (B) above);
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any such
options, warrants or rights or conversion of or
exchange for
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such convertible or exchangeable securities or any
change in the consideration to be received by the
Corporation upon such exercise, conversion or
exchange, including, but not limited to, a change
resulting from the anti-dilution provisions
thereof, the Conversion Base Price as then in
effect shall forthwith be readjusted to such
Conversion Base Price as would have been obtained
had an adjustment been made upon the issuance of
such options, warrants or rights not exercised
prior to such change, or securities not converted
or exchanged prior to such change, on the basis of
the terms of such options, warrants, rights or
convertible or exchangeable securities as so
changed;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the
termination of the right to convert or exchange
such convertible or exchangeable securities, if
the Conversion Base Price shall have been adjusted
upon the issuance thereof, the Conversion Base
Price shall forthwith be readjusted to such
Conversion Base Price as would have been obtained
had an adjustment been made upon the issuance of
such options, warrants, rights or securities on
the basis of the issuance of only the number of
shares of Common Stock actually issued upon the
exercise of such options, warrants or rights, or
upon the conversion or exchange of such
securities; and
(5) regardless of whether the Conversion
Base Price shall have been adjusted upon the
issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further
adjustment of the Conversion Base Price shall be
made for the actual issuance of Common Stock upon
the exercise, conversion or exchange thereof;
PROVIDED, HOWEVER, that no adjustment pursuant to
this clause (C) shall have the effect of increasing the
Conversion Base Price above the Initial Conversion Base
Price.
(D) EXCLUDED STOCK. For purposes hereof, "Excluded
Stock" means shares of Common Stock issued or reserved
for issuance by the Corporation (i) upon conversion of
any Series A Preferred Stock or Series C Preferred
Stock; (ii) pursuant to a stock dividend, subdivision or
split-up covered by paragraph (ii) of this Section 5(e);
(iii) to any one or more unaffiliated persons with
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whom the Corporation or one or more of its subsidiaries
effect a business combination (however structured),
whether issued in shares of Common Stock or other
securities convertible or exercisable into or
exchangeable with the Common Stock and (iv) upon
exercise of options issued to employees of the
Corporation or its subsidiaries (other than employees
who were the record holders of any Common Stock on
December 31, 1993), provided that the exercise price
thereof is not less than the fair market value per share
of Common Stock determined in good faith by the Board of
Directors at the time such options are granted.
(ii) STOCK DIVIDENDS. If the number of shares of
Common Stock outstanding at any time after the issuance of any
Series D Preferred Stock is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, and if the Conversion
Price then in effect is based upon the Conversion Base Price,
then immediately after the record date fixed for the
determination of holders of Common Stock entitled to receive
such stock dividend or the effective date of such subdivision
or split-up, as the case may be, the Conversion Base Price
shall be appropriately decreased so that the holders of any
shares of Series D Preferred Stock shall be entitled to
receive the number of shares of Common Stock of the
Corporation which they would have owned immediately following
such action had such shares of Series D Preferred Stock been
converted immediately prior thereto.
(iii) COMBINATION OF STOCK. If the number of shares of
Common Stock outstanding at any time after issuance of any
class of Series D Preferred Stock is decreased by a
combination of the outstanding shares of Common Stock, and if
the Conversion Price then in effect is based upon the
Conversion Base Price then, immediately after the effective
date of such combination, the Conversion Base Price shall be
appropriately increased so that the holders of any shares of
Series D Preferred Stock shall be entitled to receive the
number of shares of Common Stock of the Corporation which they
would have owned immediately following such action had such
shares of Series D Preferred Stock been converted immediately
prior thereto.
(iv) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Common Stock, or in case of the consolidation of the
Corporation with or the merger of the Corporation with or into
any other corporation, partnership or other business entity in
which the Corporation is not the survivor, or of the sale,
lease or other transfer of all or substantially all of the
assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series
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D Preferred Stock shall, after such capital reorganization,
reclassification, consolidation, merger, sale or lease, be
convertible into the number of shares of stock or other
securities or property to which the Common Stock issuable (at
the time of such capital reorganization, reclassification,
consolidation, merger, sale or lease) upon conversion of such
share of Series D Preferred Stock would have been entitled
upon such capital reorganization, reclassification,
consolidation, merger, sale or lease in place of (or in
addition to, in the case of any such event after which Common
Stock remains outstanding) the shares of Common Stock into
which such share of Series D Preferred Stock would otherwise
have been convertible; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Series D
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any share of
stock or other securities or property thereafter deliverable
on the conversion of the shares of Series D Preferred Stock.
The subdivision or combination of shares of Common Stock
issuable upon conversion of shares of Series D Preferred Stock
at any time outstanding into a greater or lesser number of
shares of Common Stock (whether with or without par value)
shall not be deemed to be a reclassification of the Common
Stock of the Corporation for the purposes of this subparagraph
(iv).
(v) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (e) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (e)
to the contrary notwithstanding, no adjustment in the
Conversion Base Price shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or
more.
(vi) TIMING OF ISSUANCE OF ADDITIONAL COMMON STOCK
UPON CERTAIN ADJUSTMENTS. In any case in which the provisions
of this paragraph (e) requires that an adjustment shall become
effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event
issuing to the holder of any shares of Series D Preferred
Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
or other property issuable or deliverable upon exercise by
reason of the adjustment required by such event over and above
the shares of Common Stock or other property issuable or
deliverable upon such conversion before giving effect to such
adjustment; PROVIDED, HOWEVER that the Corporation upon
request shall
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deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional shares or other property, and such cash, upon the
occurrence of the event requiring such adjustment.
(f) STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion
Base Price shall be adjusted as provided in paragraph (e), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series D Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Base Price that shall
be in effect after such adjustment, and the Corporation shall also
cause a copy of such statement to be sent by mail, first class
postage prepaid, to each holder of the Series D Preferred Stock at
his or its address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's chief financial
officer. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the
provisions of subparagraph (g) below.
(g) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii),
(iii) or (iv) of paragraph (e) above, the Corporation shall give
notice to each holder of the Series D Preferred Stock in the manner
set forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Base Price and the number, kind or class of shares or
other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of the Series D Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice
shall be given at least 10 days prior to the date so fixed, and in
case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action.
(h) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Common Stock of the Corporation or other
securities or property upon conversion of the shares of Series D
Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series D Preferred Stock in respect of which such
shares are being issued.
(i) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series D Preferred Stock remain
outstanding, free from
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preemptive rights, out of its treasury stock or its authorized but
unissued shares of Common Stock, or both, solely for the purpose of
effecting the conversion of shares of Series D Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of
all outstanding shares of Series D Preferred Stock and set aside and
keep available any other property deliverable upon conversion of all
outstanding shares of Series D Preferred Stock.
(j) APPROVALS. If any shares of Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series D Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before
such shares or other securities may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as
expeditiously as possible use its commercially reasonable efforts to
secure such registration or approval, as the case may be. The
foregoing does not include registration of such shares under the
Securities Act or state securities laws, except to the extent and in
the manner described in Section 8.
(k) VALID ISSUANCE. All shares of Common Stock or other
securities which may be issued upon conversion of the shares of
Series D Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
25. VOTING RIGHTS.
(a) GENERAL. At any annual or special meeting of shareholders
or otherwise in respect of any matter submitted for the vote of
shareholders generally, the holders of the Series D Preferred Stock
shall be entitled to such number of votes (or fractions thereof) as
shall be determined by (i) multiplying (1) vote for each share of
Series D Preferred Stock held by a fraction, the numerator of which
is $1.00 and the denominator of which is the Conversion Price in
effect on the record date for determining shareholders entitled to
vote on such matter; and (ii) dividing the resulting product by
twenty (20).
(b) SPECIAL VOTING REQUIREMENTS. Without limiting the
generality of paragraph (a) above, the Corporation shall not,
without the consent of the holders of at least a majority of the
outstanding shares of Series D Preferred Stock, voting together as a
single class, amend, alter or repeal any provision of the
Corporation's Certificate of Incorporation or Bylaws or this
Certificate of Designation, in any event so as to adversely affect
the rights or powers of any of the Series D Preferred Stock as
provided herein. As to any record holder of Series D Preferred
Stock, the Corporation will not, without the consent of such holder,
alter or amend the Initial Conversion Base Price applicable to the
Series D Preferred Stock held
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by such holder, the Dividend Rate applicable to the Series D
Preferred Stock held by such holder, or the date on which such
holder's Series D Preferred Stock is required to be redeemed under
Section 3(a).
26. REGISTRATION RIGHTS. Subject to paragraph (h) below and the other
provisions of this Section 8, the holders of the Series D Preferred
Stock shall be entitled to have their respective shares of Class A
Common Stock, issuable upon conversion of their Series D Preferred
Stock into Class B Common Stock and subsequently converted into
shares of Class A Common Stock, included in any registration of
Class A Common Stock under the Securities Act proposed by the
Corporation.
(a) INCIDENTAL RIGHTS. If at any time or from time to time the
Corporation proposes to file with the Securities and Exchange
Commission (the "Commission") a registration statement (whether on
Form S-1, S-2 or S-3 or any equivalent form then in effect) for the
registration under the Securities Act of any shares of Class A
Common Stock for sale to the public by the Corporation or on behalf
of a shareholder of the Corporation for cash (excluding any shares
of Class A Common Stock issuable by the Corporation upon the
exercise of employee or director stock options or in connection with
the merger or consolidation of the Corporation or one of its
subsidiaries with one or more other corporations if the Corporation
is the surviving corporation), the Corporation shall give each
holder of the Series D Preferred Stock at least 30 days' prior
written notice of the filing of the proposed registration statement.
The notice shall include a list of the states and foreign
jurisdictions, if any, in which the Corporation intends to qualify
such shares, and shall also include the Corporation's estimate of
the range of the offering price per share of Class A Common Stock.
On the written request of any holder of the Series D Preferred Stock
received by the Corporation within 15 days after the date of the
Corporation's notice, the Corporation shall, subject to the
conditions and in accordance with the procedures set forth in
paragraphs (b) and (c) below, and at its own expense as provided in
paragraph (e) below, include in the coverage of such registration
statement and qualify for sale under the blue sky or securities laws
of the various states, the number of shares (but not less than 5,000
shares, subject to adjustment to give effect to any stock dividends,
splits or combinations, recapitalizations or other similar corporate
events) of Class A Common Stock (herein called the "Specified
Shares") held and so requested to be registered by each such holder;
provided that if the managing underwriter for the Corporation
indicates its belief in writing that the effect of including in the
coverage of such registration statement all or part of the Specified
Shares and the shares of Class A Common Stock requested to be so
included by other stockholders having contractual registration
rights ("Other Requesting Stockholders") will materially and
adversely affect the sale of the shares of Class A Common Stock
proposed to be sold by the Corporation (which statement of the
managing underwriter shall also state the maximum number of shares
(herein called the "Maximum Shares"), if any, which can be sold by
such all such holders
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without materially and adversely affecting the sale of the shares
proposed to be sold by the Corporation), then the number of
Specified Shares which the holders of the Series D Preferred Stock
and the Other Requesting Stockholders shall collectively have the
right to include in such registration statement shall be reduced to
the number of Maximum Shares set forth in such statement of the
managing underwriter, such reduction to be effected on a pro rata
basis in accordance with the number of all such shares requested to
be so registered by the holders of the Series D Preferred Stock and
the Other Requesting Stockholders.
Except as provided in paragraph (c) below, in no event shall
the Corporation be required to amend any registration statement
filed pursuant to this Section 8 after it has become effective or to
amend or supplement any prospectus to permit the continued
disposition of shares of Class A Common Stock registered under any
registration statement.
The Corporation shall have the right to select any
underwriters, including the managing underwriter, of any public
offering of shares of Class A Common Stock subject to the provisions
of this paragraph (a). Nothing in this paragraph (a) shall create
any liability on the part of the Corporation to the holders of the
Series D Preferred Stock if the Corporation for any reason should
decide not to file such a registration statement.
The Corporation may withdraw any registration statement and
abandon any proposed offering initiated by the Corporation without
the consent of any holder of the Series D Preferred Stock,
notwithstanding the request of any such holder to participate
therein in accordance with this paragraph (a), if the Corporation
determines that such action is in the best interests of the
Corporation.
(b) CERTAIN REGISTRATION CONDITIONS. Any holder of Series D
Preferred Stock requesting registration of Class A Common Stock into
which such holder's Series D Preferred Stock is convertible,
following conversion into Class B Common Stock, pursuant to
paragraph (a) of this Section 8 is hereafter referred to as a
"Selling Stockholder." Anything in this Agreement to the contrary
notwithstanding, the Corporation shall not be required to effect a
registration of any Class A Common Stock of any Selling Stockholder
pursuant to paragraph (a) of this Section 8, or file any
post-effective amendment thereto:
(i) unless such Selling Stockholder agrees (x) to sell
and distribute a portion or all of his Class A Common Stock in
accordance with the customary plan or plans of distribution
adopted by and through underwriters, if any, acting for the
Corporation, and (y) to bear a pro rata share of underwriter's
discounts and commissions;
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(ii) unless the Corporation and the underwriters for the
Corporation shall have received from such Selling Stockholder
all such information as the Corporation and such underwriters
may reasonably request from him concerning such Selling
Stockholder to enable the Corporation to include in the
registration statement all material facts required to be
disclosed therein. Notwithstanding the foregoing, a Selling
Stockholder shall not be required to furnish to the
Corporation any personal financial information of such Selling
Stockholder unrelated to his holdings of Class A Common Stock,
Series D Preferred Stock or other securities of the
Corporation held by him, provided that each Selling
Stockholder shall nonetheless be required to furnish all
information reasonably requested by any such underwriter;
(iii) unless such Selling Stockholder is then entitled
to convert his shares of Series D Preferred Stock into Class B
Common Stock and subsequently convert into Class A Common
Stock and such Selling Stockholder in fact delivers the notice
to elect to convert the Series D Preferred Stock into Class B
Common Stock with a subsequent conversion into Class A Common
Stock prior to or contemporaneously with the notice of such
Selling Stockholder under paragraph (a) hereof; and
(iv) unless such Selling Stockholder, at the request of
the Corporation or its managing underwriter, agrees or
acknowledges that such Selling Stockholder (x) has a present
intention to sell such shares; (y) agrees to execute all
consents, powers of attorney, registration statements and
other documents required in order to cause such registration
statement to become effective; and (z) agrees, if the offering
is at the market, to give the Corporation written notice of
the first bona fide offering of such shares and to use the
prospectus forming a part of such registration statement for
only a period of 90 days (or such longer period provided for
in paragraph (c) below) unless such registration statement is
on a form that complies with Rule 415.
(c) COVENANTS AND PROCEDURES. If the Corporation becomes
obligated under the provisions of paragraph (a) of this Section 8 to
effect registration of shares of Class A Common Stock on behalf of
any Selling Stockholder, the following shall apply:
(i) The Corporation, at its own expense as provided
in paragraph (e), shall prepare and file with the Commission a
registration statement covering such shares of Class A Common
Stock and use its best efforts to cause such registration
statement to become effective; and the Corporation will file
such post-effective amendments to such registration statement
(and use its best efforts to cause them to become effective)
and
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such supplements as are necessary so that current prospectuses
are at all times available for a period of at least 90 days
after the effective date of such registration statement or for
such longer period, not to exceed 180 days, as may be required
by the Corporation or the managing underwriter under the plan
or plans of distribution set forth in such registration
statement. Each Selling Stockholder shall promptly provide the
Corporation with such information with respect to such Selling
Stockholder's shares of Class A Common Stock to be so
registered and, if applicable, the proposed terms of the
offering thereof as is required for such registration.
Further, if the shares of Class A Common Stock to be covered
by the registration statement are not to be sold to or through
underwriters acting for the Corporation, the Corporation shall
(x) deliver to each Selling Stockholder as promptly as
practicable as many copies of preliminary prospectuses as such
Selling Stockholder may reasonably request, and such Selling
Stockholder shall keep a written record of the distribution of
such preliminary prospectuses and shall refrain from delivery
of such preliminary prospectuses in any manner or under any
circumstances which would violate the Securities Act or the
securities laws of any other jurisdiction, including the
various states of the United States, (y) deliver to each
Selling Stockholder, as soon as practicable after the
effective date of the registration statement, and from time to
time thereafter during such 90-day period, or such longer
period as is herein provided, as many copies of the
prospectuses required to be delivered in connection with the
sale of shares of Class A Common Stock registered under the
registration statement as such Selling Stockholder may
reasonably request, and (z) in case of the happening, after
the effective date of such registration statement and during
such 90-day period (or such longer period specified above), of
any event or occurrence which would be set forth in an
amendment of or supplement to such prospectus to make any
statements therein not misleading or to correct any misleading
omissions, give each Selling Stockholder written notice
thereof and prepare and furnish to such Selling Stockholder,
in such quantities as he may reasonably request, copies of
such amended prospectus or of such supplement to be attached
to the prospectus in order that the prospectus, as so amended
or supplemented, will not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading.
(ii) On or prior to the date on which the registration
statement is declared effective, the Corporation shall use its
best efforts to register or qualify, and cooperate with each
Selling Stockholder, the underwriter or underwriters, if any,
and their counsel, in connection with the registration or
qualification of the Class A Common Stock covered by the
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registration statement for offer and sale under the securities
or blue sky laws of each state and other jurisdiction of the
United States as such Selling Stockholder or underwriter
reasonably requests, to use its best efforts to keep each such
registration or qualification effective, including through new
filings, or amendments or renewals, during the period such
registration statement is required to be kept effective and to
do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Class
A Common Stock covered by the applicable registration
statement; provided that the Corporation will not be required
to qualify generally to do business in any jurisdiction where
it is not then so qualified.
(iii) The Corporation shall use its best efforts to
cause all of each Selling Stockholder's Class A Common Stock
included in such registration statement to be listed, by the
date of the first sale of such Class A Common Stock pursuant
to such registration statement, on each securities exchange on
which the Class A Common Stock of the Corporation is then
listed or proposed to be listed, if any.
(iv) The Corporation shall make generally available to
each Selling Stockholder and any underwriter participating in
the offering conducted pursuant to the registration statement
an earnings statement satisfying the provisions of Section
11(a) of the Securities Act no later than 45 days after the
end of the 12-month period beginning with the first day of the
Corporation's first fiscal quarter commencing after the
effective date of the registration statement, which earnings
statement shall cover said 12-month period, which requirement
will be deemed to be satisfied if the Corporation timely files
complete and accurate information on Forms 10- Q, 10-K, and
8-K under the Securities Exchange Act of 1934, as amended, and
otherwise complies with Rule 158 under the Securities Act as
soon as feasible.
(v) The Corporation shall cooperate with each Selling
Stockholder and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends)
representing Class A Common Stock to be sold under the
registration statement, and enable such securities to be in
such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Selling
Stockholder may request, subject to the underwriters'
obligation to return any certificates representing securities
not sold.
(vi) The Corporation shall use its best efforts to
cause each Selling Stockholder's Class A Common Stock covered
by the registration
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<PAGE>
statement to be registered with or approved by such other
governmental agencies or authorities within the United States
as may be necessary to enable such Selling Stockholder or the
underwriter or underwriters, if any, to consummate the
disposition of such Class A Common Stock.
(vii) The Corporation shall make available for
inspection by each Selling Stockholder, any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent
retained by such Selling Stockholder or any such underwriter
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Corporation, as shall be reasonably necessary to enable them
to exercise their due diligence, responsibility, and cause the
Corporation's officers, directors and employees to supply all
nonconfidential information reasonably requested by any such
Inspector in connection with such registration statement. As a
condition to providing such access, the Corporation may
require that any and all Inspectors execute and deliver
confidentiality agreements, in form and substance acceptable
to the Corporation, and that confidentiality procedures be
observed, all with respect to such information.
(viii) The Corporation shall use its best efforts to
obtain a "cold comfort" letter from the Corporation's
independent public accountants, and an opinion of counsel for
the Corporation, each in customary form and covering such
matters of the type customarily covered by cold comfort
letters and opinions of counsel in connection with public
offerings of securities, as each Selling Stockholder
reasonably requests.
(d) INDEMNIFICATION.
(i) INDEMNIFICATION BY THE CORPORATION. In the event
of any registration under the Securities Act pursuant to this
Section 8 of shares of Class A Common Stock held by any
Selling Stockholder, the Corporation will hold harmless each
Selling Stockholder and each underwriter of such securities
and each other person, if any, who controls each Selling
Stockholder or such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or
liabilities (including legal fees and costs of court), joint
or several, to which such Selling Stockholder or such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under
which such securities were registered under the Securities
Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or
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supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each
Selling Stockholder and each such underwriter and each such
controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage or liability;
provided, however, that the Corporation shall not be liable to
any Selling Stockholder or his underwriters or controlling
persons in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement,
preliminary prospectus or final prospectus or such amendment
or supplement in reliance upon and in conformity with
information furnished to the Corporation through a written
instrument duly executed by such Selling Stockholder or such
underwriter specifically for use in the preparation thereof.
(ii) INDEMNIFICATION BY SELLING STOCK-HOLDERS. It shall
be a condition precedent to the obligation of the Corporation
to include in any registration statement any shares of Class A
Common Stock then held by a Selling Stockholder that the
Corporation shall have received an undertaking reasonably
satisfactory to it and its counsel from such Selling
Stockholder to severally indemnify and hold harmless (in the
same manner and to the same extent as set forth in
subparagraph (i) above) the Corporation, each director of the
Corporation, each officer of the Corporation who shall sign
such registration statement, each underwriter of such
securities and any person who controls the Corporation or such
underwriter within the meaning of the Securities Act, with
respect to any statement or omission from such registration
statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if
such statement or omission was made in reliance upon and in
conformity with information furnished to the Corporation
through a written instrument duly executed by such Selling
Stockholder specifically for use in the preparation of such
registration statement, preliminary prospectus or final
prospectus or such amendment or supplement thereto.
(iii) INDEMNIFICATION PROCEDURES. Promptly after receipt
by an indemnified party of notice of the commencement of any
action involving a claim referred to in the preceding
subparagraphs (i) and (ii), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the
commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense
thereof, with counsel reasonably satisfactory
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to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, and provided that the
indemnifying party in fact assumes such defense, the
indemnifying party will not be liable to such indemnified
party for any legal or other expenses incurred after the date
of such notice by the latter in connection with the defense
thereof. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject
to any liability for any settlement made without its consent.
No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
(iv) CONTRIBUTION. If the indemnification provided for
in this paragraph (d) from the indemnifying party is
unavailable to an indemnified party hereunder in respect of
any losses, claims, damages, liabilities or expenses referred
to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined
by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of
a material fact or a material omission, has been made by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding. For
purposes of the foregoing, it would not be just and equitable
if contribution pursuant to this paragraph (d) were determined
by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this subparagraph (iv), no
Selling Stockholder shall be required to contribute any amount
in excess of the amount by which the total price at which the
Class A Common Stock of such Selling Stockholder was offered
to the public exceeds the amount of any damages which such
Selling Stockholder has otherwise been required to pay by
reason of such untrue statement or omission. No person guilty
of fraudulent misrepresentation
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(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) EXPENSES. All expenses incurred by the Corporation in
connection with any registration statement covering shares of Class
A Common Stock offered by the Selling Stockholders, including,
without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements
of counsel for the Corporation and of its independent certified
public accountants, the reasonable fees and disbursements of one
counsel for collectively all Selling Stockholders and Other
Requesting Stockholders whose stock is included in such
registration, and the expense of qualifying such shares under state
blue sky laws, shall be borne by the Corporation; provided, however,
that all underwriter's discounts and commissions relating to the
shares of Class A Common Stock to be sold by the Selling
Stockholders shall be borne by the Selling Stockholders.
(f) DISPOSITIONS DURING REGISTRATION. Upon written request by
the Corporation, the Selling Stockholders will agree, upon the
registration of any of each such Selling Stockholder's shares of
Class A Common Stock or the Class A Common Stock issued by the
Corporation, not to sell or otherwise dispose of any shares of Stock
(other than Class A Common Stock covered by such registration, which
may be sold in accordance with the plan or plans of distribution
described in the registration statement) owned by each such Selling
Stockholder for a period of 90 days following the effective date of
such registration statement, or for such longer period (not to
exceed 180 days) as may be required under the plan or plans of
distribution set forth in such registration statement. Each holder
of the Series D Preferred Stock shall comply with the foregoing
requirements even if his Class A Common Stock issuable upon the
conversion thereof is not being included in such registration, if
(i) at such time such holder (together with his Affiliates) owns
five percent (5%) or more of the fully diluted Class A Common Stock
and (ii) other holders of five percent or more of the fully diluted
Class A Common Stock are similarly bound.
(g) RIGHTS TRANSFERABLE. The foregoing registration rights and
benefits set forth in this Section 8, including indemnification by
the Corporation, shall be transferable by each holder of the Series
D Preferred Stock in connection with the transfer by any such holder
of Series D Preferred Stock convertible into not less than 10,000
shares (subject to adjustment to give effect to any stock dividends,
splits or combinations, recapitalization or other similar corporate
events) of Class A Common Stock, otherwise than pursuant to a
registration statement of the Corporation in connection with a
public offering of Class A Common Stock.
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(h) TERM OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 8 shall be effective for a period
commencing upon the date of original issuance thereof and ending on
(i) as to any holder of Series D Preferred Stock, upon either (A)
such holder's written consent, (B) the date such holder holds,
together with such holder's Affiliates, less than 10,000 shares
(subject to adjustment as described in paragraph (g) above) of Class
A Common Stock determined on a fully diluted basis, or (c) the date
such holder is able to dispose of all shares of Class A Common Stock
that such holder may acquire upon conversion of the Series D
Preferred Stock within a single three-month period under Rule 144
promulgated under the Securities Act; and (ii) as to all holders of
the Series D Preferred Stock, on December 31, 2005.
27. PERIODIC REPORTING. If the Corporation becomes subject to the
periodic reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, while any shares of
Series D Preferred Stock are outstanding, the Corporation shall
provide to each record holder of the Series D Preferred Stock a copy
of each report filed or delivered pursuant to said Section 13 or
15(d), to substantially the same extent, in substantially the same
manner and at substantially the same times as such reports are
delivered to the holders of the Corporation's Class A Common Stock.
28. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, the
shares of Series D Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special
rights other than those specifically set forth herein.
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CERTIFICATE OF ELIMINATION
OF
SERIES A 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 by unanimous
written consent dated October __, 1996, duly adopted a resolution providing for
the elimination of a designation of 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 A
Preferred Stock ("Series A Preferred Stock"), consisting of up to
7,000,000 shares, pursuant to the Certificate of Designation, Preferences,
Rights and Limitations filed with the Secretary of State of Delaware on
January 14, 1994, as amended and restated in the form attached as Exhibit
A to the Corporation's Amended and Restated Certificate of Incorporation
filed with the Secretary of State of Delaware on July 3, 1996 (as so
amended and restated, the "Series A Certificate of Designation"); and
WHEREAS, no such shares of Series A Preferred Stock are currently
issued or outstanding, and none will be issued;
NOW, THEREFORE, BE IT RESOLVED, that no shares of Series A
Preferred Stock are issued or outstanding, and none will be issued,
and therefore 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 Series A Certificate of Designation is
hereby withdrawn and eliminated.
<PAGE>
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate of Elimination to be signed by Melvin C. Payne, its President, as of
the _____ day of October, 1996.
CARRIAGE SERVICES, INC.
By: ___________________________
MELVIN C. PAYNE, President
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CERTIFICATE OF ELIMINATION
OF
SERIES B 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 by unanimous
written consent dated October __, 1996, duly adopted a resolution providing for
the elimination of a designation of 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 B
Preferred Stock ("Series B Preferred Stock"), consisting of up to
2,500,000 shares, pursuant to the Certificate of Designation, Preferences,
Rights and Limitations filed with the Secretary of State of Delaware on
October 26, 1994, as amended and restated (and in connection with which
the number of shares authorized thereunder was decreased to 1,000,000
shares of Series B Preferred Stock) in the form attached as Exhibit B to
the Corporation's Amended and Restated Certificate of Incorporation filed
with the Secretary of State of Delaware on July 3, 1996 (as so amended and
restated, the "Series B Certificate of Designation"); and
WHEREAS, no such shares of Series B Preferred Stock are currently
issued or outstanding, and none will be issued;
NOW, THEREFORE, BE IT RESOLVED, that no shares of Series B
Preferred Stock are issued or outstanding, and none will be issued,
and therefore 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 Series B Certificate of Designation is
hereby withdrawn and eliminated.
<PAGE>
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate of Elimination to be signed by Melvin C. Payne, its President, as of
the _____ day of October, 1996.
CARRIAGE SERVICES, INC.
By: __________________________
MELVIN C. PAYNE, President
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CERTIFICATE OF ELIMINATION
OF
SERIES C 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 by unanimous
written consent dated October __, 1996, duly adopted a resolution providing for
the elimination of a designation of 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 C
Preferred Stock ("Series C Preferred Stock"), consisting of up to
8,500,000 shares, pursuant to the Certificate of Designation, Preferences,
Rights and Limitations filed with the Secretary of State of Delaware on
September 7, 1995, as amended and restated in the form attached as Exhibit
C to the Corporation's Amended and Restated Certificate of Incorporation
filed with the Secretary of State of Delaware on July 3, 1996 (as so
amended and restated, the "Series C Certificate of Designation"); and
WHEREAS, no such shares of Series C Preferred Stock are currently
issued or outstanding, and none will be issued;
NOW, THEREFORE, BE IT RESOLVED, that no shares of Series C
Preferred Stock are issued or outstanding, and none will be issued,
and therefore 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 Series C Certificate of Designation is
hereby withdrawn and eliminated.
<PAGE>
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate of Elimination to be signed by Melvin C. Payne, its President, as of
the _____ day of October, 1996.
CARRIAGE SERVICES, INC.
By: _________________________
MELVIN C. PAYNE, President
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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 by unanimous
written consent dated October __, 1996, 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 (and 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 (as so amended and restated, the "Series D Certificate of
Designation"); and
WHEREAS, there are currently 17,775,616 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 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
NINETEEN MILLION (19,000,000).
<PAGE>
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate of Elimination to be signed by Melvin C. Payne, its President, as of
the _____ day of October, 1996.
CARRIAGE SERVICES, INC.
By: _________________________
MELVIN C. PAYNE, President
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CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES E PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
PURSUANT to Section 151(g) of the General Corporation Law of
Delaware, CARRIAGE SERVICES, INC., a corporation organized and existing under
the General Corporation Law of Delaware (herein referred to as the
"Corporation"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Certificate of Incorporation, and pursuant to the
provisions of Section 151(g) of the General Corporation Law of Delaware, such
Board of Directors by written unanimous consent dated October 30, 1996, duly
adopted a resolution providing for the issuance of a series of Eleven Million
(11,000,000) shares of the Corporation's Preferred Stock, $.01 par value per
share, to be designated "Series E Preferred Stock", and fixing the voting
powers, preferences and relative, participating, optional or other rights, and
the qualifications, limitations or restrictions thereof, which resolution is as
follows:
RESOLVED, that pursuant to the authority expressly granted and
vested in the Board of Directors of the Corporation in accordance with the
provisions of its Certificate of Incorporation, there shall be established
and authorized for issuance a series of the Corporation's Preferred Stock,
$.01 par value per share, designated "Series E Preferred Stock" (herein
referred to as "Series E Preferred Stock"), consisting of Eleven Million
(11,000,000) shares, each of the par value of $.01 per share, and having
the voting powers, preferences and relative, participating, optional and
other rights, and the qualifications, limitations or restrictions set
forth below:
<PAGE>
29. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
(a) "Baseline Price" shall mean $13.50 per share of Class A
Common Stock, which number shall be subject to appropriate
adjustment to give effect to any stock splits, stock combinations,
recapitalizations and other corporate transactions in the Class A
Common Stock in the manner described in subparagraphs (ii), (iii)
and (iv) of Section 5(e).
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Class A Common Stock" means the Corporation's Class A
Common Stock, par value $.01 per share.
(d) "Class B Common Stock" means the Corporation's Class B
Common Stock, par value $.01 per share.
(e) "Common Stock" means, collectively, shares of Class A
Common Stock and Class B Common Stock.
(f) "Conversion Base Price" shall mean:
(i) if, as to any shares of Series E Preferred Stock,
the Conversion Date occurs on or before the day immediately
preceding the first anniversary of the Initial Issuance Date,
the Initial Conversion Base Price;
(ii) if, as to any such shares, the Conversion Date occurs
between the first anniversary of the Initial Issuance Date and
the day immediately preceding the second anniversary of the
Initial Issuance Date, inclusive, the product of (x) the
Initial Conversion Base Price MULTIPLIED BY (y) 106%; and
(iii) if, as to any such shares, the Conversion Date occurs
between the second anniversary of the Initial Issuance Date
and the day immediately preceding the third anniversary of the
Initial Issuance Date, inclusive, the product of (x) the
amount determined under clause (ii) above MULTIPLIED BY (y)
106%.
The foregoing shall be subject to adjustment in the manner
provided in Section 5 hereof.
(g) "Conversion Date" has the meaning specified in Section
5(c).
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(h) "Conversion Price" means:
(i) if, as to any shares of Series E Preferred Stock,
the Conversion Date occurs on or before the third anniversary
of the Initial Issuance Date, the Conversion Base Price; and
(ii) if, as to any such shares, the Conversion Date occurs
on or after the third anniversary of the Initial Issuance
Date, the Market Price.
(i) "Dividend Rate" shall mean an annual rate (expressed in
dollars or portions thereof) as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares
of Series E Preferred Stock. The Dividend Rate applicable to any
shares of Series E Preferred Stock shall be recorded in the minutes
of the Board of Directors at which such shares are authorized to be
issued, and shall be conclusively evidenced (absent manifest error)
by a notation to such effect on the face of each certificate
representing such shares.
(j) "Initial Conversion Base Price" means an amount (expressed
in dollars or portions thereof) as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares
of Series E Preferred Stock. The Initial Conversion Base Price
applicable to any shares of Series E Preferred Stock shall be
recorded in the minutes of the Board of Directors at which such
shares are authorized to be issued, and shall be conclusively
evidenced (absent manifest error) by a notation to such effect on
the face of each certificate representing such shares.
(k) "Initial Issuance Date" shall mean the first date on which
any given shares of Series E Preferred Stock shall be issued by the
Corporation. The Initial Issuance Date applicable to any shares of
Series E Preferred Stock shall be recorded in the minutes of the
Board of Directors at which such shares are authorized to be issued,
and shall be conclusively evidenced (absent manifest error) by a
notation to such effect on the face of each certificate representing
such shares.
(l) "Junior Stock" means shares of Common Stock, shares of the
Corporation's Series D Preferred Stock, $.01 par value, and shares
of any other class or series of the Corporation's capital stock
which by its terms is junior or subordinate to the Series E
Preferred Stock in any distribution of the Corporation's assets in
connection with the liquidation, dissolution or winding up of the
affairs of the Corporation.
(m) "Market Price" means the average Trading Price of a share
of Class A Common Stock for the ten trading days of the Class A
Common Stock
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preceding the Conversion Date. If during such ten-day period the
Class A Common Stock is not traded on a national securities exchange
or over-the-counter and reported on NASDAQ, then Market Value shall
be the fair market value of a share of Class A Common Stock as
reasonably determined in good faith by the Board of Directors.
(n) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(o) "Parity Stock" means shares of the Corporation's Series F
preferred Stock, $.01 par value, and shares of any other class or
series of the Corporation's stock (other than Common Stock) which by
its terms is neither subordinate nor superior to or in preference of
the Series E Preferred Stock in any distribution of the
Corporation's assets in connection with the liquidation, dissolution
or winding up of the affairs of the Corporation.
(p) "Preferred Stock" means shares of any series of the
Corporation's Preferred Stock, $.01 par value per share.
(q) "Restricted Payment" means the declaration or making by
the Corporation 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 Series E Preferred
Stock.
(r) "Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute.
(s) "Senior Credit Documents" means the Credit Agreement dated
effective August 13, 1996 among the Corporation, NationsBank of
Texas, N.A., as administrative agent, Provident Services, Inc., as
documentation agent, and the "Lenders" named therein, together with
(i) all amendments, restatements, modifications and supplements
thereto, and (ii) all replacements therefor, including (without
limitation) any refinancings of the indebtedness under such Credit
Agreement.
(t) "Series E Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series E Preferred Stock,
$.01 par value per share.
(u) "Trading Price" means, on any trading day for the Class A
Common Stock, (i) if the Class A Common Stock is traded on a
national securities exchange on such trading day, then the closing
price on such trading day as reflected in the consolidated trading
tables of the WALL STREET JOURNAL or any other appropriate
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<PAGE>
publication, (ii) if the Class A Common Stock is traded
over-the-counter and reported on the NASDAQ National Market System,
then the average of the high and low sales prices on such trading
day as reported in such publication or, if not so published, then as
reported by the NASDAQ National Market System, or (iii) if the Class
A Common Stock is not traded on a national securities exchange or in
the NASDAQ National Market System on such trading day, then the
representative bid and asked prices at the end of such trading day
in such market as reported by NASDAQ.
(v) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
30. DIVIDENDS.
(a) SERIES E PREFERRED STOCK. The holders of Series E
Preferred Stock, in preference to the holders of Common Stock, shall
be entitled to receive in respect of each such share of Series E
Preferred Stock, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends in cash
at an annual rate equal to the Dividend Rate, payable quarter-
annually on or before the last calendar day of each March, June,
September and December in each year in which the Series E Preferred
Stock is outstanding. Such dividends shall commence to accrue on the
shares of Series E Preferred Stock and be cumulative from and after
the date of issuance of such shares of Series E Preferred Stock and
shall be deemed to accumulate and accrue from day to day thereafter.
So long as any shares of Series E Preferred Stock remain
outstanding, no dividends or distributions (other than dividends or
distributions on Common Stock payable in Common Stock) shall be paid
upon, or declared or set apart for, the Common Stock, nor shall any
Common Stock (other than Common Stock acquired in exchange for, or
out of cash proceeds of, the issue of other Common Stock or out of
cash contributions to the capital of the Corporation) be purchased,
redeemed, retired or otherwise acquired by the Corporation, unless
and until in either case all past due, cumulative dividends on the
then outstanding shares of Series E Preferred Stock for all past
dividend periods shall have been or concurrently shall be paid.
(b) OTHER STOCK. Subject to paragraph (a) above, (i) dividends
may be declared and paid on Common Stock, and (ii) Common Stock may
be purchased, retired or otherwise acquired, when and as determined
by the Board of Directors, out of any funds legally available for
such purposes.
(c) RESTRICTED PAYMENTS. Notwithstanding the foregoing
provisions of this Section 2 and the provisions of Section 3 below,
the Corporation shall not
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<PAGE>
declare or pay, and no holder of the Series E Preferred Stock shall
be entitled to receive or retain, any Restricted Payment in respect
of shares of Series E Preferred Stock if, at the time of such
Restricted Payment, such holder has received written notice from any
lender under the Senior Credit Documents, or from the Corporation,
that an event of default (within the meaning of the Senior Credit
Documents) has occurred and is then continuing and that Restricted
Payments should be blocked. Such blockage period shall continue (i)
indefinitely after receipt of any such notice, if the event of
default specified therein results from any default in the payment by
the Corporation of any obligations under any Senior Credit Document,
whether by maturity, acceleration, or otherwise, for so long as such
event of default shall continue, or (ii) in the case of any other
event of default, for a period of 180 days after such holder's
receipt of any such notice. This paragraph does not have the intent
or effect of impairing, as between the Corporation and the holders
of the Series E Preferred Stock, the obligation of the Corporation,
which is unconditional and absolute (subject to the other provisions
hereof), to declare and pay dividends and to redeem shares of Series
E Preferred Stock, at such times and in the manner herein specified.
31. REDEMPTION.
(a) MANDATORY REDEMPTION. As to any shares of Series E
Preferred Stock, on the tenth anniversary of the Initial Issuance
Date for such shares, the Corporation shall redeem all of such
shares of Series E Preferred Stock then outstanding (subject,
however, to the right of the holders of the Series E Preferred Stock
to convert their shares pursuant to Section 5 by providing the
written conversion notice referred to in Section 5(c) below on or
before 30 days prior to the date set for such redemption), at a
redemption price of $1.00 per share, together with all accrued and
unpaid dividends through the effective date of redemption.
(b) OPTIONAL REDEMPTION. As to any shares of Series E
Preferred Stock, at any time during the period commencing on the
fifth anniversary of the Initial Issuance Date for such shares and
ending on the tenth anniversary of such Initial Issuance Date (the
"Optional Redemption Period"), the Corporation, at the option of the
Board of Directors, may redeem from the holders of Series E
Preferred Stock, at a redemption price of $1.00 per share, together
with accrued and unpaid dividends thereon to the date fixed for
redemption, all or any portion of such shares of Series E Preferred
Stock outstanding on such date. Written notice of such redemption of
such shares of Series E Preferred Stock to be so redeemed shall be
mailed, postage prepaid, to the holders of record of the shares to
be so redeemed at their respective addresses then appearing on the
books of the Corporation, not less than 45 nor more than 75 days
prior to the date designated for such redemption, which shall occur
during the Optional Redemption Period. In case the Corporation
intends to redeem less than all of the outstanding shares
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<PAGE>
of Series E Preferred Stock which are then eligible for redemption,
the Corporation's notice shall so state and such redemption shall be
made on or pro rata basis in accordance with each holder's
respective holdings of Series E Preferred Stock. Such redemption by
the Corporation shall be subject, however, to the right of each such
holder to convert such holder's shares of Series E Preferred Stock
into shares of Class A Common Stock pursuant to Section 5 by
delivering the written conversion notice referred to in Section 5(c)
at least 15 days prior to the date fixed for redemption.
(c) GENERAL. From and after the effective date of redemption
and the setting aside of the funds necessary for redemption,
notwithstanding that any certificate for shares of Series E
Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the shares to be redeemed shall no
longer be deemed outstanding, and the holders of certificates
representing such shares shall have with respect to such shares no
rights in or with respect to the Corporation except the right to
receive, upon the surrender of such certificates, the redemption
price therefor. Shares of Series E Preferred Stock redeemed by the
Corporation pursuant to this Section 3, or shares of Series E
Preferred Stock otherwise purchased by the Corporation, shall not be
reissued and shall be cancelled and retired in the manner provided
by the laws of the State of Delaware, and no other shares of Series
E Preferred Stock shall be issued in lieu thereof.
32. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 4.
(b) SERIES E PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series E
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of any outstanding Junior Stock, and PARI PASSU with any
distribution of assets to the holders of outstanding Parity Stock,
an amount in cash for each share of Series E Preferred Stock equal
to $1.00 together with all accrued and unpaid dividend through the
effective date of such liquidation, dissolution or winding up, or
funds necessary for such payment shall have been set aside in trust
for the account of the holders of the outstanding Series E Preferred
Stock so as to be and continue available therefor. If upon such
liquidation, dissolution or winding up, the assets distributable to
the holders of the Series E Preferred Stock as aforesaid shall be
insufficient to permit the payment to them (together with any
distributions to the holders of Parity Stock) of $1.00 per share
(plus such accrued and unpaid
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dividends), the assets of the Corporation shall be distributed to
the holders of the Series E Preferred Stock and the Parity Stock
ratably until they shall have received the full amount to which they
would otherwise be entitled. If the assets of the Corporation are
sufficient to permit the payment of such amounts to the holders of
the Series E Preferred Stock and the Parity Stock, the remainder of
the assets of the Corporation, if any, after the distributions as
aforesaid shall be distributed and divided ratably among the holders
of the Junior Stock then outstanding according to their respective
shares.
33. CONVERSION. The Series E Preferred Stock shall be convertible into
Class A Common Stock in accordance with the following provisions of
this Section 5.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 5, each holder of shares of Series E
Preferred Stock shall have the right at such holder's option, at any
time or from time to time from, to convert all or any part of his or
her shares of Series E Preferred Stock into fully paid and
nonassessable shares of Class A Common Stock, at the Conversion
Price in effect on the Conversion Date, upon the terms hereinafter
set forth.
(b) CONVERSION PRICE. The shares of Series E Preferred Stock
shall be convertible into the number of shares of Class A Common
Stock as is determined by multiplying the number of shares of Series
E Preferred Stock to be converted by a fraction, the numerator of
which is $1.00 and the denominator of which is the Conversion Price
in effect on the Conversion Date.
(c) MECHANICS OF CONVERSION. The holder of any shares of
Series E Preferred Stock may exercise the optional conversion right
specified in paragraph (a) above by surrendering to the Corporation
or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written
notice stating that the holder elects to convert all or a specified
portion of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered; any such date is referred to herein
as the "Conversion Date". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order of
such holders a certificate or certificates for the number of full
shares of Class A Common Stock to which such holders are entitled
rounded down to the next whole share as provided in paragraph (d)
below. The person in whose name the certificate or certificates of
Class A Common Stock are to be issued shall be deemed to have become
a holder of record of such Class A Common Stock on the Conversion
Date.
(d) FRACTIONAL SHARES. No fractional shares of Class A Common
Stock or scrip shall be issued upon conversion of shares of Series E
Preferred Stock.
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Instead of any fractional shares of Class A Common Stock which would
otherwise be issuable upon conversion of any shares of Series E
Preferred Stock, the number of full shares of Class A Common Stock
issuable upon conversion thereof shall be reduced to the next lowest
number of whole shares, and the Corporation will pay a cash
adjustment in respect of any surrendered shares of Series E
Preferred Stock not converted into Class A Common Stock in an amount
equal to $1.00 per share of Series E Preferred Stock.
(e) CONVERSION PRICE ADJUSTMENTS. The Conversion Base Price
shall be subject to adjustment from time to time as follows:
(i) CERTAIN ISSUANCES OF EQUITY STOCK. If, as to any
shares of Series E Preferred Stock, at any time following the
Initial Issuance Date for such shares, and while the
Conversion Price is based upon the Conversion Base Price, the
Corporation issues any Class A Common Stock, or any security
or evidence of indebtedness which is convertible or exer-
cisable into or exchangeable for Class A Common Stock
(including, without limitation, any Class B Common Stock or
any Preferred Stock), or any warrant, option or other right to
subscribe for or purchase Class A Common Stock or any security
or evidence of indebtedness which is convertible or
exchangeable for Class A Common Stock (hereinafter, "Equity
Stock"), other than Excluded Stock (as defined in clause (D)
below), for a consideration per share less than the Baseline
Price, then the Conversion Base Price shall immediately be
reduced to a price per share determined by multiplying the
Conversion Base Price then in effect by a fraction, the
numerator of which is an amount equal to the sum of (x) the
number of shares of Equity Stock of the Corporation
outstanding immediately prior to such issue or sale multiplied
by the Baseline Price plus (y) the consideration, if any,
received by the Corporation upon such issue or sale, and the
denominator of which is the total number of shares of Equity
Stock of the Corporation outstanding immediately after such
issue or sale multiplied by the Baseline Price. The number of
shares of Equity Stock outstanding at any given time for the
purposes of the foregoing computation means the shares of
Class A Common Stock outstanding together with all shares of
Class A Common Stock issuable upon conversion or exercise of
any such Equity Stock, excluding any shares of Equity Stock
previously outstanding that have been reacquired by the
Corporation and constitute treasury shares.
For purposes of any adjustment of the Conversion Base
Price pursuant to this subparagraph (i) of this Section 5(e),
the following provisions shall be applicable:
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(A) CASH. In the case of the issuance of Equity
Stock for cash, the amount of the consideration received
by the Corporation shall be deemed to be the amount of
the cash proceeds received by the Corporation for such
Equity Stock before deducting therefrom any discounts,
commissions, taxes, legal and accounting fees or other
expenses allowed, paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of
the issuance of Equity Stock (other than as described in
clause (C) below) for a consideration in whole or in
part other than cash, including securities acquired in
exchange therefor (other than securities by their terms
so exchangeable), the consideration other than cash
shall be deemed to be the fair market value thereof as
reasonably determined by the Board of Directors in good
faith.
(C) OPTIONS AND CONVERTIBLE SECURITIES, ETC. In
the case of the issuance of (i) options, warrants or
other rights to purchase or acquire Class A Common Stock
or other Equity Stock (whether or not at the time
exercisable), (ii) securities which by their terms are
convertible or exercisable into or exchangeable for
Class A Common Stock or other Equity Stock (whether or
not at the time so convertible, exercisable or
exchangeable) or (iii) options, warrants or rights to
purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(1) the aggregate maximum number of shares
of Class A Common Stock deliverable upon exercise
of such options, warrants or other rights to
purchase or acquire Class A Common Stock shall be
deemed to have been issued at the time such
options, warrants or rights were issued and for a
consideration equal to the aggregate consideration
(determined in the manner provided in clauses (A)
and (B) above), if any, received by the
Corporation upon the issuance of such options,
warrants or rights plus the aggregate minimum
purchase price provided in such options, warrants
or rights for the Class A Common Stock covered
thereby;
(2) the aggregate maximum number of shares
of Class A Common Stock deliverable upon
conversion of or in exchange for any such
convertible or exchangeable securities, or upon
the exercise of options, warrants or other rights
to purchase or acquire such convertible or
exchangeable securities and the subsequent
conversion or
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exchange thereof, shall be deemed to have been
issued at the time such securities were issued or
such options, warrants or rights were issued and
for a consideration equal to the consideration, if
any, received by the Corporation for any such
securities and related options, warrants or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the
additional consideration, if any, to be received
by the Corporation upon the conversion or exchange
of such securities and the exercise of any related
options, warrants or rights (the consideration in
each case to be determined in the manner provided
in clauses (A) and (B) above);
(3) on any change in the number of shares of
Class A Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion
of or exchange for such convertible or
exchangeable securities or any change in the
consideration to be received by the Corporation
upon such exercise, conversion or exchange,
including, but not limited to, a change resulting
from the anti-dilution provisions thereof, the
Conversion Base Price as then in effect shall
forthwith be readjusted to such Conversion Base
Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or securities not converted or
exchanged prior to such change, on the basis of
the terms of such options, warrants, rights or
convertible or exchangeable securities as so
changed;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the
termination of the right to convert or exchange
such convertible or exchangeable securities, if
the Conversion Base Price shall have been adjusted
upon the issuance thereof, the Conversion Base
Price shall forthwith be readjusted to such
Conversion Base Price as would have been obtained
had an adjustment been made upon the issuance of
such options, warrants, rights or securities on
the basis of the issuance of only the number of
shares of Class A Common Stock actually issued
upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such
securities; and
(5) regardless of whether the Conversion
Base Price shall have been adjusted upon the
issuance of any
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such options, warrants, rights or convertible or
exchangeable securities, no further adjustment of
the Conversion Base Price shall be made for the
actual issuance of Class A Common Stock upon the
exercise, conversion or exchange thereof.
(D) EXCLUDED STOCK. For purposes hereof, "Excluded
Stock" means, for purposes of determining whether there
shall be any adjustment in the Conversion Base Price
pursuant to this subparagraph (i) as to any shares of
Series E Preferred Stock, any shares of Common Stock
that are issued or reserved for issuance by the
Corporation (i) upon conversion, exercise or exchange of
any Equity Stock that is outstanding on the Initial
Issuance Date for such Shares; (ii) pursuant to a stock
dividend, subdivision or split-up covered by
subparagraph (ii) or (iii) of this Section 5(e); and
(iii) upon exercise of options issued to employees or
directors of the Corporation or its subsidiaries,
provided that (x) the exercise price thereof is not less
than the fair market value per share of the Class A
Common Stock determined in good faith by the Board of
Directors at the time such options are granted, and (y)
options covering no more than five percent (5%) of the
fully diluted Class A Common Stock (assuming the full
conversion, exercise and exchange of all Equity Stock
then outstanding into shares of Class A Common Stock)
may be issued under this clause (D) without causing an
adjustment in the Conversion Base Price herein
described.
(ii) STOCK DIVIDENDS. If the number of shares of Class
A Common Stock outstanding at any time after the issuance of
any Series E Preferred Stock is increased by a stock dividend
payable in shares of Class A Common Stock or by a subdivision
or split-up of shares of Class A Common Stock, and if the
Conversion Price then in effect is based upon the Conversion
Base Price, then immediately after the record date fixed for
the determination of holders of Class A Common Stock entitled
to receive such stock dividend or the effective date of such
subdivision or split-up, as the case may be, the Conversion
Base Price shall be appropriately decreased so that the
holders of any shares of Series E Preferred Stock shall be
entitled to receive the number of shares of Class A Common
Stock of the Corporation which they would have owned
immediately following such action had such shares of Series E
Preferred Stock been converted immediately prior thereto.
(iii) COMBINATION OF STOCK. If the number of shares of
Class A Common Stock outstanding at any time after issuance of
any class of
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Series E Preferred Stock is decreased by a combination of the
outstanding shares of Class A Common Stock, and if the
Conversion Price then in effect is based upon the Conversion
Base Price then, immediately after the effective date of such
combination, the Conversion Base Price shall be appropriately
increased so that the holders of any shares of Series E
Preferred Stock shall be entitled to receive the number of
shares of Class A Common Stock of the Corporation which they
would have owned immediately following such action had such
shares of Series E Preferred Stock been converted immediately
prior thereto.
(iv) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Class A Common Stock, or in case of the consolidation
of the Corporation with or the merger of the Corporation with
or into any other corporation, partnership or other business
entity in which the Corporation is not the survivor, or of the
sale, lease or other transfer of all or substantially all of
the assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series E
Preferred Stock shall, after such capital reorganization,
reclassification, consolidation, merger, sale or lease, be
convertible into the number of shares of stock or other
securities or property to which the Class A Common Stock
issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale or lease) upon
conversion of such share of Series E Preferred Stock would
have been entitled upon such capital reorganization,
reclassification, consolidation, merger, sale or lease in
place of (or in addition to, in the case of any such event
after which Class A Common Stock remains outstanding) the
shares of Class A Common Stock into which such share of Series
E Preferred Stock would otherwise have been convertible; and
in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of
the holders of the shares of Series E Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any share of stock or other securities
or property thereafter deliverable on the conversion of the
shares of Series E Preferred Stock. The subdivision or
combination of shares of Class A Common Stock issuable upon
conversion of shares of Series E Preferred Stock at any time
outstanding into a greater or lesser number of shares of Class
A Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Class A Common Stock
of the Corporation for the purposes of this subparagraph (iv).
(v) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (e) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (e)
to the contrary notwithstanding, no
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adjustment in the Conversion Base Price shall be made if the
amount of such adjustment would be less than $0.01, but any
such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall
aggregate $0.01 or more.
(vi) TIMING OF ISSUANCE OF ADDITIONAL CLASS A COMMON
STOCK UPON CERTAIN ADJUSTMENTS. In any case in which the
provisions of this paragraph (e) requires that an adjustment
shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such
event issuing to the holder of any shares of Series E
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class A
Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event
over and above the shares of Class A Common Stock or other
property issuable or deliverable upon such conversion before
giving effect to such adjustment; PROVIDED, HOWEVER that the
Corporation upon request shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's
right to receive such additional shares or other property, and
such cash, upon the occurrence of the event requiring such
adjustment.
(f) CERTAIN ADJUSTMENTS. In case of any adjustment in
the Conversion Base Price pursuant to this Section 5(e) at a
time when the amount of the Conversion Base Price is due to
increase at one or more future dates in accordance with the
schedule contained within the definition of such term, then in
addition to the adjustment of the Conversion Base Price then
in effect, each subsequent increase therein contained within
such definition shall be appropriately adjusted to give effect
to provisions of this Section 5(e). In case, at a time when
the Conversion Price is based upon the Market Price, the
record date for any action of the type described subparagraph
(ii), (iii) or (iv) above occurs prior to a Conversion Date
but after one or more of the trading days for which the
Trading Price therefor is determined, then the Trading Price
for each trading day occurring prior to such record date shall
be appropriately adjusted in order to give effect to such
action, in the manner provided in said subparagraph (ii),
(iii) or (iv), as the case may be.
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion
Base Price shall be adjusted as provided in paragraph (e), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series E Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Base Price that shall
be in effect
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after such adjustment, and the Corporation shall also cause a copy
of such statement to be sent by mail, first class postage prepaid,
to each holder of the Series E Preferred Stock at his or her address
appearing on the Corporation's records. Each such statement shall be
signed by the Corporation's chief financial officer. Where
appropriate, such copy may be given in advance and may be included
as part of a notice required to be mailed under the provisions of
subparagraph (h) below.
(h) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii),
(iii) or (iv) of paragraph (e) above, the Corporation shall give
notice to each holder of the Series E Preferred Stock in the manner
set forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Base Price and the number, kind or class of shares or
other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of the Series E Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice
shall be given at least 10 days prior to the date so fixed, and in
case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action.
(i) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Class A Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series
E Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series E Preferred Stock in respect of which such
shares are being issued.
(j) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series E Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock
or its authorized but unissued shares of Class A Common Stock, or
both, solely for the purpose of effecting the conversion of shares
of Series E Preferred Stock, sufficient shares of Class A Common
Stock to provide for the conversion of all outstanding shares of
Series E Preferred Stock and set aside and keep available any other
property deliverable upon conversion of all outstanding shares of
Series E Preferred Stock.
(k) APPROVALS. If any shares of Class A Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series E Pre-
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ferred Stock require registration with or approval of any
governmental authority under any Federal or state law before such
shares or other securities may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as
expeditiously as possible use its commercially reasonable efforts to
secure such registration or approval, as the case may be. The
foregoing shall not be interpreted to require to Corporation to
cause the registration of such shares under the Securities Act or
the securities or blue laws of any state.
(l) VALID ISSUANCE. All shares of Class A Common Stock or
other securities which may be issued upon conversion of the shares
of Series E Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
34. VOTING RIGHTS.
(a) GENERAL. At any annual or special meeting of stockholders
or otherwise in respect of any matter submitted for the vote of
stockholders generally, the holders of the Series E Preferred Stock
shall be entitled to such number of votes (rounded down to the
nearest whole vote) as shall be determined by multiplying (1) vote
for each share of Series E Preferred Stock so held by a fraction,
the numerator of which is $1.00 and the denominator of which is the
Conversion Price in effect on the record date for determining
stockholders entitled to vote on such matter.
(b) SPECIAL VOTING REQUIREMENTS. Without limiting the
generality of paragraph (a) above, the Corporation shall not,
without the consent of the holders of at least a majority of the
outstanding shares of Series E Preferred Stock, voting together as a
single class, either (i) amend, alter or repeal any provision of the
Corporation's Certificate of Incorporation or Bylaws or this
Certificate of Designation, in any event so as to adversely affect
the rights or powers of any of the Series E Preferred Stock as
provided herein, or (ii) issue any Preferred Stock or other class or
series of the Corporation's capital stock that is senior or
preferential to the Series E Preferred Stock in any distribution of
the Corporation's assets in connection with the liquidation,
dissolution or winding up of the affairs of the Corporation.
35. REGISTRATION RIGHTS. Subject to paragraph (h) below and the other
provisions of this Section 7, the holders of the Series E Preferred
Stock shall be entitled to have their respective shares of Class A
Common Stock issuable upon conversion of their Series E Preferred
Stock included in any registration of Class A Common Stock under the
Securities Act proposed by the Corporation.
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(a) INCIDENTAL RIGHTS. If at any time or from time to time the
Corporation proposes to file with the Securities and Exchange
Commission (the "Commission") a registration statement (whether on
Form S-1, S-2 or S-3 or any equivalent form then in effect) for the
registration under the Securities Act of any shares of Class A
Common Stock for sale to the public by the Corporation or on behalf
of a shareholder of the Corporation for cash (excluding any shares
of Common Stock issuable by the Corporation upon the exercise of
employee or director stock options or in connection with the merger
or consolidation of the Corporation or one of its subsidiaries with
one or more other corporations if the Corporation is the surviving
corporation), the Corporation shall give each holder of the Series E
Preferred Stock at least 30 days' prior written notice of the filing
of the proposed registration statement. The notice shall include a
list of the states and foreign jurisdictions, if any, in which the
Corporation intends to qualify such shares, and shall also include
the Corporation's estimate of the range of the offering price per
share of Class A Common Stock. On the written request of any holder
of the Series E Preferred Stock received by the Corporation within
15 days after the date of the Corporation's notice, the Corporation
shall, subject to the conditions and in accordance with the
procedures set forth in paragraphs (b) and (c) below, and at its own
expense as provided in paragraph (e) below, include in the coverage
of such registration statement and qualify for sale under the blue
sky or securities laws of the various states, the number of shares
(but not less than 5,000 shares, subject to adjustment to give
effect to any stock dividends, splits or combinations,
recapitalizations or other similar corporate events) of Class A
Common Stock (herein called the "Specified Shares") held (or to be
held upon conversion of the Series E Preferred Stock) and so
requested to be registered by each such holder; provided that if the
managing underwriter for the Corporation indicates its belief in
writing that the effect of including in the coverage of such
registration statement all or part of the Specified Shares and the
shares of Class A Common Stock requested to be so included by other
stockholders having contractual registration rights ("Other
Requesting Stockholders") will materially and adversely affect the
sale of the shares of Class A Common Stock proposed to be sold by
the Corporation (which statement of the managing underwriter shall
also state the maximum number of shares (herein called the "Maximum
Shares"), if any, which can be sold by such all such holders without
materially and adversely affecting the sale of the shares proposed
to be sold by the Corporation), then the number of Specified Shares
which the holders of the Series E Preferred Stock and the Other
Requesting Stockholders shall collectively have the right to include
in such registration statement shall be reduced to the number of
Maximum Shares set forth in such statement of the managing
underwriter, such reduction to be effected on a pro rata basis in
accordance with the number of all such shares requested to be so
registered by the holders of the Series E Preferred Stock and the
Other Requesting Stockholders.
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Except as provided in paragraph (c) below, in no event shall
the Corporation be required to amend any registration statement
filed pursuant to this Section 7 after it has become effective or to
amend or supplement any prospectus to permit the continued
disposition of shares of Class A Common Stock registered under any
registration statement.
The Corporation shall have the right to select any
underwriters, including the managing underwriter, of any public
offering of shares of Class A Common Stock subject to the provisions
of this paragraph (a). Nothing in this paragraph (a) shall create
any liability on the part of the Corporation to the holders of the
Series E Preferred Stock if the Corporation for any reason should
decide not to file such a registration statement.
The Corporation may withdraw any registration statement and
abandon any proposed offering initiated by the Corporation without
the consent of any holder of the Series E Preferred Stock,
notwithstanding the request of any such holder to participate
therein in accordance with this paragraph (a), if the Corporation
determines that such action is in the best interests of the
Corporation.
(b) CERTAIN REGISTRATION CONDITIONS. Any holder of Series E
Preferred Stock requesting registration of Class A Common Stock into
which such holder's Series E Preferred Stock is convertible pursuant
to paragraph (a) of this Section 7 is hereafter referred to as a
"Selling Stockholder." Anything in this Agreement to the contrary
notwithstanding, the Corporation shall not be required to effect a
registration of any Class A Common Stock of any Selling Stockholder
pursuant to paragraph (a) of this Section 7, or file any
post-effective amendment thereto:
(i) unless such Selling Stockholder agrees (x) to sell
and distribute a portion or all of his Class A Common Stock in
accordance with the customary plan or plans of distribution
adopted by and through underwriters, if any, acting for the
Corporation, and (y) to bear a pro rata share of underwriter's
discounts and commissions;
(ii) unless the Corporation and the underwriters for
the Corporation shall have received from such Selling
Stockholder all such information as the Corporation and such
underwriters may reasonably request from him concerning such
Selling Stockholder to enable the Corporation to include in
the registration statement all material facts required to be
disclosed therein;
(iii) unless such Selling Stockholder is then entitled
to convert his shares of Series E Preferred Stock into Class A
Common Stock and such Selling Stockholder in fact delivers the
notice to elect to convert the Series E Preferred Stock into
Class A Common Stock prior to or
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contemporaneously with the notice of such Selling Stockholder
under paragraph (a) hereof; and
(iv) unless such Selling Stockholder, at the request of
the Corporation or its managing underwriter, agrees or
acknowledges that such Selling Stockholder (x) has a present
intention to sell such shares; (y) agrees to execute all
consents, powers of attorney, registration statements and
other documents required in order to cause such registration
statement to become effective; and (z) agrees, if the offering
is at the market, to give the Corporation written notice of
the first bona fide offering of such shares and to use the
prospectus forming a part of such registration statement for
only a period of 90 days (or such longer period provided for
in paragraph (c) below) unless such registration statement is
on a form that complies with Rule 415.
(c) COVENANTS AND PROCEDURES. If the Corporation becomes
obligated under the provisions of paragraph (a) of this Section 7 to
effect registration of shares of Class A Common Stock on behalf of
any Selling Stockholder, the following shall apply:
(i) The Corporation, at its own expense as provided
in paragraph (e), shall prepare and file with the Commission a
registration statement covering such shares of Class A Common
Stock and use its best efforts to cause such registration
statement to become effective; and the Corporation will file
such post-effective amendments to such registration statement
(and use its best efforts to cause them to become effective)
and such supplements as are necessary so that current
prospectuses are at all times available for a period of at
least 90 days after the effective date of such registration
statement or for such longer period, not to exceed 180 days,
as may be required by the Corporation or the managing
underwriter under the plan or plans of distribution set forth
in such registration statement. Each Selling Stockholder shall
promptly provide the Corporation with such information with
respect to such Selling Stockholder's shares of Class A Common
Stock to be so registered and, if applicable, the proposed
terms of the offering thereof as is required for such
registration. Further, if the shares of Class A Common Stock
to be covered by the registration statement are not to be sold
to or through underwriters acting for the Corporation, the
Corporation shall (x) deliver to each Selling Stockholder as
promptly as practicable as many copies of preliminary
prospectuses as such Selling Stockholder may reasonably
request, and such Selling Stockholder shall keep a written
record of the distribution of such preliminary prospectuses
and shall refrain from delivery of such preliminary
prospectuses in any manner or under any circumstances which
would violate the Securities Act or the securities laws
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of any other jurisdiction, including the various states of the
United States, (y) deliver to each Selling Stockholder, as
soon as practicable after the effective date of the
registration statement, and from time to time thereafter
during such 90-day period, or such longer period as is herein
provided, as many copies of the prospectuses required to be
delivered in connection with the sale of shares of Class A
Common Stock registered under the registration statement as
such Selling Stockholder may reasonably request, and (z) in
case of the happening, after the effective date of such
registration statement and during such 90-day period (or such
longer period specified above), of any event or occurrence
which would be set forth in an amendment of or supplement to
such prospectus to make any statements therein not misleading
or to correct any misleading omissions, give each Selling
Stockholder written notice thereof and prepare and furnish to
such Selling Stockholder, in such quantities as he may
reasonably request, copies of such amended prospectus or of
such supplement to be attached to the prospectus in order that
the prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) On or prior to the date on which the registration
statement is declared effective, the Corporation shall use its
best efforts to register or qualify, and cooperate with each
Selling Stockholder, the underwriter or underwriters, if any,
and their counsel, in connection with the registration or
qualification of the Class A Common Stock covered by the
registration statement for offer and sale under the securities
or blue sky laws of each state and other jurisdiction of the
United States as such Selling Stockholder or underwriter
reasonably requests, to use its best efforts to keep each such
registration or qualification effective, including through new
filings, or amendments or renewals, during the period such
registration statement is required to be kept effective and to
do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Class
A Common Stock covered by the applicable registration
statement; provided that the Corporation will not be required
to qualify generally to do business in any jurisdiction where
it is not then so qualified.
(iii) The Corporation shall use its best efforts to
cause all of each Selling Stockholder's Class A Common Stock
included in such registration statement to be listed, by the
date of the first sale of such Class A Common Stock pursuant
to such registration statement, on each securities exchange on
which the Class A Common Stock of the Corporation is then
listed or proposed to be listed, if any.
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(iv) The Corporation shall make generally available to
each Selling Stockholder and any underwriter participating in
the offering conducted pursuant to the registration statement
an earnings statement satisfying the provisions of Section
11(a) of the Securities Act no later than 45 days after the
end of the 12-month period beginning with the first day of the
Corporation's first fiscal quarter commencing after the
effective date of the registration statement, which earnings
statement shall cover said 12-month period, which requirement
will be deemed to be satisfied if the Corporation timely files
complete and accurate information on Forms 10- Q, 10-K, and
8-K under the Securities Exchange Act of 1934, as amended, and
otherwise complies with Rule 158 under the Securities Act as
soon as feasible.
(v) The Corporation shall cooperate with each Selling
Stockholder and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends)
representing Class A Common Stock to be sold under the
registration statement, and enable such securities to be in
such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Selling
Stockholder may request, subject to the underwriters'
obligation to return any certificates representing securities
not sold.
(vi) The Corporation shall use its best efforts to
cause each Selling Stockholder's Class A Common Stock covered
by the registration statement to be registered with or
approved by such other governmental agencies or authorities
within the United States as may be necessary to enable such
Selling Stockholder or the underwriter or underwriters, if
any, to consummate the disposition of such Class A Common
Stock.
(vii) The Corporation shall make available for
inspection by each Selling Stockholder, any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent
retained by such Selling Stockholder or any such underwriter
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Corporation, as shall be reasonably necessary to enable them
to exercise their due diligence, responsibility, and cause the
Corporation's officers, directors and employees to supply all
nonconfidential information reasonably requested by any such
Inspector in connection with such registration statement. As a
condition to providing such access, the Corporation may
require that any and all Inspectors execute and deliver
confidentiality agreements, in form and substance acceptable
to the Corporation, and that confidentiality procedures be
observed, all with respect to such information.
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(viii) The Corporation shall use its best efforts to
obtain a "cold comfort" letter from the Corporation's
independent public accountants, and an opinion of counsel for
the Corporation, each in customary form and covering such
matters of the type customarily covered by cold comfort
letters and opinions of counsel in connection with public
offerings of securities, as each Selling Stockholder
reasonably requests.
(d) INDEMNIFICATION.
(i) INDEMNIFICATION BY THE CORPORA-TION. In the event
of any registration under the Securities Act pursuant to this
Section 7 of shares of Class A Common Stock held by any
Selling Stockholder, the Corporation will hold harmless each
Selling Stockholder and each underwriter of such securities
and each other person, if any, who controls each Selling
Stockholder or such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or
liabilities (including legal fees and costs of court), joint
or several, to which such Selling Stockholder or such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under
which such securities were registered under the Securities
Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
will reimburse each Selling Stockholder and each such
underwriter and each such controlling person for any legal or
any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage
or liability; provided, however, that the Corporation shall
not be liable to any Selling Stockholder or his underwriters
or controlling persons in any such case to the extent that any
such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration
statement, preliminary prospectus or final prospectus or such
amendment or supplement in reliance upon and in conformity
with information furnished to the Corporation through a
written instrument duly executed by such Selling Stockholder
or such underwriter specifically for use in the preparation
thereof.
(ii) INDEMNIFICATION BY SELLING STOCK-HOLDERS. It shall
be a condition precedent to the obligation of the Corporation
to include in any registration statement any shares of Class A
Common Stock then held by
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a Selling Stockholder that the Corporation shall have received
an undertaking reasonably satisfactory to it and its counsel
from such Selling Stockholder to severally indemnify and hold
harmless (in the same manner and to the same extent as set
forth in subparagraph (i) above) the Corporation, each
director of the Corporation, each officer of the Corporation
who shall sign such registration statement, each underwriter
of such securities and any person who controls the Corporation
or such underwriter within the meaning of the Securities Act,
with respect to any statement or omission from such
registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance
upon and in conformity with information furnished to the
Corporation through a written instrument duly executed by such
Selling Stockholder specifically for use in the preparation of
such registration statement, preliminary prospectus or final
prospectus or such amendment or supplement thereto.
(iii) INDEMNIFICATION PROCEDURES. Promptly after receipt
by an indemnified party of notice of the commencement of any
action involving a claim referred to in the preceding
subparagraphs (i) and (ii), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the
commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, and provided that the indemnifying party
in fact assumes such defense, the indemnifying party will not
be liable to such indemnified party for any legal or other
expenses incurred after the date of such notice by the latter
in connection with the defense thereof. Whether or not such
defense is assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement
made without its consent. No indemnifying party will consent
to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or
litigation.
(iv) CONTRIBUTION. If the indemnification provided for
in this paragraph (d) from the indemnifying party is
unavailable to an indemnified party hereunder in respect of
any losses, claims, damages, liabilities or expenses referred
to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to
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reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or a
material omission, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with
any investigation or proceeding. For purposes of the
foregoing, it would not be just and equitable if contribution
pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the
provisions of this subparagraph (iv), no Selling Stockholder
shall be required to contribute any amount in excess of the
amount by which the total price at which the Class A Common
Stock of such Selling Stockholder was offered to the public
exceeds the amount of any damages which such Selling
Stockholder has otherwise been required to pay by reason of
such untrue statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) EXPENSES. All expenses incurred by the Corporation in
connection with any registration statement covering shares of Class
A Common Stock offered by the Selling Stockholders, including,
without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements
of counsel for the Corporation and of its independent certified
public accountants, the reasonable fees and disbursements of one
counsel for collectively all Selling Stockholders and Other
Requesting Stockholders whose stock is included in such
registration, and the expense of qualifying such shares under state
blue sky laws, shall be borne by the Corporation; provided, however,
that all underwriter's discounts and commissions relating to the
shares of Class A Common Stock to be sold by the Selling
Stockholders shall be borne by the Selling Stockholders.
(f) DISPOSITIONS DURING REGISTRATION. Upon written request by
the Corporation, the Selling Stockholders will agree, upon the
registration of any of each such Selling Stockholder's shares of
Class A Common Stock or the Class A
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Common Stock issued by the Corporation, not to sell or otherwise
dispose of any shares of Stock (other than Class A Common Stock
covered by such registration, which may be sold in accordance with
the plan or plans of distribution described in the registration
statement) owned by each such Selling Stockholder for a period of 90
days following the effective date of such registration statement, or
for such longer period (not to exceed 180 days) as may be required
under the plan or plans of distribution set forth in such
registration statement.
(g) RIGHTS TRANSFERABLE. The foregoing registration rights and
benefits set forth in this Section 7, including indemnification by
the Corporation, shall be transferable by each holder of the Series
E Preferred Stock in connection with the transfer by any such holder
of Series E Preferred Stock convertible into not less than 10,000
shares (subject to adjustment to give effect to any stock dividends,
splits or combinations, recapitalization or other similar corporate
events) of Class A Common Stock, otherwise than pursuant to a
registration statement of the Corporation in connection with a
public offering of Class A Common Stock.
(h) TERM OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 7 shall be effective for a period
commencing upon the Initial Issuance Date and ending on (i) as to
any holder of Series E Preferred Stock, upon either (A) such
holder's written consent, (B) the date such holder holds, together
with such holder's Affiliates, less than 10,000 shares (subject to
adjustment as described in paragraph (g) above) of Class A Common
Stock determined on a fully diluted basis, or (c) the date such
holder is able to dispose of all shares of Class A Common Stock that
such holder may acquire upon conversion of the Series E Preferred
Stock within a single three-month period under Rule 144 promulgated
under the Securities Act; and (ii) as to all holders of the Series E
Preferred Stock, on December 31, 2006. For purposes of the
foregoing, an "Affiliate" of a person shall mean (a) any member of
the immediate family of such person, including parents, siblings,
spouse and lineal descendants (including those by adoption); the
parents, siblings, spouse, or lineal descendants (including those by
adoption) of such immediate family member; and in any such case any
trust whose primary beneficiary is such person or one or more
members of such immediate family and/or such person's lineal
descendants; (b) the legal representative or guardian of such person
or of any such immediate family members in the event such person or
any such immediate family members becomes mentally incompetent; and
(c) any person, corporation or other entity controlling, controlled
by or under common control with such person. As used in this
definition, the term "control", including the correlative terms
"controlling", "controlled by" and "under common control with" shall
mean possession, directly or indirectly, of the power to direct or
cause the direction of management or policies (whether through
ownership of securities or any partnership or other ownership
interest, by contract or otherwise) of a person, corporation or
other entity.
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36. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, the
shares of Series E Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special
rights other than those specifically set forth herein.
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate to be signed by Melvin C. Payne, its President, as of the 30th day
of October, 1996.
CARRIAGE SERVICES, INC.
By:__________________________________
MELVIN C. PAYNE, President
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CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES F PREFERRED STOCK
OF
CARRIAGE SERVICES, INC.
PURSUANT to Section 151(g) of the General Corporation Law of
Delaware, CARRIAGE SERVICES, INC., a corporation organized and existing under
the General Corporation Law of Delaware (herein referred to as the
"Corporation"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Certificate of Incorporation, and pursuant to the
provisions of Section 151(g) of the General Corporation Law of Delaware, such
Board of Directors by written unanimous consent dated October 30, 1996, duly
adopted a resolution providing for the issuance of a series of Twenty Million
(20,000,000) shares of the Corporation's Preferred Stock, $.01 par value per
share, to be designated "Series F Preferred Stock", and fixing the voting
powers, preferences and relative, participating, optional or other rights, and
the qualifications, limitations or restrictions thereof, which resolution is as
follows:
RESOLVED, that pursuant to the authority expressly granted and
vested in the Board of Directors of the Corporation in accordance with the
provisions of its Certificate of Incorporation, there shall be established
and authorized for issuance a series of the Corporation's Preferred Stock,
$.01 par value per share, designated "Series F Preferred Stock" (herein
referred to as "Series F Preferred Stock"), consisting of Twenty Million
(20,000,000) shares, each of the par value of $.01 per share, and having
the voting
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powers, preferences and relative, participating, optional and other
rights, and the qualifications, limitations or restrictions set forth
below:
37. DEFINITIONS. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
(a) "Base Conversion Price" shall mean:
(i) in the case of Designated Preferred Stock, the
following:
(A) $15.00, if the Conversion Date occurs on or
before March 31, 1997;
(B) $16.00, if the Conversion Date occurs between
April 1, 1997 and December 31, 1997, inclusive;
(C) $17.00, if the Conversion Date occurs between
January 1, 1998 and December 31, 1998, inclusive;
(D) $18.00, if the Conversion Date occurs between
January 1, 1999 and December 31, 1999, inclusive;
(E) $19.00, if the Conversion Date occurs between
January 1, 2000 and December 31, 2000, inclusive; and
(F) $20.00, if the Conversion Date occurs between
January 1, 2001 and December 31, 2001, inclusive;
(ii) in the case of all Series F Preferred Stock which is
not Designated Preferred Stock, the following:
(A) $16.00, if the Conversion Date occurs between
on or before December 31, 1997;
(B) $17.00, if the Conversion Date occurs between
January 1, 1998 and December 31, 1998, inclusive;
(C) $18.00, if the Conversion Date occurs between
January 1, 1999 and December 31, 1999, inclusive;
(D) $19.00, if the Conversion Date occurs between
January 1, 2000 and December 31, 2000, inclusive; and
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(E) $20.00, if the Conversion Date occurs between
January 1, 2001 and December 31, 2001, inclusive.
The foregoing shall be subject to adjustment in the
manner provided in Section 5 hereof.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Class A Common Stock" means the Corporation's Class A
Common Stock, par value $.01 per share.
(d) "Class B Common Stock" means the Corporation's Class B
Common Stock, par value $.01 per share.
(e) "Common Stock" means, collectively, shares of Class A
Common Stock and Class B Common Stock.
(f) "Conversion Date" has the meaning specified in Section
5(c).
(g) "Conversion Price" means:
(i) if the Conversion Date occurs on or before December
31, 2001, the Base Conversion Price; and
(ii) if the Conversion Date occurs on or after January
1, 2002, the Market Price.
(h) "Designated Preferred Stock" means those shares, if any,
of the outstanding Series F Preferred Stock which are specially
designated by the Board of Directors to constitute "Designated
Preferred Stock" for purposes of the determination of the Base
Conversion Price applicable thereto as determined in accordance with
paragraph (a) above. Any shares to be so designated as Designated
Preferred Stock shall be specially designated as such by resolution
of the Board of Directors and set forth in the minutes of the Board
of Directors at which such shares are authorized to be issued, and
shall be conclusively evidenced (absent manifest error) by a
notation to such effect on the face of each certificate representing
such shares. Designated Preferred Stock shall in all respects have
the same voting powers, preferences and relative, participating,
optional or other rights, qualifications, limitations or
restrictions as other Series F Preferred Stock, except as to the
determination of the Base Conversion Price.
(i) "Dividend Rate" shall mean an annual rate determined as
follows:
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(i) $.0400 for all periods while the Series F Preferred
Stock is outstanding on or before December 31, 1997;
(ii) $.0420 for the period between January 1, 1998 and
December 31, 1998, inclusive;
(iii) $.0441 for the period between January 1, 1999 and
December 31, 1999, inclusive;
(iv) $.0463 for the period between January 1, 2000 and
December 31, 2000, inclusive; and
(v) $.0486 for all periods on and after January 1, 2001
for so long as the Series F Preferred Stock is outstanding.
(j) "Junior Stock" means shares of Common Stock, shares of the
Corporation's Series D Preferred Stock, $.01 par value, and shares
of any other class or series of the Corporation's capital stock
which by its terms is junior or subordinate to the Series F
Preferred Stock in any distribution of the Corporation's assets in
connection with the liquidation, dissolution or winding up of the
affairs of the Corporation.
(k) "Market Price" means the average Trading Price of a share
of Class A Common Stock for the ten trading days of the Class A
Common Stock preceding the Conversion Date. If during such ten-day
period the Class A Common Stock is not traded on a national
securities exchange or over-the-counter and reported on NASDAQ, then
Market Value shall be the fair market value of a share of Class A
Common Stock as reasonably determined in good faith by the Board of
Directors.
(l) The term "outstanding", when used with reference to shares
of capital stock, shall mean issued shares, excluding shares held by
the Corporation or a subsidiary of the Corporation.
(m) "Parity Stock" means the Corporation's Series E Preferred
Stock, $.01 par value, and any other class or series of the
Corporation's stock (other than Common Stock) which by its terms is
neither subordinate nor superior to or in preference of the Series F
Preferred Stock in any distribution of the Corporation's assets in
connection with the liquidation, dissolution or winding up of the
affairs of the Corporation.
(n) "Preferred Stock" means shares of any series of the
Corporation's Preferred Stock, $.01 par value per share.
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(o) "Restricted Payment" means the declaration or making by
the Corporation 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 Series F Preferred
Stock, other than dividends payable in shares of Common Stock.
(p) "Senior Credit Documents" means the Credit Agreement dated
effective August 13, 1996 among the Company, NationsBank of Texas,
N.A., as administrative agent, Provident Services, Inc., as
documentation agent, and the "Lenders" named therein, together with
(i) all amendments, restatements, modifications and supplements
thereto, and (ii) all replacements therefor, including (without
limitation) any refinancings of the indebtedness under such Credit
Agreement.
(q) "Series F Preferred Stock" means the series of Preferred
Stock designated by the Corporation as its Series F Preferred Stock,
$.01 par value per share.
(r) "Trading Price" means, on any trading day for the Class A
Common Stock, (i) if the Class A Common Stock is traded on a
national securities exchange on such trading day, then the closing
price on such trading day as reflected in the consolidated trading
tables of the WALL STREET JOURNAL or any other appropriate
publication, (ii) if the Class A Common Stock is traded
over-the-counter and reported on the NASDAQ National Market System,
then the average of the high and low sales prices on such trading
day as reported in such publication or, if not so published, then as
reported by the NASDAQ National Market System, or (iii) if the Class
A Common Stock is not traded on a national securities exchange or in
the NASDAQ National Market System on such trading day, then the
representative bid and asked prices at the end of such trading day
in such market as reported by NASDAQ.
(s) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
38. DIVIDENDS.
(a) SERIES F PREFERRED STOCK. The holders of Series F
Preferred Stock, in preference to the holders of Junior Stock, shall
be entitled to receive in respect of each such share of Series F
Preferred Stock, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends in cash
at an annual rate equal to the Dividend Rate, payable
quarter-annually on or before the last calendar day of each March,
June, September and December in
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each year in which the Series F Preferred Stock is outstanding. Such
dividends shall commence to accrue on the shares of Series F
Preferred Stock and be cumulative from and after the date of
issuance of such shares of Series F Preferred Stock and shall be
deemed to accumulate and accrue from day to day thereafter whether
or not declared or if the Corporation has earnings. Notwithstanding
that the Corporation may not have sufficient surplus or income in
order to pay any such dividends on the Series F Preferred Stock,
such dividends shall continue to accrue and to accumulate until paid
in full. So long as any shares of Series F Preferred Stock remain
outstanding, if the Corporation shall not pay any dividends on the
Series F Preferred Stock on the date due, then no dividends or
distributions shall be paid upon, or declared or set apart for, any
Junior Stock or Parity Stock, nor shall any Junior Stock or Parity
Stock be purchased, redeemed, retired or otherwise acquired by the
Corporation or any of its consolidated subsidiaries, unless and
until in either case all past due, cumulative dividends on the then
outstanding shares of Series F Preferred Stock for all past dividend
periods shall have been or concurrently shall be paid; provided,
however, that the foregoing shall not prevent or impair (i) the
payment or declaration of dividends or distributions on Junior Stock
to the extent payable solely in shares of Junior Stock, and the
payment or declaration of dividends or distributions on Parity Stock
to the extent payable solely in shares of Junior Stock; (ii) the
Corporation's purchase, redemption or acquisition of Parity Stock
outstanding on the date of first issuance of the Series F Preferred
Stock, but only to the extent in accordance with regularly scheduled
dates set for any such purchase, redemption or acquisition in
accordance with the terms applicable to such Parity Stock; or (iii)
redemptions of shares of Series D Preferred Stock outstanding on the
date of first issuance of the Series F Preferred Stock, but only to
the extent that (x) the Corporation's obligation to redeem such
shares or pay regularly scheduled dividends thereon is secured by a
standby letter of credit, and (y) such redemption is deemed to occur
in connection with a draw upon such letter of credit by or on behalf
of the holder(s) of such shares.
(b) OTHER STOCK. Subject to paragraph (a) above, (i) dividends
may be declared and paid on Junior Stock and Parity Stock, and (ii)
Junior Stock and Parity Stock may be purchased, retired or otherwise
acquired, when and as determined by the Board of Directors, out of
any funds legally available for such purposes.
(c) RESTRICTED PAYMENTS. Notwithstanding the foregoing
provisions of this Section 2 and the provisions of Section 3 below,
the Corporation shall not declare or pay, and no holder of the
Series F Preferred Stock shall be entitled to receive or retain, any
Restricted Payment in respect of shares of Series F Preferred Stock
if, at the time of such Restricted Payment, such holder has received
written notice from any lender under the Senior Credit Documents, or
from the Corporation, that an event of default (within the meaning
of the Senior Credit
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Documents) has occurred and is then continuing and that Restricted
Payments should be blocked. Such blockage period shall continue (i)
indefinitely after receipt of any such notice, if the event of
default specified therein results from any default in the payment by
the Corporation of any obligations under any Senior Credit Document,
whether by maturity, acceleration, or otherwise, for so long as such
event of default shall continue, or (ii) in the case of any other
event of default, for a period of 180 days after such holder's
receipt of any such notice. This paragraph does not have the intent
or effect of impairing, as between the Corporation and the holders
of the Series F Preferred Stock, the obligation of the Corporation,
which is unconditional and absolute (subject to the other provisions
hereof), to declare and pay dividends and to redeem shares of Series
F Preferred Stock, at such times and in the manner herein specified.
The Corporation agrees that other Parity Stock issued by it shall,
so long as the foregoing provisions of this paragraph (c) apply to
the Series F Preferred Stock, contain restrictions on such Parity
Stock equivalent to the foregoing provisions of this paragraph (c).
39. REDEMPTION.
(a) MANDATORY REDEMPTION. On December 31, 2007, the
Corporation shall redeem all of the shares of Series F Preferred
Stock then outstanding (subject, however, to the right of the
holders of the Series F Preferred Stock to convert their shares
pursuant to Section 5 by providing the written conversion notice
referred to in Section 5(c) below on or before November 30, 2007),
at a redemption price of $1.00 per share, together with all accrued
and unpaid dividends through the effective date of redemption.
(b) NO OPTIONAL REDEMPTION. The Corporation shall not have the
right to redeem the Series F Preferred Stock except in accordance
with paragraph (a) above.
(c) GENERAL. From and after the effective date of redemption
and the setting aside of the funds necessary for redemption,
notwithstanding that any certificate for shares of Series F
Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the shares to be redeemed shall no
longer be deemed outstanding, and the holders of certificates
representing such shares shall have with respect to such shares no
rights in or with respect to the Corporation except the right to
receive, upon the surrender of such certificates, the redemption
price therefor. Shares of Series F Preferred Stock redeemed by the
Corporation pursuant to this Section 3, or shares of Series F
Preferred Stock otherwise purchased by the Corporation, shall not be
reissued and shall be cancelled and retired in the manner provided
by the laws of the State of Delaware, and no other shares of Series
F Preferred Stock shall be issued in lieu thereof.
40. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
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(a) DEFINITION. A consolidation or merger of the Corporation,
a sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within
the meaning of this Section 4.
(b) SERIES F PREFERRED STOCK. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series F
Preferred Stock shall be entitled to receive, before any
distribution of the assets of the Corporation shall be made in
respect of any outstanding Junior Stock, and PARI PASSU with any
distribution of assets to the holders of outstanding Parity Stock,
an amount in cash for each share of Series F Preferred Stock equal
to $1.00 together with all accrued and unpaid dividends through the
effective date of such liquidation, dissolution or winding up, or
funds necessary for such payment shall have been set aside in trust
for the account of the holders of the outstanding Series F Preferred
Stock so as to be and continue available therefor. If upon such
liquidation, dissolution or winding up, the assets distributable to
the holders of the Series F Preferred Stock as aforesaid shall be
insufficient to permit the payment to them (together with any
distributions to the holders of Parity Stock) of $1.00 per share
(plus such accrued and unpaid dividends), the assets of the
Corporation shall be distributed to the holders of the Series F
Preferred Stock and the Parity Stock ratably until they shall have
received the full amount to which they would otherwise be entitled.
If the assets of the Corporation are sufficient to permit the
payment of such amounts to the holders of the Series F Preferred
Stock and the Parity Stock, the remainder of the assets of the
Corporation, if any, after the distributions as aforesaid shall be
distributed and divided ratably among the holders of the Junior
Stock then outstanding according to their respective shares.
41. CONVERSION. The Series F Preferred Stock shall be convertible into
Class A Common Stock in accordance with the following provisions of
this Section 5.
(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 5, each holder of shares of Series F
Preferred Stock shall have the right at such holder's option, at any
time or from time to time from, to convert all or any part of his or
her shares of Series F Preferred Stock into fully paid and
nonassessable shares of Class A Common Stock, at the Conversion
Price in effect on the Conversion Date, upon the terms hereinafter
set forth.
(b) CONVERSION PRICE. The shares of Series F Preferred Stock
shall be convertible into the number of shares of Class A Common
Stock as is determined by multiplying the number of shares of Series
F Preferred Stock to be converted by a fraction, the numerator of
which is $1.00 and the denominator of which is the Conversion Price
in effect on the Conversion Date.
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(c) MECHANICS OF CONVERSION. The holder of any shares of
Series F Preferred Stock may exercise the optional conversion right
specified in paragraph (a) above by surrendering to the Corporation
or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written
notice stating that the holder elects to convert all or a specified
portion of the shares represented thereby. Optional conversion under
paragraph (a) shall be deemed to have been effected on the date when
notice of an election to convert and certificates for the shares to
be converted has been delivered; any such date is referred to herein
as the "Conversion Date". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order of
such holders a certificate or certificates for the number of full
shares of Class A Common Stock to which such holders are entitled
rounded down to the next whole share as provided in paragraph (d)
below. The person in whose name the certificate or certificates of
Class A Common Stock are to be issued shall be deemed to have become
a holder of record of such Class A Common Stock on the Conversion
Date.
(d) FRACTIONAL SHARES. No fractional shares of Class A Common
Stock or scrip shall be issued upon conversion of shares of Series F
Preferred Stock. Instead of any fractional shares of Class A Common
Stock which would otherwise be issuable upon conversion of any
shares of Series F Preferred Stock, the number of full shares of
Class A Common Stock issuable upon conversion thereof shall be
reduced to the next lowest number of whole shares, and the
Corporation will pay a cash adjustment in respect of any surrendered
shares of Series F Preferred Stock not converted into Class A Common
Stock in an amount equal to the number of shares of Series F
Preferred Stock not so converted multiplied by a fraction, the
numerator of which is the Market Price on the Conversion Date and
the denominator of which is the Conversion Price on the Conversion
Date.
(e) CONVERSION PRICE ADJUSTMENTS. The Base Conversion Price
shall be subject to adjustment from time to time as follows:
(i) CERTAIN ISSUANCES OF EQUITY STOCK. If, at any time
following issuance of any Series F Preferred Stock while the
Conversion Price is based upon the Base Conversion Price, the
Corporation issues any Class A Common Stock, or any security
or evidence of indebtedness which is convertible or
exercisable into or exchangeable for Class A Common Stock
(including, without limitation, any Class B Common Stock or
any Preferred Stock), or any warrant, option or other right to
subscribe for or purchase Class A Common Stock or any security
or evidence of indebtedness which is convertible or
exchangeable for Class A Common Stock (hereinafter, "Equity
Stock"), other than Excluded Stock (as defined in clause (D)
below), for a consideration per share less than the Base
Conversion Price then in effect (as adjusted as provided in
this Section 5),
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then the Base Conversion Price shall immediately be reduced to
a price per share determined by multiplying the Base
Conversion Price then in effect by a fraction, the numerator
of which is an amount equal to the sum of (x) the number of
shares of Equity Stock of the Corporation outstanding
immediately prior to such issue or sale multiplied by the Base
Conversion Price in effect immediately prior to such issuance
or sale plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, and the denominator of
which is the total number of shares of Equity Stock of the
Corporation outstanding immediately after such issue or sale
multiplied by the Base Conversion Price. The number of shares
of Equity Stock outstanding at any given time for the purposes
of the foregoing computation means the shares of Class A
Common Stock outstanding together with all shares of Class A
Common Stock issuable upon conversion or exercise of any such
Equity Stock, excluding any shares of Equity Stock previously
outstanding that have been reacquired by the Corporation and
constitute treasury shares.
For purposes of any adjustment of the Base Conversion
Price pursuant to this subparagraph (i) of this Section 5(e),
the following provisions shall be applicable:
(A) CASH. In the case of the issuance of Equity
Stock for cash, the amount of the consideration received
by the Corporation shall be deemed to be the amount of
the cash proceeds received by the Corporation for such
Equity Stock before deducting therefrom any discounts,
commissions, taxes, legal and accounting fees or other
expenses allowed, paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of
the issuance of Equity Stock (other than as described in
clause (C) below) for a consideration in whole or in
part other than cash, including securities acquired in
exchange therefor (other than securities by their terms
so exchangeable), the consideration other than cash
shall be deemed to be the fair market value thereof as
reasonably determined by the Board of Directors in good
faith.
(C) OPTIONS AND CONVERTIBLE SECURITIES, ETC. In
the case of the issuance of (i) options, warrants or
other rights to purchase or acquire Class A Common Stock
or other Equity Stock (whether or not at the time
exercisable), (ii) securities which by their terms are
convertible or exercisable into or exchangeable for
Class A Common Stock or other Equity Stock (whether or
not at the time so convertible, exercisable or
exchangeable) or (iii) options,
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warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(1) the aggregate maximum number of shares
of Class A Common Stock deliverable upon exercise
of such options, warrants or other rights to
purchase or acquire Class A Common Stock shall be
deemed to have been issued at the time such
options, warrants or rights were issued and for a
consideration equal to the aggregate consideration
(determined in the manner provided in clauses (A)
and (B) above), if any, received by the
Corporation upon the issuance of such options,
warrants or rights plus the aggregate minimum
purchase price provided in such options, warrants
or rights for the Class A Common Stock covered
thereby;
(2) the aggregate maximum number of shares
of Class A Common Stock deliverable upon
conversion of or in exchange for any such
convertible or exchangeable securities, or upon
the exercise of options, warrants or other rights
to purchase or acquire such convertible or
exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were
issued or such options, warrants or rights were
issued and for a consideration equal to the
consideration, if any, received by the Corporation
for any such securities and related options,
warrants or rights (excluding any cash received on
account of accrued interest or accrued dividends),
plus the additional consideration, if any, to be
received by the Corporation upon the conversion or
exchange of such securities and the exercise of
any related options, warrants or rights (the
consideration in each case to be determined in the
manner provided in clauses (A) and (B) above);
(3) on any change in the number of shares of
Class A Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion
of or exchange for such convertible or
exchangeable securities or any change in the
consideration to be received by the Corporation
upon such exercise, conversion or exchange,
including, but not limited to, a change resulting
from the anti-dilution provisions thereof, the
Base Conversion Price as then in effect shall
forthwith be readjusted to such Base Conversion
Price as would have been obtained had an
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adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or securities not converted or
exchanged prior to such change, on the basis of
the terms of such options, warrants, rights or
convertible or exchangeable securities as so
changed;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the
termination of the right to convert or exchange
such convertible or exchangeable securities, if
the Base Conversion Price shall have been adjusted
upon the issuance thereof, the Base Conversion
Price shall forthwith be readjusted to such Base
Conversion Price as would have been obtained had
an adjustment been made upon the issuance of such
options, warrants, rights or securities on the
basis of the issuance of only the number of shares
of Class A Common Stock actually issued upon the
exercise of such options, warrants or rights, or
upon the conversion or exchange of such
securities; and
(5) regardless of whether the Base
Conversion Price shall have been adjusted upon the
issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further
adjustment of the Base Conversion Price shall be
made for the actual issuance of Class A Common
Stock upon the exercise, conversion or exchange
thereof;
provided, however, that no adjustment pursuant to
clause (C) shall have the effect of increasing the
Base Conversion Price above the initial Base
Conversion Price.
(D) EXCLUDED STOCK. For purposes hereof, "Excluded
Stock" means shares of Common Stock issued or reserved
for issuance by the Corporation (i) upon conversion,
exercise or exchange of any Equity Stock that is
outstanding as of September 30, 1996; (ii) pursuant to a
stock dividend, subdivision or split-up covered by
subparagraph (ii) or (iii) of this Section 5(e); and
(iii) upon exercise of options issued to employees or
directors of the Corporation or its subsidiaries,
provided that (x) the exercise price thereof is not less
than the fair market value per share of the Class A
Common Stock determined in good faith by the Board of
Directors at the time such options are granted, and (y)
options covering no more than five percent (5%) of the
fully diluted Class A Common Stock
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may be issued under this clause (iii) without causing an
adjustment in the Base Conversion Price herein
described.
(ii) STOCK DIVIDENDS. If the number of shares of Class
A Common Stock outstanding at any time after the issuance of
any Series F Preferred Stock is increased by a stock dividend
payable in shares of Class A Common Stock or by a subdivision
or split-up of shares of Class A Common Stock, and if the
Conversion Price then in effect is based upon the Base
Conversion Price, then immediately after the record date fixed
for the determination of holders of Class A Common Stock
entitled to receive such stock dividend or the effective date
of such subdivision or split-up, as the case may be, the Base
Conversion Price shall be appropriately decreased so that the
holders of any shares of Series F Preferred Stock shall be
entitled to receive the number of shares of Class A Common
Stock of the Corporation which they would have owned
immediately following such action had such shares of Series F
Preferred Stock been converted immediately prior thereto.
(iii) COMBINATION OF STOCK. If the number of shares of
Class A Common Stock outstanding at any time after issuance of
any class of Series F Preferred Stock is decreased by a
combination of the outstanding shares of Class A Common Stock,
and if the Conversion Price then in effect is based upon the
Base Conversion Price then, immediately after the effective
date of such combination, the Base Conversion Price shall be
appropriately increased so that the holders of any shares of
Series F Preferred Stock shall be entitled to receive the
number of shares of Class A Common Stock of the Corporation
which they would have owned immediately following such action
had such shares of Series F Preferred Stock been converted
immediately prior thereto.
(iv) REORGANIZATIONS. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Class A Common Stock, or in case of the consolidation
of the Corporation with or the merger of the Corporation with
or into any other corporation, partnership or other business
entity in which the Corporation is not the survivor, or of the
sale, lease or other transfer of all or substantially all of
the assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series F
Preferred Stock shall, after such capital reorganization,
reclassification, consolidation, merger, sale or lease, be
convertible into the number of shares of stock or other
securities or property to which the Class A Common Stock
issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale or lease) upon
conversion of such share of Series F Preferred Stock would
have been entitled upon such capital reorganization,
reclassification, consolidation,
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merger, sale or lease in place of (or in addition to, in the
case of any such event after which Class A Common Stock
remains outstanding) the shares of Class A Common Stock into
which such share of Series F Preferred Stock would otherwise
have been convertible; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Series F
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any share of
stock or other securities or property thereafter deliverable
on the conversion of the shares of Series F Preferred Stock,
and such shares so deliverable shall be entitled, as nearly as
practicable, to the same rights, preferences and privileges
and the benefits of the same restrictions as those which the
shares of Series F Preferred Stock were so entitled
immediately prior thereto. The subdivision or combination of
shares of Class A Common Stock issuable upon conversion of
shares of Series F Preferred Stock at any time outstanding
into a greater or lesser number of shares of Class A Common
Stock (whether with or without par value) shall not be deemed
to be a reclassification of the Class A Common Stock of the
Corporation for the purposes of this subparagraph (iv).
(v) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this paragraph (e) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph (e)
to the contrary notwithstanding, no adjustment in the Base
Conversion Price shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or
more.
(vi) TIMING OF ISSUANCE OF ADDITIONAL CLASS A COMMON
STOCK UPON CERTAIN ADJUSTMENTS. In any case in which the
provisions of this paragraph (e) requires that an adjustment
shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such
event issuing to the holder of any shares of Series F
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class A
Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event
over and above the shares of Class A Common Stock or other
property issuable or deliverable upon such conversion before
giving effect to such adjustment; PROVIDED, HOWEVER that the
Corporation upon request shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's
right to receive such additional shares
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or other property, and such cash, upon the occurrence of the
event requiring such adjustment.
(f) CERTAIN ADJUSTMENTS. In case of any adjustment in
the Conversion Base Price pursuant to this Section 5(e) at a
time when the amount of the Conversion Base Price is due to
increase at one or more future dates in accordance with the
schedule contained within the definition of such term, then in
addition to the adjustment of the Base Conversion Price then
in effect, each subsequent increase therein contained within
such definition shall be appropriately adjusted to give effect
to provisions of this Section 5(e). In case, at a time when
the Conversion Price is based upon the Market Price, the
record date for any action of the type described subparagraph
(ii), (iii) or (iv) above occurs prior to a Conversion Date
but after one or more of the trading days for which the
Trading Price therefor is determined, then the Trading Price
for each trading day occurring prior to such record date shall
be appropriately adjusted in order to give effect to such
action, in the manner provided in said subparagraph (ii),
(iii) or (iv), as the case may be.
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Base
Conversion Price shall be adjusted as provided in paragraph (e), the
Corporation shall forthwith file, at the office of any transfer
agent for the Series F Preferred Stock and at the principal office
of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Base Conversion Price that shall
be in effect after such adjustment, and the Corporation shall also
cause a copy of such statement to be sent by mail, first class
postage prepaid, to each holder of the Series F Preferred Stock at
his or her address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's chief financial
officer. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the
provisions of subparagraph (h) below.
(h) NOTICE TO HOLDERS. In the event the Corporation proposes
to take any action of the type described in subparagraph (i), (ii),
(iii) or (iv) of paragraph (e) above, the Corporation shall give
notice to each holder of the Series F Preferred Stock in the manner
set forth in subparagraph (f) above, which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Base Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of the Series F Preferred
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Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to
the date so fixed, and in case of all other action, such notice
shall be given at least 15 days prior to the taking of such proposed
action.
(i) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance
or delivery of shares of Class A Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series
F Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not
be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder
of the shares of Series F Preferred Stock in respect of which such
shares are being issued.
(j) RESERVATION OF SHARES. The Corporation shall reserve at
all times so long as any shares of Series F Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock
or its authorized but unissued shares of Class A Common Stock, or
both, solely for the purpose of effecting the conversion of shares
of Series F Preferred Stock, sufficient shares of Class A Common
Stock to provide for the conversion of all outstanding shares of
Series F Preferred Stock and set aside and keep available any other
property deliverable upon conversion of all outstanding shares of
Series F Preferred Stock.
(k) APPROVALS. If any shares of Class A Common Stock or other
securities to be reserved for the purpose of conversion of shares of
Series F Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before
such shares or other securities may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as
expeditiously as possible use its commercially reasonable efforts to
secure such registration or approval, as the case may be. The
foregoing shall not be interpreted to require the Corporation to
cause the registration of such shares under the Securities Act of
1933, as amended, or the securities or blue laws of any state.
(l) VALID ISSUANCE. All shares of Class A Common Stock or
other securities which may be issued upon conversion of the shares
of Series F Preferred Stock will upon issuance by the Corporation be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary
result.
42. VOTING RIGHTS.
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(a) GENERAL. At any annual or special meeting of stockholders
or otherwise in respect of any matter submitted for the vote of
stockholders generally, the holders of the Series F Preferred Stock
shall be entitled to such number of votes (or fractions thereof) as
shall be determined by multiplying (1) vote for each share of Series
F Preferred Stock so held by a fraction, the numerator of which is
$1.00 and the denominator of which is the Conversion Price in effect
on the record date for determining stockholders entitled to vote on
such matter.
(b) BOARD REPRESENTATION. For so long as the Minimum
Investment (as hereafter delivered) shall be maintained, the holders
of the Series F Preferred Stock, in addition to any other voting
rights herein specified, shall be entitled to vote (voting together
as if a class, by a majority of the outstanding shares thereof) for
the election to the Board of Directors of one (1) member thereof.
Provided, however, that the person so elected by the holders of the
Series F Preferred Stock may be only Mark Wilson (and no other
person) for so long as Mark Wilson is alive or is not prevented for
an indefinite period of time by a physical or mental impairment from
performing the essential functions attendant to a position on the
Board of Directors, and in case of the death or such a disability of
Mark Wilson, then the holders of the Series F Preferred Stock shall
be entitled, for so long as the Minimum Investment is maintained and
subject to the provisions hereof, to elect such other person, who
shall have more than a nominal amount of experience and knowledge
concerning the conduct of publicly held corporations, to such
position on the Board of Directors. The director so elected by the
holders of Series F Preferred Stock shall be a Class III Director,
within the meaning of the Corporation's Certificate of
Incorporation, so long as such classification is used and applicable
to the Board of Directors. For so long as the Minimum Investment is
maintained, the director elected by the holders of the Series F
Preferred Stock may be removed only (i) for cause by the affirmative
vote of the holders of not less than 80% of the votes of the
outstanding shares of the class or classes of stock then entitled to
be voted for the election of directors, in accordance with the terms
and procedures provided in the Corporation's Certificate of
Incorporation, provided that the holders of a majority of the
outstanding Series F Preferred Stock shall be entitled to vote for a
replacement director (who shall have the minimum experience and
knowledge referred to above) to fill the vacancy created by such
removal, or (ii) by the affirmative vote of the holders of a
majority of the outstanding Series F Preferred Stock (subject to the
above provisions regarding Mark Wilson). At such time as the Minimum
Investment has no longer been maintained, the special voting rights
under this paragraph (b) shall terminate, but the person elected to
the Board of Directors by the holders of the Series F Preferred
Stock shall not thereby automatically be removed from office, but
rather shall continue to hold office in accordance with the
Corporation's Certificate of Incorporation and Bylaws. For purposes
hereof, the term "Minimum Investment" means the holding by those
persons who have acquired Series F Preferred Stock upon the original
issuance thereof, together with their affiliates, of at least
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$7,000,000 in shares of Series F Preferred Stock, shares of Class A
Common Stock, or any combination thereof, each share of Series F
Preferred Stock being deemed to have a value of $1.00 per share and
each share of Class A Common Stock being deemed to have a value of
$15.00 per share, for such purposes. An "affiliate" of a person
means one who controls, is controlled by or is under common control
with that person.
(c) SPECIAL VOTING REQUIREMENTS. Without limiting the
generality of paragraph (a) above, the Corporation shall not,
without the consent of the holders of at least a majority of the
outstanding shares of Series F Preferred Stock, voting together as a
single class, either (i) amend, alter or repeal any provision of the
Corporation's Certificate of Incorporation or Bylaws or this
Certificate of Designation, in any event so as to adversely affect
the rights, powers, preferences or privileges or restrictions
provided for the benefit of any of the Series F Preferred Stock as
provided herein, or (ii) issue any Preferred Stock or other class or
series of the Corporation's capital stock that is senior or
preferential to the Series F Preferred Stock in any distribution of
the Corporation's assets in connection with the liquidation,
dissolution or winding up of the affairs of the Corporation, or
issue any bonds, debentures or other obligations convertible or
exchangeable for, or having the right to purchase, such senior or
preferential stock, or reclassify any Junior Stock into stock having
such senior or preferential rights.
43. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, the
shares of Series F Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special
rights other than those specifically set forth herein.
IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate to be signed by Melvin C. Payne, its President, as of the 30th day
of October, 1996.
CARRIAGE SERVICES, INC.
By:__________________________________
MELVIN C. PAYNE, President
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AMENDED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
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:
FIRST: That 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
(the "Series F Designation"), and no shares of Series F Preferred Stock have
been issued;
SECOND: 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 by unanimous
consent dated December 10, 1996 duly adopted a resolution providing for an
amendment to the Certificate of Designation, Preferences, Rights and Limitations
of the Corporation's Series F Preferred Stock, 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
<PAGE>
Certificate of Designation, Preferences, Rights and Limitations filed with
the Secretary of State of Delaware on November 6, 1996 (the "Series F
Designation"); and
WHEREAS, no shares of Series F Preferred Stock have been issued, and
the Board of Directors deems it in the Corporation's best interests that
the Series F Designation be amended in certain respects;
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,
there is hereby added to Section 2 of the Series F Designation a new
paragraph (d), which paragraph (d) of said Section 2 shall read as
follows:
"(d) DIVIDENDS UPON CONVERSION. In no event shall any
conversion of shares of Series F Preferred Stock have the effect of
extinguishing any accrued and unpaid dividends on such shares
through the Conversion Date referred to in Section 5(c). In case of
any such conversion, accrued and unpaid dividends on the outstanding
Series F Preferred Stock through the Conversion Date shall remain
due and owing, provided that such dividends for the prorated period
in the applicable quarter-annual period shall nonetheless remain
payable on or before the regular date called for the payment of
dividends as specified in paragraph (a) above. No dividends shall
accrue or be payable in respect of any Series F Preferred Stock from
and after the Conversion Date."
THIRD: The designation of the Series F Preferred Stock as such will
not change as a result of the foregoing amendment.
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IN WITNESS WHEREOF, CARRIAGE SERVICES, INC. has caused this
Certificate to be signed by Melvin C. Payne, its President, as of the ____ day
of December, 1996.
CARRIAGE SERVICES, INC.
By:__________________________________
MELVIN C. PAYNE,
Chief Executive Officer
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of October 17, 1996
(this "Agreement"), among CARRIAGE SERVICES, INC., a Delaware corporation (the
"Purchaser"), CARRIAGE FUNERAL SERVICES OF CALIFORNIA, INC., a California
corporation (the "Acquisition Subsidiary"), CNM, a California corporation (the
"Company"), and MARK F. WILSON, a resident of Contra Costa County, California,
WENDY WILSON BOYER, a resident of Contra Costa County, California, WARREN A.
BROWN, IV, a resident of Alameda County, California, William Boyer and Wendy
Wilson Boyer, Trustees of THE BOYER FAMILY TRUST DATED SEPTEMBER 22, 1986, fbo
Wendy Wilson Boyer, Marie Dietz and Mark F. Wilson, Trustees of TRUST B UNDER
AGREEMENT DATED SEPTEMBER 9, 1977 by Francis Wilson, and Marie Dietz and Mark F.
Wilson, Trustees of TRUST C UNDER AGREEMENT DATED SEPTEMBER 9, 1977 by Francis
Wilson (together, the "Shareholders");
W I T N E S S E T H:
WHEREAS, the Company, through its wholly owned subsidi aries,
owns and operates the nine Wilson & Kratzer Funeral Homes located in Alameda and
Contra Costa Counties, California as more particularly described on Schedule I
hereto (collectively, the "Homes"), and the Rolling Hills Memorial Park Cemetery
located in Contra Costa County, California, also more particularly described on
Schedule I (the "Cemetery"), and the Shareholders collectively own all of the
issued and outstanding capital stock of the Company in the respective amounts
shown on Schedule II hereto; and
WHEREAS, the parties desire that the Company merge with and
into the Acquisition Subsidiary in a statutory merger (the "Merger") to be
consummated under the laws of the State of California and upon the terms and
conditions and for the consideration herein set forth;
NOW, THEREFORE, the parties agree as follows:
1. REORGANIZATION AND MERGER.
1.1. THE MERGER. At the Effective Time of the Merger (as
defined in Section 1.2 below), the Company shall be merged with and
into the Acquisition Subsidiary in a statutory merger (the "Merger") to
be consummated pursuant to and on the terms and conditions set forth in
this Agreement and in accordance with the California General
Corporation Law ("CGCL"). The Acquisition Subsidiary shall be the
surviving corporation of the Merger (the "Surviving Corporation"), and
shall continue its corporate existence as a corporation governed by the
laws of the State of California.
1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall
become effective at such time (the "Effective Time of the
Merger") as a copy of this Agreement (or a short-form version
hereof meeting the statutory requirements of the CGCL) and the
requisite officers' certificate pursuant to Section 1103 of
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the CGCL are filed with the Secretary of State of California and become
effective; such filing shall be made, and shall provide that the
instruments filed therewith shall become effective, as soon as
practicable after the Closing referred to in Section 4.1.
1.3. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 1107 of the CGCL.
1.4. SS.368 REORGANIZATION. It is the intention of the parties
that the Merger constitute a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"), in accordance with Section 368(a)(2)(D) of the Code. The
parties agree to file all of their respective tax returns and reports
in a manner consistent with such intention, and to not take any filing
position in a manner inconsistent with such intention unless compelled
to do so by court order or administrative decree. Each party agrees to
furnish such information and take such action as may be reasonably
requested of the other party in connection with the foregoing (which
action shall not include any change in the commercial terms of the
Merger and the other transactions incident thereto). In no event,
however, shall the Purchaser or the Surviving Corporation be required
to incur any out-of-pocket expenses in defending such position or
providing such information or taking such action, but shall cooperate
to the extent reasonably necessary in connection with the defense by
the Shareholders of the intended tax free nature of the reorganization,
nor shall the foregoing constitute a warranty or guaranty that the
Merger will in fact constitute such a reorganization.
2. ARTICLES OF INCORPORATION, BYLAWS, OFFICERS AND DIRECTORS.
2.1. ARTICLES OF INCORPORATION. From and after the Effective
Time of the Merger, the Articles of Incorporation of the Acquisition
Subsidiary in effect immediately prior to the Effective Time of the
Merger shall be the Articles of Incorporation of the Surviving
Corporation, subject to the right of the Surviving Corporation to amend
its Articles of Incorporation after the Effective Time of the Merger in
accordance with such Articles of Incorporation and the CGCL.
2.2. BYLAWS. From and after the Effective Time of the Merger,
the bylaws of the Acquisition Subsidiary in effect immediately prior to
the Effective Time of the Merger, shall be the bylaws of the Surviving
Corporation, until changed or amended as provided therein.
2.3. DIRECTORS. From and after the Effective Time of the
Merger, the directors of the Surviving Corporation shall be three (3),
who shall be those persons who are directors of the Acquisition
Subsidiary immediately prior thereto and Mark F. Wilson, each of whom
shall hold office subject to the provisions of, and the number of
directors shall be subject to adjustment as provided in, the CGCL and
the Articles of Incorporation and bylaws of the Surviving Corporation.
2.4. OFFICERS. From and after the Effective Time of the
Merger, the officers of the Surviving Corporation shall be those
persons who are officers of the Acquisition Subsidiary immediately
prior thereto, except that at the Effective Time of the Merger Mark F.
Wilson shall become President of the Surviving Corporation. Each of the
foregoing officers shall thereafter hold office subject to the
provisions of the CGCL and the bylaws of the Surviving Corporation.
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3. CONVERSION OF SHARES.
3.1. CONVERSION OF SHARES. The manner of converting shares of
the capital stock of the Company and the Acquisition Subsidiary issued
and outstanding immediately prior to the Effective Time of the Merger
into shares of Common Stock, no par value, of the Surviving
Corporation, or into the right to receive shares of Class A Common
Stock, $.01 par value, of the Purchaser ("Class A Common Stock"),
shares of Series F Preferred Stock, $.01 par value ("Series F Preferred
Stock"), of the Purchaser, cash or Deferred Merger Consideration (as
hereafter defined), as the case may be, shall be as follows:
(a) At the Effective Time of the Merger, each share
of Common Stock, no par value, of the Acquisition Subsidiary
then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the Acquisition Subsidiary
or the holder of such shares, be converted into one share of
Common Stock, no par value, of the Surviving Corporation.
(b) At the Effective Time of the Merger, each share
of capital stock of the Company issued and held in its
treasury, shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be
outstanding and shall be cancelled and retired without the
payment of any consideration in respect thereof.
(c) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time of the
Merger shall, by virtue of the Merger, without any action on
the part of the holders thereof, automatically be converted
into and become, at the Effective Time of the Merger, the
right to receive from the Purchaser, consideration
(collectively, the "Merger Consideration"), determined as
follows:
FIRST, the aggregate Merger Consideration for all shares of
issued and outstanding Company Common Stock shall be
calculated as the sum of the following:
(A) An amount in cash equal to $14,900,000.00
LESS the outstanding balance as of the
Effective Time of the Merger of the Closing
Date Liabilities (as defined in Section
3.7), PLUS $54,189.00 PLUS those Interim
Expenses for the Danville Property that are
approved pursuant to Section 7.3(d) PLUS an
amount accruing at the rate of $109.10 per
diem from September 20, 1996 through the
Closing Date;
(B) 200,000 shares of Class A Common Stock;
(C) 15,000,000 shares of Series F Preferred
Stock;
(D) $5,000,000.00 payable in installments after
the Closing as provided in Section 3.6 below
(the "Deferred Merger Consideration");
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(E) An amount (not to exceed $250,000.00),
payable in cash, equal to the amount of the
aggregate cash balances at the Effective
Time of the Merger of the Company and the
Subsidiaries referred to in Section 5.4
(excluding any cash balances dedicated to
fund preneed, merchandise and perpetual care
trusts and accounts), which amount shall be
set forth in a certificate of the
Shareholders as to such balances; and
(F) The amount of those accounts receivable of
the Subsidiaries outstanding at the
Effective Time of the Merger which arise
from the sale of merchandise and services
for funeral service performed at the Homes
prior to the Closing Date and from the
at-need sale of Cemetery merchandise and
plots at the Cemetery prior to the Closing
Date (collectively "Closing Date
Receivables") specifically excluding preneed
cemetery accounts receivables. An amount
equal to 50% of those Closing Date
Receivables which are less than 90 days past
the invoice date at the Effective Time of
the Merger shall be paid in cash at the
Closing, and the remainder shall be payable
as provided in Section 3.8.
SECOND, the Merger Consideration payable per share of
outstanding Company Common Stock shall be determined by
dividing the aggregate Merger Consideration calculated above
by the number of shares of Company Common Stock which are
issued and outstanding at the Effective Time of the Merger.
Each component of Merger Consideration set forth in clauses
(A) through (F) above shall be allocated equally among all of
the shares of Company Common Stock which are issued and
outstanding at the Effective Time of the Merger, unless the
Purchaser receives, at least thirty (30) days prior to the
date set for the Closing, a written notice (which shall be
irrevocable and binding on each Shareholder) signed by all of
the Shareholders, setting forth a different allocation of such
components of the Merger Consideration specified in clauses
(A), (B), (C) and (D) above. Such notice may provide for a
reallocation of each such component of the Merger
Consideration among the Shareholders without affecting the
total allocation of Merger Consideration to such component, or
may provide for a reallocation of Merger Consideration from
one or more such components to one or more other such
components, all as shall be specified in such notice, which
notice shall be attached to this Agreement and constitute a
part hereof when accepted by the Purchaser; provided, however,
that (i) for purposes of any such reallocation, each share of
Class A Common Stock shall be deemed to have a value of
$15.00, each share of Series F Preferred Stock shall be deemed
to have a value of $1.00, and the Deferred Merger
Consideration shall be based upon the present value thereof on
the Closing Date at a discount rate of seven percent (7%) per
annum; (ii) in no event shall the aggregate Merger
Consideration be affected; (iii) in no event shall the net
amount under clause (A) above, after deducting the amount of
Closing Date Liabilities, be reduced to below zero; and (iv)
the amount under clause (C) above shall in
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no event exceed 20,000,000 shares of Series F Preferred Stock.
The terms and provisions applicable to the Series F Preferred
Stock shall be as described in Section 3.5 below, the terms
and provisions applicable to the Deferred Merger Consideration
shall be as described in Section 3.6 below, and the terms
applicable to the Closing Date Receivables shall be as
described in Section 3.8 below.
(d) At the Effective Time of the Merger, all options,
warrants, calls, or other securities convertible into or
exchangeable with Company Common Stock, and all hereafter
issued Company Common Stock that is not issued and outstanding
on the date of this Agreement, shall, by virtue of the Merger
and without any action on the part of any holder thereof,
cease to be outstanding and shall be cancelled and retired
without the payment of any con sideration in respect thereof.
(e) No fractional shares of Class A Common Stock or
Series F Preferred Stock (collectively, "Purchaser Stock") or
scrip will be issued in respect of fractional interests; in
lieu of any fractional shares of Purchaser Stock which may be
issued in respect of shares of Company Common Stock as
aforesaid, the holders thereof instead shall receive a cash
payment in an amount equal to the product of such fraction
multiplied by $15.00.
3.2. SURRENDER AND PAYMENT. After the Effective Time of the
Merger, each holder of an outstanding certificate which prior to the
Effective Time of the Merger represented shares of Company Common Stock
shall, upon surrender of such certifi cate to the Surviving
Corporation, be entitled to receive the Merger Consideration pursuant
to Section 3.1(c) of this Agreement. Until so surrendered, each
outstanding certificate which prior to the Effective Time of the Merger
represented shares of Company Common Stock shall, upon and after the
Effective Time of the Merger, represent and evidence only the right to
receive payment therefor as provided in Section 3.1(c) of this
Agreement.
3.3. NO FURTHER TRANSFERS. Upon and after the Effective Time
of the Merger, no transfer of shares of Company Common Stock issued and
outstanding immediately prior to the Effec tive Time of the Merger
shall be made on the stock transfer books of the Surviving Corporation.
3.4. CONSENT TO MERGER; WAIVER OF DISSENTERS' RIGHTS. Each
Shareholder, in his or her capacity as a shareholder of the Company,
and the Purchaser, in its capacity as a share holder of the Acquisition
Subsidiary, hereby (i) consent to the Merger pursuant to Chapter 12 of
the CGCL, and (ii) irrevocably and unconditionally waive all
dissenters' and other similar rights with respect to the Merger under
and pursuant to Chapter 13 of the CGCL.
3.5. SERIES F PREFERRED STOCK. The terms and provisions of the
Series F Preferred Stock shall be as provided in the Certificate of
Designation, Preferences, Rights and Limita tions of the Series F
Preferred Stock in the form attached hereto as Exhibit H attached
hereto, with such amendments thereto as shall be agreed upon by the
parties hereto, and which shall be the form on file with the Secretary
of State of Delaware and in effect at the Effective Time of the Merger
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(the "Series F Designation"), subject to amendment as therein provided.
Of the shares of Series F Preferred Stock to be so issued as part of
the Merger Consideration (as the same may be reallocated prior to the
Closing as described in Section 3.1(c)), one-third (1/3) of such shares
(rounded down to the nearest whole share) shall be issued as
"Designated Preferred Stock" (within the meaning of the Series F
Designation) and the remainder of such shares shall constitute Series F
Preferred Stock which is not Designated Preferred Stock.
3.6. DEFERRED MERGER CONSIDERATION. The Deferred Merger
Consideration shall be payable in ten (10) equal annual installments of
$500,000.00 each, payable on or before the first through tenth
anniversaries of the Closing Date. Each installment of Deferred Merger
Consideration shall be payable to each Shareholder on a pro rata basis
in proportion to his or her respective holdings of Company Common Stock
at the Effective Time of the Merger, except as the same may be
reallocated among the Shareholders as provided in Section 3.1(c). No
interest shall accrue or be payable in respect of the Deferred Merger
Consideration. For federal income tax purposes, the parties agree that
the Deferred Merger Consideration shall be deemed to include an imputed
rate of interest of seven percent (7%) per annum.
3.7. CLOSING DATE LIABILITIES. At the Closing, the
Shareholders shall deliver to the Purchaser a statement, certified by
them to be true and complete, of all liabilities and obligations of the
Company and the Subsidiaries of whatever nature and character including
(but not limited to) indebtedness for borrowed money, indebtedness
secured by Liens against any assets or properties of the Company or any
Subsidiary, accounts and trade payable, accrued liabilities, any
liabilities under suits, claims, judgments or orders then pending or
any other liability or obligation of the Company and the Subsidiaries
attributable to the operation of the their businesses prior to Closing
(collectively, "Closing Date Liabilities"), EXCLUDING (i) obligations
under preneed funeral contracts for which the full amount has been
deposited in trust or funded by insurance as required under applicable
law, and under cemetery endowment care, merchandise and service
contracts for which the full amount has been deposited in trust, the
merchandise has been purchased, or as to which there are outstanding
preneed accounts receivable covering such obligations, and obligations
in respect of commissions for preneed services and merchandise based
upon cemetery preneed accounts receivable to the extent not collected
as of the Effective Time of the Merger, (ii) obligations arising after
the Closing under the executory contracts listed on Schedule 5.13 under
the heading "Executory Contracts" and under the Greer Lease, (iii) any
obligations to be paid by the Company or Purchaser with respect to the
Danville Property pursuant to Section 7.3(d) hereof, and (iv)
obligations payable after the Closing under the Stahl Agreement
referred to in Section 5.6(h). Such statement of the Shareholders shall
include a proration, as of the Closing Date, of proratable items, such
as property taxes, rents under leases (including the Greer Lease) and
(to the extent known) utilities, subject to reconciliation as described
in Section 3.9. In the case of indebtedness for borrowed money or
secured by Liens against any assets of the Company or any Subsidiary,
such statement shall be accompanied by statements of the holders of
such indebtedness certifying as to the balance thereof, including per
diem interest. For purposes of
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calculating the amount of Closing Date Liabilities, there shall be
included all amounts necessary to pay and discharge the same in full at
the Effective Time of the Merger, includ ing principal, interest, fees,
prepayment fees or premiums, and other similar amounts, however
characterized. Such statement shall include estimated federal and state
income tax liabilities, which shall be reconciled as described in
Section 3.9. To the extent that Closing Date Liabilities are
outstanding at the Effective Time of the Merger, the amount thereof
shall be deducted from the cash portion of the Merger Consideration as
described in Section 3.1(c)(A). Any Closing Date Liabilities remaining
unpaid after the Closing which are not set forth on such statement of
the Shareholders shall be paid by the Shareholders and shall be subject
to indemnification under Section 10.1.
3.8. CLOSING DATE RECEIVABLES. At the Closing, the
Shareholders shall deliver to the Purchaser a list of the Closing Date
Receivables, certified by them to be true and complete. That portion of
the Merger Consideration payable under Section 3.1(c)(F), which is not
paid at the Closing, shall be payable as hereafter provided in this
Section 3.8. Within 30 days after the last day of each of the third,
eighth and twelfth calendar months following the Closing Date (each
such date being referred to as a "Collection Date"), the Surviving
Corporation shall deliver to the Shareholders a certificate of the
Surviving Corporation, certified by it to be true and complete, as to
the amount of collections received by it on Closing Date Receivables
from the Effective Time of the Merger through such Collection Date
("Post-Closing Collections"). To the extent that the cumulative amount
of Post-Closing Collections through each Collection Date exceed the
amount theretofore paid by the Purchaser as Merger Consideration in
respect of Closing Date Receivables pursuant to Section 3.1(c)(F)
(including amounts payable hereunder in respect of previous Collection
Dates), the Purchaser shall pay the amount of the excess to the
Shareholders in cash upon delivery of each such certificate; provided,
however, that such payment in respect of the Collection Date which is
the last day of the third month after the Closing shall be subject to
reconciliation as provided in Section 3.9. Neither the Surviving
Corporation nor the Purchaser shall have any duty to pursue collection
of Closing Date Receivables by means greater than used on its
collection of other accounts receivable, and in no event shall the
Surviving Corporation or the Purchaser be required to institute suit or
refer any account to a collection agency. If the amount of all
collections on Closing Date Receivables is less than the amount paid
under clause (F) of Section 3.1(c), or if any Closing Date Receivables
remain uncollected on such last Collection Date and are thereafter
collected, in either event there shall be no further adjustments to the
Merger Consideration or payments in respect thereof.
3.9. POST-CLOSING RECONCILIATION. Within 30 days after the
first Collection Date referred to in Section 3.8, the Purchaser shall
deliver to the Shareholders a certificate certified by it to be true
and complete, of the following reconciling items as of the Effective
Time of the Merger:
(i) Any trade or accounts payable of the Company or
any Subsidiary outstanding at the Effective Time of the
Merger, or other Closing Date Liabilities (including federal
income tax liabilities), to the extent not
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deducted from the Merger Consideration pursuant to Section
3.1(c)(A);
(ii) Any proratable items described in Section 3.7,
as adjusted to reflect information regarding such prorations
which became known after the Closing;
(iii) non-trusted cemetery merchandise obligations
for lawn crypts, markers and granite bases, which shall be
reconciled in a manner to be mutually determined among the
parties prior to the Closing Date; and
(iv) the non-preneed and non-trusted cash balances of
the Company and the Subsidiaries that, despite the
Shareholders' best efforts to reduce such balances to below
$250,000 by the Effective Time of the Merger, is in excess of
such amount and therefore has not been added to the Merger
Consideration under Section 3.1(c)(A).
Based upon a reconciliation of the foregoing items, the Merger
Consideration shall be adjusted as hereafter provided. The Shareholders
shall be given credit as of such Collection Date for the first Closing
Date Receivables reconciliation then due under Section 3.8, and for
proratable items to the extent of expenses arising after the Effective
Time of the Merger; and the Purchaser shall be given credit for Closing
Date Liabilities under (i) above and proratable times to the extent of
expenses arising prior to the Effective Time of the Merger. If, based
upon such reconciliation, the Merger Consideration shall be increased,
the Purchaser shall pay to the Shareholders the amount of such increase
in cash within 30 days after such reconciliation, and if the Merger
Consideration shall be decreased, the Shareholders shall pay to the
Purchaser the amount of such decrease within 30 days after such
reconciliation.
3.10. FURTHER ASSURANCES. Each party agrees to execute and
deliver from time to time after the Effective Time of the Merger, at
the reasonable request of any other party, and without further
consideration, such additional instruments of conveyance and transfer,
and to take such other action as the other party may reasonably require
to more effectively carry out the terms and provisions of the Merger
and the other transaction contemplated by this Agreement.
4. THE CLOSING.
4.1. TIME AND PLACE. The Closing of the Merger (the "Closing")
shall occur at the offices of Freeland, Cooper, LeHocky & Hamburg, 150
Spear Street, Suite 1800, San Francisco, California on the second
business day following the date that the last of the conditions to
Closing under Section 8 hereof have been satisfied, or at such other
date, time or place as may be mutually agreed upon by the parties, but
in no event later than January 10, 1997. The date and time of the
Closing is herein called the "Closing Date". At the Closing, the
Shareholders shall surrender for cancellation pursuant to the Merger
all certificates representing their respective shares of capital stock
of the Company, against receipt from the Purchaser of the Merger
Consideration. All action to be taken at the Closing as hereinafter set
forth, and all documents and instruments executed and delivered, and
all payments made with respect thereto, shall be considered to have
been taken, delivered or made simultaneously, and no such
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<PAGE>
action or delivery or payment shall be considered as complete until all
action incident to the Closing has been completed.
4.2. RELATED TRANSACTIONS. In addition to the Merger, at the
Closing the following transactions shall occur:
(a) The Purchaser and the Shareholders shall each
execute and deliver to the other a Stock Registration
Agreement to be dated the Closing Date and in substantially
the form of Exhibit A hereto (the "Registration Agreement");
(b) The number of positions on the Purchaser's Board
of Directors shall be increased by one (1), and Mark Wilson
("Wilson") shall be elected to the vacancy created by such
increase, as a Class III Director, within the meaning of the
Purchaser's By-laws;
(c) The Acquisition Subsidiary, on the one hand, and
each of Wilson and Wendy Wilson Boyer ("Boyer"), on the other,
shall each execute and deliver a separate Employment Agreement
to be dated the Closing Date and in substantially the forms of
Exhibits B-1 and B-2 hereto, respectively (collectively, the
"Employment Agreements");
(d) The Acquisition Subsidiary shall establish its
Carriage Partners Program for California in substantially the
form of Exhibit C hereto (the "Program"), and Wilson shall
become a participant in the Program in accordance with the
terms and provisions thereof;
(e) The Acquisition Subsidiary and the Purchaser, on
the one hand, and each of Wilson and Boyer, on the other,
shall each execute and deliver a separate Non- Competition
Agreement to be dated the Closing Date and in substantially
the forms of Exhibits D-1 and D-2, respectively, hereto
(collectively, the "Non-Competition Agreements");
(f) Melvin C. Payne, Mark W. Duffey, C. Byron
Snyder and Barry K. Fingerhut (collectively, the
"Carriage Stockholders") and the Shareholders shall each
execute and deliver to the other a Co-Sale Agreement to
be dated the Closing Date and in substantially the form
of Exhibit E hereto (the "Co-Sale Agreement");
(g) Crockett Properties, a California partnership
("Related Partnership"), shall convey fee simple title to
Wilson & Kratzer Mortuaries, a California corporation and
wholly owned subsidiary of the Company ("Wilson & Kratzer"),
all of the real property and improvements on which the Grant
Miller Chapel in Oakland, California is situated (as more
particularly described on Schedule 5.6, hereafter the "Grant
Real Property"), free and clear of all Liens other than
Permitted Liens against such property described on Schedule
5.6, for a consideration consisting entirely in cash or notes
of Wilson & Kratzer that will, at the Effective Time of the
Merger, constitute Closing Date Liabilities deducted from the
Merger Consideration under Section 3.1(c)(A); and
(h) BWB Diablo Properties, LLC ("BWB") shall convey
and assign to Wilson & Kratzer fee simple title to all of the
real property and improvements located at 825 Hartz
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Way in Danville, Contra Costa County, California more
particularly described on Schedule 5.6(c) (the "Danville
Property"), acquired by BWB from The Danville Community
Development Agency pursuant to the Purchase and Sale Agreement
between BWB and such Agency dated July 22, 1996 (the "Danville
Purchase Agreement"), such assignment to include BWB's rights
under the Danville Purchase Agree ment, under the
Architectural and Engineering Services Agreement and the
Interior Design, Procurement and Installment Series Agreement,
both dated March 5, 1996 and both with The Doody Group, and
under all other con tracts, agreements and appurtenant rights
acquired or entered into in connection with the foregoing (all
of the foregoing being collectively referred to as the
"Danville Agreements"), without payment or obligation on the
part of the Company or any Subsidiary, subject to Section
7.3(d).
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders jointly and severally represent and warrant to and agree with the
Purchaser and the Acquisition Subsidiary that:
5.1. TITLE TO SHARES. The Shareholders are the owners and
holders, beneficially and of record, of all of the issued and
outstanding shares of capital stock of the Company as shown on Schedule
II, and the Shareholders have good and marketable title to all of such
issued and outstanding shares, free and clear of any and all liens,
encumbrances, pledges, security interests, mortgages or claims of any
other person (collectively, "Liens").
5.2. ORGANIZATION AND EXISTENCE. The Company is a corpo ration
duly organized, validly existing and in good standing under the laws of
the State of California, and has all requisite corporate power to enter
into and perform its obligations under this Agreement and to carry on
its business as now conducted. The Shareholders have delivered to the
Purchaser complete and correct copies of the Articles of Incorporation,
certified by the Secretary of State of California, and the Bylaws,
certified by its Secretary, of the Company, all as in effect on the
date hereof.
5.3. CAPITALIZATION. The authorized capital stock of the
Company consists of 100,000 shares of Common Stock, no par value, of
which 41,625 shares are issued and outstanding and held by the
Shareholders. All such issued and outstanding shares are validly issued
and outstanding, fully paid and nonassessable and not issued in
violation of the preemptive rights of any person. No such shares of
capital stock are held by the Company as treasury stock. The Company
does not have any outstanding subscriptions, options or other
agreements or commitments obligating it to issue shares of its capital
stock. There are no shareholders, buy-sell, voting or other similar
agreements or commitments affecting the voting or transferability of
any such shares.
5.4. SUBSIDIARIES. Schedule 5.4 sets forth the name and
jurisdiction of incorporation or organization of Wilson & Kratzer and
every other corporation in which the Company directly or indirect has
an ownership interest (collectively, the "Subsidiaries"), other than
Brown & Wilson, Inc., a California corporation which is a subsidiary of
Wilson & Kratzer ("Brown & Wilson"). Each Subsidiary is a corporation
duly organized, validly existing and in good standing under
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the laws of the State of California, and has all requisite power to
carry on its business as now conducted. The Shareholders have delivered
to the Purchaser complete and correct copies of the Articles of
Incorporation and bylaws of each Subsidiary, both as in effect on the
date hereof. The authorized, issued and outstanding capital stock of
each Subsidiary is correctly and completely described on Schedule 5.4.
All such shares of stock are issued and outstanding and owned by the
Company (except for 208 shares of the non-voting common stock of Wilson
& Kratzer which are owned by Dennis Steiner, hereafter the "Steiner
Shares"), free and clear of all Liens (except for a pledge of the
outstanding shares of Rolling Hills to secure obligations under the
Stahl Agreement), fully paid and nonassessable, and not issued in
violation of the preemptive rights of any person. No shares of any
Subsidiary have been issued that are held by it in its treasury. No
Subsidiary has any outstanding subscriptions, options or other
agreements or commitments obligating it to issue any shares of its
capital stock. Neither the Company nor any Subsidiary has an investment
or ownership interest in any corporation, limited liability company,
partnership, joint venture or other business entity, except as
described on Schedule 5.4 and except for Brown & Wilson.
5.5. FINANCIAL INFORMATION. The Shareholders have delivered to
the Purchaser (i) for Wilson & Kratzer, (x) its unaudited (compiled)
balance sheet at March 31, 1996 (the "Wilson & Kratzer Balance Sheet")
and the related unaudited (compiled) statement of earnings of Wilson &
Kratzer for the twelve months then ended, together with the
supplementary schedules thereto and the compilation report thereon of
Alphonse deRoo & Associates, and (y) its unaudited (compiled) balance
sheet at March 31, 1995 and the related unaudited (compiled) statement
of earnings of Wilson & Kratzer for the twelve months then ended,
together with the supplementary schedules thereto and the compilation
report thereon of Alphonse deRoo & Associates; and (ii) for Rolling
Hills Memorial Park, a California corporation and one of the
Subsidiaries ("Rolling Hills"), (x) its unaudited (reviewed) balance
sheet at March 31, 1996 (the "Rolling Hills Balance Sheet") and the
related unaudited (reviewed) statements of income and retained
earnings, and cash flows of Rolling Hills for the twelve months then
ended, together with the notes thereto and the review report thereon of
Hood and Strong dated June 27, 1996, and (y) its unaudited (reviewed)
balance sheet at March 31, 1995 and the related unaudited (reviewed)
state ments of income and retained earnings, and cash flows of Rolling
Hills for the twelve months then ended, together with the notes thereto
and the review report thereon of Hood and Strong dated July 14, 1995.
The Wilson & Kratzer Balance Sheet and the Rolling Hills Balance Sheet
are sometimes here after collectively referred to as the "Year-End
Balance Sheets". All such financial statements are true and correct in
all material respects, have been prepared in accordance with the books
and records of the applicable Subsidiaries, and present fairly the
respective financial positions of such Subsidiaries at the dates
indicated and their respective results of operations for the periods
then ended in accordance with generally accepted accounting principles
consistently applied. The Company has no assets or properties other
than the outstanding capital stock of each Subsidiary, has no
liabilities or obligations of any kind (other than arising under this
Agreement and for federal income tax liability based upon the
consolidated earnings and profits of its
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subsidiaries, for which the Shareholders shall be responsible as
described in Section 12.1), and has no income or expenses except for
dividend income and nominal expenses incident to the maintenance of its
corporate status. Each Home performed the number of funeral services in
each of the twelve-month periods ended March 31, 1994 through 1996 as
set forth on Schedule 5.5 hereto. The Cemetery performed at least the
number of interments as set forth on Schedule 5.5.
5.6. REAL PROPERTY.
(a) DESCRIPTION AND TITLE. Schedule 5.6 will set
forth a legal description of all parcels of real property in
which the Company or the Subsidiaries have any interest or
which is used in their respective businesses (collectively,
the "Real Property"), and also briefly describes each building
and major structure and improvement thereon. No person other
than the Company or a Subsidiary (as to be shown on Schedule
5.6) has any ownership, leasehold or other interest of any
kind in the Real Property, other than (i) the Real Property on
which the Greer Mortuary is located (the "Greer Real
Property"), which is validly leased to Wilson & Kratzer under
the Greer Lease described in paragraph (b) below, (ii) the
Grant Real Property, which is validly leased to Wilson &
Kratzer by the Related Partnership and which will be conveyed
to Wilson & Kratzer on the Closing Date as contemplated in
Section 4.2(g), and (iii) the undeveloped portion of the
Cemetery which is subject to option under the Stahl Agreement.
The Real Property is the only interest in real property
required for the conduct of the business of the Homes and the
Cemetery as presently conducted. To the best knowledge of
Shareholders, all of the buildings, structures and im
provements located on the Real Property are in good oper ating
condition, ordinary wear and tear excepted. To the best of the
Shareholders' knowledge, none of such build ings, structures
or improvements, or the operation or maintenance thereof as
now operated or maintained, contravenes any zoning ordinance
or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would
interfere with or prevent their continued use for the purposes
for which they are now being used. There is not pending nor,
to the knowledge of any Shareholder, threatened any proceeding
for the taking or condemnation of the Real Property or any
portion thereof. As shown on Schedule 5.6, each Subsidiary has
good and marketable fee simple title to all of its respective
Real Property, free and clear of all Liens, other than (i)
easements and other similar title exceptions to be described
on Schedule 5.6 ("Permitted Liens"), (ii) the Greer Real
Property, in which Wilson & Kratzer has good and marketable
title to its leasehold interest thereto, free and clear of any
and all Liens, (iii) the Grant Real Property, and at the
Closing Wilson & Kratzer will have good and marketable fee
simple title to the Grant Real Property free and clear of all
Liens other than Permitted Liens to be described on Schedule
5.6, and (iv) that portion of the Cemetery subject to option
under the Stahl Agreement.
(b) GREER LEASE. All of the Greer Real Property is
validly leased to Wilson & Kratzer under the Lease Agreement
dated January 16, 1983 among Don L. Koubek and
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Mary Sue Koubek dba DLK Properties, as lessor, and Ralph
Greer, Freda Greer and Holly Haugen dba Greer Family Mortuary
- Alameda Chapel, as lessee (such Lease Agreement, together
with all amendments thereto, being hereafter referred to as
the "Greer Lease"); Wilson & Kratzer is the current lessee
under the Greer Lease; a true and complete copy of the Greer
Lease has been provided to the Purchaser; there have been no
amendments or modifications to the Greer Lease except for
those for which copies have been provided to the Purchaser;
the Greer Lease is in full force and effect and valid and
binding on the parties thereto, and neither Wilson & Kratzer
nor (to the Shareholders' knowledge) the lessor thereunder is
in default thereunder.
(c) DANVILLE PROPERTY. Schedule 5.6(c) sets forth a
true and complete legal description of the Danville Property,
and also accurately and completely lists each Danville
Agreement. The Shareholders have provided to the Purchaser a
true and correct copy of each Danville Agreement. Each
Danville Agreement is valid, binding and enforceable against
the parties, and neither BWB nor (to the knowledge of the
Shareholders) the other parties thereto are in default
thereunder. Prior to the closing under the Danville Purchase
Agreement, BWB conducted a reasonable due diligence review of
the matters covered thereby, and nothing has come to its
attention before or after such closing which would reasonably
cause it to believe that any of the representations and
warranties of the seller thereunder are untrue in any material
respect. Schedule 5.6(c) also sets forth a true and complete
listing of all closing costs, fees and expenses paid by BWB
pursuant to the Danville Purchase Agreement, as well as all
out-of-pocket expenses, professional fees and other sums paid
or incurred through the date hereof in renovating or
refurbishing the improvements located on the Danville Property
(collectively, "Danville Expenses").
(d) FIRPTA. None of the Company, the Subsidiaries or
the Shareholders is a "foreign person" (as defined in Section
1445(f)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations issued thereunder), and the
Shareholders shall deliver at Closing one or more non-foreign
affidavits in recordable form containing such information as
shall be required by Code Section 1445(b)(2) and the
regulations issued thereunder.
(e) BILLS PAID. All bills and other payments due with
respect to the ownership, operation, and maintenance of the
Real Property have been (and on the Closing Date will be)
paid, and no Liens (except for Permitted Liens) or other
claims for the same have been filed or asserted against any
part of the Real Property.
(f) NO FLOOD HAZARDS. To the best of the
Shareholders' knowledge, no portion of the Real Property is
located within an area that has been designated by the Federal
Insurance Administration, the Army Corp of Engineers, or any
other governmental agency or body as being subject to special
flooding hazards.
(g) STATUS OF CEMETERY PROPERTY. All of the Real
Property used in the business of the Cemetery has been plotted
for cemetery use. The Cemetery (including the Real Property
remaining under option under Stahl
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Agreement) consists of approximately 96 acres (of which 46
acres have been developed and 50 acres are undeveloped), had,
as of September 30, 1996, at least 3,068 unsold developed
individual grave spaces, 151 unsold niches, 136 unsold
mausoleum crypts and 1,132 unsold lawn crypts.
(h) STAHL AGREEMENT. The Shareholders have delivered
to the Purchaser a true and complete copy of the Exclusive
Option dated March 31, 1960 among Tennessee Land Company and
John M. Stahl (collectively, "Stahl"), and Rolling Hills
Memorial Park, predecessor to Rolling Hills, as amended by the
letter agreement dated May 29, 1963 (collectively, the "Stahl
Agreement"). The Stahl Agreement is currently in full force
and effect, Rolling Hills is the valid successor in interest
as the "Second Party" thereunder, and neither Rolling Hills
nor, to the Shareholders' knowledge, the "First Party" is in
default thereunder. Rolling Hills has duly and validly
acquired all of the Cemetery Real Property owned by it in
accordance with the Stahl Agreement, and Rolling Hills has the
continuing option to acquire one acre per year (of which there
remains approximately 40 acres to be acquired) under the Stahl
Agreement, subject to Rolling Hills' continued compliance
therewith. All necessary consents to the transfer of the
outstanding stock of Rolling Hills to the Company has been
obtained, and the only person required to consent to the
transactions under the terms of the Stahl Agreement is Rosalie
K. Stahl.
5.7. TITLE TO AND STATUS OF PROPERTIES. All assets, rights and
properties utilized in the conduct of the business of the Homes and the
Cemetery are owned by the Company or one or more of its Subsidiaries,
and none of such assets, rights or properties is subject to any lease
or license, except for Real Property leased to Wilson & Kratzer as
described in Section 5.6 and except for those assets which are leased
as described in Schedule 5.13. The Company and each Subsidiary is in
actual possession and control of all properties owned by it, and has
good and marketable title to all of its assets, rights and properties,
including without limitation, all properties and assets reflected in
the Year-End Balance Sheets, free and clear of all Liens, except for
(i) Liens to be discharged and released at or prior to Closing, and
(ii) Permitted Liens against Real Property.
5.8. ABSENCE OF CHANGES OR EVENTS. Since the date of the
Year-End Balance Sheets, there has not been:
(i) any material adverse change in the finan cial
condition, operations, business, properties or pros pects of
the Company and its Subsidiaries taken as a whole;
(ii) any change in the authorized capital or
outstanding securities of the Company or any Subsidiary;
(iii) any capital stock, bonds or other securi ties
which the Company or any Subsidiary has issued, sold,
delivered or agreed to issue, sell or deliver, nor has the
Company or any Subsidiary granted or agreed to grant any
options, warrants or other rights calling for the issue, sale
or delivery thereof;
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(iv) any borrowing or agreement by the Company or
any Subsidiary to borrow any funds, nor has the Company or any
Subsidiary incurred, or become subject to, any absolute or
contingent obligation or liability, except trade payables
incurred in the ordinary course of business and obligations
incurred in connection with the acquisition or improvement of
the Danville Property;
(v) any declaration or payment of any bonus or
other extraordinary compensation to any employee of the
Company or any Subsidiary;
(vi) any hiring, firing, reassignment or other
change in any key personnel of the Company or any
Subsidiary;
(vii) any sale, transfer or other disposition of, or
agreement to sell, transfer or otherwise dispose of, any of
the inventories or other assets or properties of the Company
or any Subsidiary, except in the ordinary course of business;
(viii) any material damage, destruction or losses
against the Company or any Subsidiary, or any waiver of any
rights of material value to the Company or any Subsidiary;
(ix) any labor strike or labor dispute, or the
entering into of any collective bargaining agreement, with
respect to employees of the Company or any Subsidiary;
(x) any claim or liability for any material
damages for any actual or alleged negligence or other tort or
breach of contract against or affecting the Company or any
Subsidiary, except as set forth in Schedule 5.18;
(xi) any new competitor that has, to the knowledge
of any Shareholder, built, commenced to build or announced
intentions to build a funeral home or mortuary in direct
competition with any Home or a cemetery or mausoleum in direct
competition with the Cemetery; or
(xii) any other transaction or event entered into or
affecting the Company or any Subsidiary other than in the
ordinary course of business, except for the acquisition of the
Danville Property and as set forth in Schedule 5.18.
5.9. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
in the Year-End Balance Sheets, neither the Company nor any Subsidiary
has any, and none of their respective assets or properties are subject
to any, liabilities or obligations of any kind or nature, other than
unsecured trade accounts pay able, accrued expenses and preneed
obligations (fully funded by insurance or covered by trust) arising in
the ordinary course of the business since the date of the Year-End
Balance Sheets, except as set forth in Schedule 5.9.
5.10. TAX MATTERS. All federal, state, county, local
and other taxes due and payable by the Company and the
Subsidiaries on or before the date of this Agreement have been
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paid or are adequately provided for in the Year-End Balance Sheets. The
Company and the Subsidiaries have filed all tax returns and reports
required to be filed by each of them with all taxing authorities, and
all such tax returns and reports are true, complete and correct in all
material respects. True and correct copies of the federal, state and
local income tax returns filed by or for the Company and the
Subsidiaries for each of their last three taxable years have been
furnished to the Purchaser. For each of such years, the Company and
each Subsidiary has been included in the consolidated group of
corporations of which the Company is the parent corporation. No
assessments of deficiencies for taxes of any kind have been made
against the Company or any Subsidiary which are presently pending or
outstanding. No state of facts exists or has existed which would
constitute grounds for the assessment of any tax liability against the
Company or any Subsidiary with respect to any prior taxable period
which has not been audited by the Internal Revenue Service or which has
not been closed by applicable statute. There are no outstanding
agreements or waivers extending the statutory period of limitations
applica ble to any income tax return of the Company or any Subsidiary
for any period.
5.11. INVENTORY; ACCOUNTS RECEIVABLE. The inven tories
reflected in the Year-End Balance Sheets, and all items placed in
inventory since the date thereof, are (i) accounted for in accordance
with generally accepted accounting prin ciples applied on a consistent
basis, and (ii) saleable or usable in the ordinary course of business
of the Company and the Subsidiaries at usual and customary prices,
subject to normal returns and markdowns consistent with past practice.
All cemetery pre-need accounts and notes receivable reflected in the
Year-End Balance Sheets, and all such accounts and notes receivable
arising since the date thereof, (x) represent bona fide claims against
customers for goods sold or services rendered, and (y) to the
Shareholder's knowledge, are not subject to offsets or defenses of any
kind. At the Closing, the Shareholders shall deliver to the Purchaser a
list, certi fied by the Shareholders to be complete and correct, of all
of the inventory of the Subsidiaries as of the Closing Date and all of
their accounts receivable arising from the preneed sale of services or
merchandise by the Cemetery as of the Closing Date.
5.12. FIXED ASSETS. Schedule 5.12 will list all motor vehicles
and all other material items of equipment, fix tures, furniture and
other fixed assets owned by the Company and the Subsidiaries. All such
items are in good operating condition and repair, ordinary wear and
tear excepted.
5.13. CONTRACTS AND COMMITMENTS. Schedule 5.13 will set forth
a complete description of:
(i) all loan, credit and similar agreements to
which the Company or any Subsidiary is a party or by which it
is bound, and all notes or other evidences of indebtedness of,
or agreements creating any Lien on any property of, the
Company or any Subsidiary;
(ii) all employment contracts, noncompetition
agreements and other agreements relating to the employment of
any employees of the Company and the Subsidiaries;
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(iii) all contracts and agreements affecting the
Company or any Subsidiary which do not terminate or are not
terminable by the Company or such Subsidiary upon notice of 30
days or less or which involve an obligation on its part in
excess of $1,000 per annum or $5,000 in the aggregate; and
(iv) all other contracts and commitments of the
Company or any Subsidiary entered into outside the ordi nary
course of business.
Each contract and commitment to be described on Schedule 5.13
is valid and binding on the parties thereto and in full force and
effect, and neither the Company or the applicable Subsidiary, as the
case may be, nor, to the knowledge of the Shareholders, any of the
other parties thereto, are in default thereunder. The Shareholders will
have furnished to the Purchaser a true and complete copy of each
document listed on Schedule 5.13.
5.14. PRENEED CONTRACTS AND TRUST ACCOUNTS. Schedule 5.14
hereto will accurately and completely list, as of the date of this
Agreement (i) all preneed contracts of the Company and the Subsidiaries
unfulfilled as of the date hereof, including contracts for the sale of
funeral merchandise and services and for cemetery merchandise and
plots, and (ii) all trust accounts relating to the Homes and the
Cemetery, indicating the location of each and the balance thereof. All
preneed contracts required to be listed on Schedule 5.14 (x) have been
entered into in the normal course of business at regular retail prices
then in effect, or pursuant to a sales promotion program, solely for
use by the named customers and members of their families on terms not
more materially favorable than shown on the specimen contracts which
have been delivered to the Purchaser, (y) are subject to the rules and
regulations of the Company or the applicable Subsidiary as now in force
(copies of which have been delivered to the Purchaser), and (z) on the
date hereof are in full force and effect, subject to the Shareholders'
knowledge, to no offsets, claims or waivers, and neither the Company or
the applicable Subsidiary, as the case may be, nor such customer is in
default thereunder, except as to be set forth in Schedule 5.14. All
funds received by the Company and the Subsidiaries under preneed
contracts have been deposited in the appropriate accounts and
administered and reported in accordance with the terms thereof and as
required by applicable laws and regulations. The Shareholders make no
representation or warranty to the effect that the market value of the
preneed accounts, trusts or other deposits is equal to or greater than
the preneed liability related thereto. The services heretofore provided
by the Company and the Subsidiaries have been rendered in a
professional and competent manner consistent with prevailing
professional standards, practices and customs.
5.15. TRADEMARKS, ETC. Schedule 5.15 accurately and completely
describes all trademarks, copyrights, patents and other intellectual
property rights, and applications and licenses for the foregoing
(collectively, "Intangible Rights"), owned by or licensed to or in the
name of the Company or any Subsidiary. The Company and the Subsidiaries
own or possess valid rights or adequate licenses for all of such
Intangible Rights as are necessary to the conduct of the business of
the Homes and the Cemetery as presently conducted.
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Neither the Company nor any Subsidiary is charged with infringement of
any Intangible Rights of any other person, nor does any Shareholder
know of any such infringement, whether or not claimed by any person.
5.16. INSURANCE. The Company and the Subsidiaries maintain
such policies of insurance in such amounts, and which insure against
such losses and risks, as are, in the Company's opinion, generally
maintained for comparable businesses and properties. Valid policies for
such insurance will be outstanding and duly in force at all times prior
to the Closing.
5.17. LICENSES, PERMITS, ETC. Schedule 5.17 hereto will
correctly and completely list all licenses, franchises, permits,
certificates, consents, rights and privileges issued to or held by the
Company and each Subsidiary, which will be all that are necessary or
appropriate for the operation of the Homes and the Cemetery as
presently operated. All such items are in full force and effect.
5.18. LITIGATION. Except as set forth in Schedule 5.18, there
are no claims, actions, suits, proceedings or investigations pending
or, to the knowledge of any Shareholder, threatened against or
affecting the Company or any Subsidiary or any of their respective
assets or properties, at law or in equity or before or by any court or
federal, state, municipal or other governmental department, commission,
board, agency or instrumentality. Neither the Company nor any
Subsidiary is subject to any continuing court or administrative order,
writ, injunction or decree, nor is the Company or any Subsidiary in
default with respect to any order, writ, injunction or decree issued by
any court or foreign, federal, state, municipal or other governmental
department, commission, board, agency or instrumentality.
5.19. COMPLIANCE WITH LAWS. The Company and the Subsidiaries
have complied and are in compliance in all material respects with all
federal, state, municipal and other statutes, rules, ordinances, and
regulations applicable to the Company, the Subsidiaries and their
respective assets, rights and properties, and to the operation of each
Home and the Cemetery (including without limitation all occupational
safety and health rules, regulations and laws, and laws and regula
tions applicable to preneed and perpetual care contracts and trust
accounts, including the so-called "FTC Funeral Rule").
5.20. ENVIRONMENTAL MATTERS.
(a) The Company and each Subsidiary has complied and
is in compliance in all material respects with all
Environmental Laws, insofar as the same relate to
asbestos-containing materials ("ACM") that are friable,
underground storage tanks and the ownership and operation of
crematories ("Identified Environmental Concerns"), and to the
Shareholders' knowledge have so complied as to all other
matters.
(b) Without limiting the generality of the foregoing,
the Company and each Subsidiary has obtained, and has complied
and is in compliance with, all permits, licenses and other
authorizations that may be required pursuant to Environmental
Laws for the occupation of the Real Property and the operation
of the business of the
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Company and the Subsidiaries, insofar as the same relates to
Identified Environmental Concerns and, to the Shareholders'
knowledge, as to all other matters.
(c) Neither the Company nor any Subsidiary has
received any notice, report or other information regarding any
liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or investigatory, remedial or
corrective obligations, relating to their respective
businesses or any of the Real Property arising under
Environmental Laws.
(d) Except as set forth on Schedule 5.20, none of the
following exists on any portion of the Real Property:
(i) Underground storage tanks or surface
impoundments;
(ii) Any friable ACM, or to the
Shareholders' knowledge, any other ACM in any form or
condition; or
(iii) To the Shareholders' knowledge, any
materials or equipment containing polychlorinated
biphenyls.
(e) In respect of Identified Environmental Concerns,
and to the knowledge of the Shareholders, in all other
respects, neither the Company nor any Subsidiary has treated,
stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or Released any substance, including
without limitation any Hazardous Materials, or owned or
operated any facility or property, so as to give rise to
liabilities for response costs, natural resource damages or
attorneys fees pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"),
as amended, or similar state Environmental Laws.
(f) To the knowledge of the Shareholders, neither
this Agreement nor the consummation of the transaction that is
the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or
consent of any governmental authority or third parties,
pursuant to any so-called "transaction- triggered" or
"responsible property transfer" Environmental Laws.
(g) To the knowledge of the Shareholders, without
limiting the foregoing, no facts, events or conditions
relating to the past or present facilities, properties or
operations of the Company or any Subsidiary will prevent,
hinder or limit continued compliance with Environmental Laws,
give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental Laws, or give rise to
any other liabilities (whether accrued absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Laws,
including without limitation any relating to onsite or offsite
Releases or threatened Releases of Hazardous Materials,
substances or wastes, personal injury, property damage or
natural resource damage.
(h) For purposes of this Section 5.20:
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"Environmental Laws" means all laws concerning
pollution or protection of the environment (including without
limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or
cleanup of any Hazardous Materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).
"Hazardous Materials" means any hazardous, toxic,
dangerous or other waste, substance of material defined as
such in, regulated by or for purposes of any Environmental
Law.
"Release" has the meaning set forth in CERCLA.
5.21. EMPLOYEES. Schedule 5.21 will correctly and completely
list the names and monthly or hourly rates of salary and other
compensation of all the employees and agents of the Company and the
Subsidiaries. Schedule 5.21 will also set forth the date of the last
salary increase for each employee listed thereon, the outstanding
balances of all loans and advances, if any, made by the Company or any
Subsidiary to any employee or agent thereof, and the number of vacation
days or other time off to which each such employee is presently
eligible to take. There are not pending or, to the knowledge of any
Shareholder, threatened against the Company or any Subsidiary any
general labor disputes, strikes or concerted work stoppages, and there
are no discussions, negotiations, demands or proposals that are pending
or have been conducted or made with or by any labor union or
association with respect to any employees of the Company or any
Subsidiary. No Shareholder is aware of the existence of any serious
health condition of any key management personnel of the Company or any
Subsidiary that might impair any such person's ability to perform the
essential functions of his or her normal duties into the foreseeable
future after the Closing. The Share holders believe that the relations
between the Company and the Subsidiaries, on the one hand, and their
respective employees, on the other, are good.
5.22. EMPLOYEE BENEFIT PLANS. Schedule 5.22 will set forth a
description of all plans, contracts, commitments, programs and policies
(including, without limitation, pension, profit sharing, thrift, bonus,
deferred compensation, severance, retirement, disability, medical,
life, dental and accidental insurance, vacation, sick leave, death
benefit and other similar employee benefit plans and policies)
maintained by the Company or any Subsidiary which provides benefits to
any employee or former employee of the Company or any Subsidiary. True
and complete copies of all such benefit plans have been provided to the
Purchaser. All obligations of the Company and the Subsidiaries under
the Plans have been fully paid, fully funded or adequate accruals
therefor have been made on the Year-End Balance Sheets. All necessary
governmental approvals have been obtained for all Plans subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") and have been
qualified under Section 401 of the Code, and each trust established for
any Plan is exempt from federal income taxation pursuant to Section
501(a) of the Code. With respect to any such Plan, there has been no
(i)
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"reportable event" as defined in Section 4043 of ERISA, (ii) event
described in Section 4062(e) or 4063(a) of ERISA, or (iii) in the case
of any defined benefit plan, termination or partial termination.
5.23. AFFILIATED PARTY TRANSACTIONS. Except as described on
Schedule 5.23, the Company and the Subsidiaries have been operated and
are being operated in a manner separate from the personal and other
business activities of the Share holders and their affiliates, and none
of the Company, any Subsidiary nor any of their respective assets are
subject to any affiliated party commitments or transactions.
5.24. BOOKS AND RECORDS. All books and records of the Company
and each Subsidiary are true, correct and complete and have been
maintained by them in accordance with good business practices and in
accordance with all laws, regula tions and other requirements
applicable to the Company and the Subsidiaries. The corporate records
of the Company and the Subsidiaries reflect a true record of all
meetings and pro ceedings of the respective Boards of Directors and
sharehold ers of the Company and the Subsidiaries.
5.25. FINDERS. None of the Company, any Subsidiary nor any
Shareholder is a party to or in any way obligated under any contract or
other agreement, and there are no out standing claims against any of
them, for the payment of any broker's or finder's fee in connection
with the origin, nego tiation, execution or performance of this
Agreement.
5.26. AUTHORITY OF THE SHAREHOLDERS. Each Share holder has the
full right, capacity and authority to enter into and perform this
Agreement and the other documents to be executed by such Shareholder as
provided in this Agreement, and to consummate the transactions
contemplated hereby and thereby. For each Shareholder that is a trust,
the execution, delivery and performance of this Agreement is within
such trust's powers, and each of the undersigned trustees of such trust
has all requisite authority to enter into this Agreement on behalf of
such trust. This Agreement constitutes, and upon execution and delivery
by each Shareholder, each of such other documents will constitute, the
legal, valid and binding obligations of the Shareholders enforceable
against them in accordance with their respective terms. Neither the
execution, delivery nor performance of this Agreement or any of such
other documents, nor the consummation of the transactions contemplated
hereby or thereby, will: (i) result in a violation or breach of any
term or provision of, constitute a default or acceleration under,
require notice to or consent of any third party to, or result in the
creation of any Lien by virtue of (x) the Articles of Incorporation or
Bylaws of the Company or any Subsidiary or the trust documents of any
Shareholder that is a trust or (y) any contract, agreement, lease,
license or other commitment to which the Company, any Subsidiary or any
Shareholder is a party or by which the Company, any such Subsidiary or
any such Shareholder or his, her or its respective assets or properties
are bound, other than those contracts and commitments described on
Schedule 5.26 (provided, however, that all necessary consents under the
Stahl Agreement have been duly and validly obtained); nor (ii) violate
any statute or any order, writ, injunction or decree of any court,
administrative agency or governmental body, other than the filing of a
notification of
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change of ownership with the California Department of Consumer Affairs
(the "CDCA Consent").
5.27. AUTHORITY OF THE COMPANY. The execution, delivery and
performance by the Company of this Agreement have been duly authorized
by its Board of Directors. This Agree ment is legally binding and
enforceable against the Company in accordance with its terms. Neither
the execution, delivery nor performance by the Company of this
Agreement will result in a violation or breach of, nor constitute a
default or accelerate the performance required under, the Articles of
Incorporation or Bylaws of the Company or any Subsidiary or any
indenture, mortgage, deed of trust or other contract or agreement to
which the Company or any Subsidiary is a party or by which it or its
properties are bound, other than those described in Section 5.26 above,
or violate any order, writ, injunction or decree of any court,
administrative agency or governmental body, other than the CDCA
Consent.
5.28. ACQUISITION OF PURCHASER STOCK. The Purchaser Stock to
be acquired by the Shareholders pursuant to the Merger will be acquired
by them for investment purposes only and not with the present intention
or view to, or resale in connection with, any distribution thereof
within the meaning of the Securities Act of 1933, as amended. Each
Shareholder understands that such Purchaser Stock will not be
registered under such Securities Act or any state securities or blue
sky laws, that transferability of such Purchaser Stock will be
restricted in accordance with applicable state and federal securities
laws, and that a restrictive legend to such effect will be inscribed on
each certificate representing such Purchaser Stock. Prior to the
Closing, each Shareholder will have had full opportunity to receive
such information and ask such questions of representatives of the
Purchaser concerning the Purchaser, its subsidiaries and their
business, opera tions, assets and prospects, and concerning an
investment in the Purchaser Stock, as such Shareholder will then have
deemed appropriate in order to make an informed investment decision
with respect to the Purchaser Stock.
5.29. FULL DISCLOSURE. The representations and war ranties
made by the Shareholders hereunder or in any Schedules or certificates
furnished to the Purchaser pursuant hereto or thereto, do not and will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein necessary to make
the representa tions or warranties herein or therein, in light of the
circum stances in which they are made, not misleading.
5.30. SCHEDULES. The Schedules identified in the
Exhibit/Schedule Page hereto as "Delivered" have been prepared as of
the date hereof in a separate binder or volume contemporaneously with
the execution of this Agreement, and have been signed for
identification by the Shareholders. The Shareholders shall deliver to
the Purchaser those Schedules identified on the Exhibit/ Schedule Page
as "To Be Delivered" within fifteen (15) business days after the date
of execution of this Agreement.
The representations and warranties of the Shareholders herein
or in any Schedules or certificates furnished to Purchaser pursuant
hereto are the only representations and warranties upon which Purchaser
is relying in connection with the transactions described herein.
Purchaser is an
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experienced and sophisticated owner and operator of mortuaries and
cemeteries and is not relying upon the Shareholders (except for such
representations and warranties) in determining the extent to which it
will conduct any due diligence investigations in evaluating the truth
and accuracy of the representations and warranties of the Shareholders
contained herein. No statement, assurance or other action by any other
person or entity, whether or not an employee, affiliate, agent or other
representative of the Company or the Shareholders shall be deemed to be
a representation or warranty upon which Purchaser may rely unless same
shall be set forth herein or pursuant hereto.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE
ACQUISITION SUBSIDIARY. The Purchaser and the Acquisition Subsidiary jointly and
severally represent and warrant to and agree with the Shareholders that:
6.1. ORGANIZATION AND EXISTENCE. The Acquisition Subsidiary is
a corporation duly organized, validly existing and in good standing
under the laws of the State of California, and has all requisite
corporate power to enter into and perform its obligations under this
Agreement and the other documents to which it is a party. The Purchaser
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite
corporate power to enter into and perform its obligations under this
Agreement, including the issuance and delivery of the Purchaser Stock
to the Shareholders as provided in this Agreement. The Purchaser has
delivered to the Shareholders complete and correct copies of the
Amended and Restated Certificate of Incorporation and Bylaws of the
Purchaser and the Articles of Incorporation and Bylaws of the
Acquisition Subsidiary, both as in effect on the date hereof.
6.2. CAPITALIZATION. The authorized capital stock of the
Purchaser consists of (i) 15,000,000 shares of Class A Common Stock,
$.01 par value, of which 3,942,194 shares were issued and outstanding
as of September 30, 1996; (ii) 15,000,000 shares of Class B Common
Stock, $.01 par value; of which 4,501,466 shares were issued and
outstanding as of September 30, 1996, and (iii) 50,000,000 shares of
Preferred Stock, $.01 par value, of which (x) 19,000,000 shares have
been (or will be) designated as Series D Preferred Stock, $.01 par
value of which 17,775,616 shares were issued and outstanding as of
September 30, 1996 and (y) 11,000,000 shares have been (or will be)
designated as Series E Preferred Stock, $.01 par value, none of which
shares were issued and outstanding as of September 30, 1996; and (z)
20,000,000 shares have been (or will be) designated as Series F
Preferred Stock, $.01 par value, none of which shares were issued and
outstanding as of September 30, 1996. All such issued and outstanding
shares are validly issued and outstanding, fully paid and nonassessable
and not issued in violation of the preemptive rights of any person. No
such shares of capital stock are held by the Purchaser as treasury
stock. Neither the Purchaser nor the Acquisition Subsidiary has any
outstanding subscriptions, options or other agreements or commitments
obligating it to issue shares of its capital stock, other than options
granted under one or more of the Purchaser's stock incentive and option
plans, of which options covering an aggregate of 689,900 shares were
outstanding on September 30, 1996. There are no shareholders, buy-sell,
voting or other similar agreements or commitments affecting the voting
or
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transferability of any such shares, of which the Purchaser has actual
knowledge, except as described in the Registration Statement referred
to in Section 6.3.
6.3. REPORTS AND FINANCIAL STATEMENTS. The Purchaser has filed
all reports required to be filed by it under the Securities Exchange
Act of 1934, as amended. The Purchaser has delivered to the
Shareholders true and complete copies of (i) its Registration Statement
on Form S-1 (No. 333-05545) relating to the initial public offering of
the Purchaser's Class A Common Stock, and (ii) its Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1996, both as filed
with the Securities and Exchange Commission (collec tively, "SEC
Filings"). In addition, the Purchaser will deliver to the Shareholders
a true and complete copy of its Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996, promptly after the filing
thereof. As of their respective dates, the SEC Filings did not, and
such Form 10-Q at September 30, 1996 will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
All of the financial statements included in the SEC Filings are or will
be (as the case may be) true and correct in all material respects, have
been (or will be) prepared in accordance with the books and records of
the Purchaser and its subsidiaries, and present (or will present)
fairly the consolidated financial positions of the Purchaser and its
subsidiaries at the dates indicated and the consolidated results of
their operations for the periods then ended in accordance with
generally accepted accounting principles consistently applied.
6.4. NO MATERIAL ADVERSE CHANGE. Since June 30, 1996, there
has not been any material adverse change in the financial condition,
operations, properties or prospects of the Purchaser and its
consolidated subsidiaries taken as a whole.
6.5. AUTHORITY. The execution, delivery and performance by the
Purchaser and the Acquisition Subsidiary of this Agree ment and the
documents contemplated in this Agreement to be executed and delivered
by them have been duly authorized by their respective Boards of
Directors. This Agreement is, and upon their execution and delivery as
herein provided such other documents will be, valid and binding upon
the Purchaser and the Acquisition Subsidiary and enforceable against
each of them in accordance with their respective terms. Neither the
execution, delivery or performance by the Purchaser or the Acquisition
Subsidiary of this Agreement or any such other document will conflict
with or result in a violation or breach of any term or provision of,
nor constitute a default under, the Amended and Restated Certificate of
Incorporation or Bylaws of the Purchaser or the Articles of
Incorporation or Bylaws of the Acquisition Subsidiary, or under any
indenture, mortgage, deed of trust or other contract or agreement to
which the Purchaser or the Acquisition Subsidiary is a party or by
which they or their respective properties are bound, except for such
contracts and commitments for which all necessary consents have been
duly and validly obtained, or violate any order, writ, injunction or
decree of any court, administrative agency or governmental body, except
for the CDCA Consent. Consummation of the transactions contemplated by
this Agreement will not require the consent or approval of
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the stockholders of the Purchaser, under the laws of the State of
Delaware, under applicable rules and regulations of the National
Association of Securities Dealers, or otherwise.
6.6. NO MATERIAL DEFAULTS OR LITIGATION. There exists no
material default by the Purchaser or any of its consolidated
Subsidiaries under its senior credit agreement or any other material
agreement to which the Purchaser or any such Subsidiary is a party, or
any pending or, to the Purchaser's knowledge, threatened, claim,
action, suit, proceeding or investigation against the Purchaser or any
such subsidiary, any of which would reasonably be expected to have a
material adverse effect on the financial condition, operations,
properties or prospects of the Purchaser and such Subsidiaries taken as
a whole. The Purchaser is not in default in the payment of dividends on
its preferred stock which require the payment of dividends.
6.7. FULL DISCLOSURE. The representations and warranties made
by the Purchaser hereunder or in any certificate furnished to the
Shareholders pursuant hereto or thereto, do not and will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein necessary to make the
representations or warranties herein or therein, in light of the
circumstances in which they were made, not misleading.
6.8. FINDERS. Except as described in Section 13.1, neither the
Purchaser nor the Acquisition Subsidiary is a party to or in any way
obligated under any contract or other agreement, and there are no
outstanding claims against either of them, for the payment of any
broker's or finder's fee in connection with the origin, negotiation,
execution or per formance of this Agreement.
6.9. DISCLAIMER OF RELIANCE. The representations and
warranties of the Purchaser and the Acquisition Subsidiary herein or in
any certificates furnished to the Shareholders pursuant hereto are the
only representations and warranties upon which the Shareholders are
relying in connection with the transactions described herein. The
Shareholders are experienced and sophisticated in transactions of this
nature. No statement, assurance or other action by any other person or
entity, whether or not an employee, affiliate, agent or other
representation of the Purchaser or the Acquisition Subsidiary, shall be
deemed to be a representation or warranty upon which any Shareholder
may rely unless the same shall be set forth herein or pursuant hereto.
7. COVENANTS PENDING CLOSING.
7.1. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS. The
Company and the Shareholders jointly and severally covenant and agree
with the Purchaser that:
(a) CONDUCT OF BUSINESS. From the date of this
Agreement to the Closing Date, the business of the Company and
each Subsidiary will be operated only in the ordinary course,
and, in particular, without the prior written consent of the
Purchaser, the Company will not, and the Shareholders will not
cause or allow the Company to, and neither the Company nor any
Shareholder will cause or allow any Subsidiary to, do any the
following:
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(i) cancel or permit any insurance to lapse
or terminate, unless renewed or replaced by like
coverage;
(ii) amend or otherwise modify its Articles
of Incorporation or Bylaws;
(iii) issue or enter into any subscriptions,
options, agreements or other commitments in respect
of the issuance, transfer, sale or encumbrance of any
shares of capital stock of the Company or any
Subsidiary, except for the acquisition by Wilson &
Kratzer of the Steiner Shares as described in Section
8.1(n);
(iv) take any action described in Section
5.8;
(v) enter into any contract, agreement or
other commitment of the type described in Sec tion
5.13, except for (1) the sale of the assets of
Brown-Wilson and its dissolution as described in
Section 8.1(m), and the sale by the Subsidiaries to
the Shareholders for consideration consisting only of
cash, without recourse or warranty to such
Subsidiary, of those assets described on Schedule
7.1(a), (2) the acquisition of the Grant Real
Property and the Danville Property, and (3) the sale
of four (4) residences owned by Rolling Hills located
on Alhambra Avenue, El Sobrante, California.
(vi) hire, fire, reassign or make any other
change in key personnel of the Company, or increase
the rate of compensation of or declare or pay any
bonuses to any employee in excess of that listed on
Schedule 5.21, other than year-end bonuses consistent
with past practices; or
(vii) take any other action which would
cause any of the representations and warranties made
in Section 5 hereof not to be true and correct in all
material respects on and as of the Closing Date with
the same force and effect as if the same had been
made on and as of the Closing Date.
(b) ACCESS TO INFORMATION. Prior to Closing, the
Company will give to the Purchaser and its counsel,
accountants and other representatives, full and free ac cess
to all of the properties, books, contracts, commit ments and
records of the Company and the Subsidiaries so that the
Purchaser may have full opportunity to make such investigation
as it shall desire to make of the affairs of the Company and
each Subsidiary.
(c) CONSENTS AND APPROVALS. The Company and the
Shareholders will use their best efforts to obtain the
necessary consents and approvals of other persons which may be
required to be obtained on their part to consum mate the
transactions contemplated by this Agreement.
(d) NO SHOP. For so long as this Agreement remains in
effect, neither the Company nor any Shareholder shall enter
into any agreements or commitments, or initiate,
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solicit or encourage any offers, proposals or expressions of
interest, or otherwise hold any discussions with or respond to
any inquiries or expressions of interest with any potential
buyers, investors investment bankers or finders, with respect
to the possible sale or other disposition of all or any
substantial portion of the assets and business of the Company
or any Subsidiary or any other sale of the Company or any
Subsidiary (whether by merger, consolidation, sale of any
shares of capital stock of the Company or any Subsidiary, or
otherwise), other than with the Purchaser and the Acquisition
Subsidiary as contemplated in this Agreement. If, during such
period, the Company or any Shareholder receives an inquiry or
expression of interest regarding any such transaction, the
Company or such Shareholder, as the case may be, shall
promptly notify the Purchaser of such fact; provided that the
foregoing shall not require that the source of such expression
of interest be disclosed.
7.2. COVENANTS OF THE PURCHASER AND THE ACQUISITION
SUBSIDIARY. The Purchaser and the Acquisition Subsidiary jointly and
severally covenant with the Shareholders that:
(a) CONSENTS AND APPROVALS. The Purchaser and the
Acquisition Subsidiary will use their best efforts to obtain
the necessary consents and approvals of other persons which
may be required to be obtained on their part to consummate the
transactions contemplated in this Agreement.
(b) SERIES F PREFERRED STOCK. From the date of this
Agreement to the Closing Date: the Purchaser will not cause or
permit any amendment or modification to the Series F
Designation as in effect on the date of this Agreement and in
the form delivered to the Shareholders pursuant to Section
6.1, nor shall the Purchaser issue to any person, other than
to the Shareholders pursuant to this Agreement, any shares of
Series F Preferred Stock, nor shall the Purchaser issue any
shares of capital stock or take any action which would be
prohibited under the provisions of, or would require the
consent of the holders of, the Series F Preferred Stock, had
the Series F Preferred Stock been issued and outstanding on
the date hereof.
7.3. MUTUAL COVENANTS. Each party agrees with one another
that:
(a) CONFIDENTIALITY. Prior to the Closing, such party
will hold in confidence any data and information obtained with
respect to the other party or parties from any representative,
officer, director or employee thereof, including their
accountants or legal counsel, or from any books or records of
any of them, in connection with the transactions contemplated
by this Agreement, except that such party may disclose such
information to its outside attorneys and accountants and to
its lenders, provided that the disclosing party shall remain
responsi ble to the other parties for any unauthorized
disclosure thereof by such attorneys, accountants or lenders.
If the transactions contemplated hereby are not consummated,
no party in receipt of such information shall disclose such
data or information to others, except as such data or
information is published or is a matter of public
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<PAGE>
knowledge or is required by an applicable law or regula tion
to be disclosed. If this Agreement is terminated for any
reason, any party receiving such confidential information
shall return to the party which provided it all such data and
information so obtained which is in written form.
(b) PUBLIC ANNOUNCEMENTS. Any public announcement
with respect to this Agreement or the transactions con
templated hereby will be issued, if at all, at such time and
in such manner as may be determined by the Purchaser. Unless
consented to by the Purchaser in advance, prior to the Closing
neither the Company nor any Shareholder shall (and the Company
shall not cause or permit any Subsidiary to) make any public
announcement or disclosure of this Agreement or such
transactions. The Purchaser and the Shareholders shall consult
with one another concerning the means by which the employees,
customers and suppliers of the Company and the Subsidiaries
will be informed of such transactions, and representatives of
the Purchaser shall have the right to be present for any such
communication.
(c) HART-SCOTT-RODINO. The Company, as the "ulti mate
parent entity" of the acquired person (as defined in the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, hereafter the "HSR Act") shall promptly pre pare and
cause to be filed a premerger notification and report under
the HSR Act, and the Purchaser, as the "ultimate parent
entity" of the acquiring person, shall promptly prepare and
cause to be filed a premerger notification and report under
the HSR Act. The Purchaser shall bear sole responsibility for
the cost of the filing fee due under ss.605 of PL 101-162 (103
Stat 1031), as amended by PL 103-317 (108 Stat 1724). Each
such party shall request early termination in connection
therewith and shall promptly respond to any inquiries of the
Federal Trade Commission or Department of Justice in
connection with such filings and shall coordinate the
foregoing with one another.
(d) DANVILLE PROPERTY. At the Closing, and subject to
the conditions herein specified, the Purchaser shall pay to
BWB the sum of $669,647. From the date of this Agreement
through the Closing, the Shareholders shall keep the Purchaser
advised regarding the progress of the renovation and
refurbishing of the improvements on the Danville Property. In
addition, the Shareholders shall provide the Purchaser with
periodic estimates of expenses incurred or to be incurred
after October 11, 1996 in connection with such renovation and
refurbishing ("Interim Expenses"), and for purposes of the
Purchaser's expense reimbursement obligation set forth below,
such estimates shall be subject to the Purchaser's approval,
which approval shall not be unreasonably withheld or delayed.
At the Closing, the Purchaser shall also pay, as a portion of
the Merger Consideration under Section 3.1(C)(a), all Interim
Expenses which have been so approved in advance by the
Purchaser.
8. CONDITIONS TO CLOSING.
8.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND THE
ACQUISITION SUBSIDIARY. The obligations of the Purchaser and
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the Acquisition Subsidiary under this Agreement shall be sub ject to
the following conditions, any of which may be express ly waived by the
Purchaser in writing:
(a) REPRESENTATIONS AND WARRANTIES TRUE; COVENANTS
PERFORMED. The Purchaser shall not have discovered any
material error, misstatement or omission in the
representations and warranties made by the Shareholders in
Section 5 hereof; the representations and warranties made by
the Shareholders herein shall be deemed to have been made
again at and as of the time of Closing and shall then be true
and correct; the Company and the Shareholders shall have
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
them at or prior to the Closing; and the Purchaser shall have
received a certifi cate, signed by the Shareholders and an
executive officer of the Company, to the effect of the
foregoing provisions of this Section 8.1(a).
(b) OPINION OF LEGAL COUNSEL. The Shareholders shall
have caused to be delivered to the Purchaser an opinion of
Freeland, Cooper, LeHocky & Hamburg, legal counsel for the
Company, the Subsidiaries and the Shareholders, dated the
Closing Date, in substantially the form attached as Exhibit F.
(c) CONSENTS AND APPROVALS. The Company and the
Shareholders shall have obtained all consents and approvals of
other persons and governmental authorities to the transactions
contemplated by this Agreement. Without limiting the
generality of the foregoing, the lessor under the Greer Lease
shall have delivered to the Purchaser a written instrument
pursuant to which such lessor (x) consents to the transactions
hereunder (or certifies that such consent is not required) and
(y) represents to the Purchaser that the Greer Lease is in
full force and effect and that neither it nor, to its
knowledge, Wilson & Kratzer is in default thereunder.
(d) NO MATERIAL ADVERSE CHANGE. Prior to the Closing
there shall not have occurred any loss or damage to the assets
and properties of the Company or any Subsidiary, including
(without limitation) any of the Real Property or any
improvements located thereon (regardless of whether such loss
or damage was insured), or any other event or condition, the
effect of which could reasonably be expected to have a
material adverse effect on the condition, business, operations
or prospects of the Company and the Subsidiaries, taken as a
whole. The foregoing shall not be construed to include (i)
events or conditions affecting the United States economy or
the funeral/cemetery industry in general, or (ii) the
consummation or failure to consummate any transaction
unrelated to the transactions hereunder.
(e) RELATED TRANSACTIONS. The Shareholders shall have
executed and delivered to the Purchaser the Registration
Agreement; each of Wilson and Boyer shall have executed and
delivered to the Acquisition Subsidiary their respective
Employment Agreements and their respec tive Non-Competition
Agreements; Wilson shall have exe cuted and delivered his plan
adoption agreement pursuant to the terms of the Program; the
Shareholders shall have
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executed and delivered the Co-Sale Agreement; the Related
Partnership shall have conveyed fee simple title to the Grant
Real Property to Wilson & Kratzer in the manner specified in
Section 4.2(g); and BWB shall have conveyed to Wilson &
Kratzer the Danville Property and the Danville Agreements in
the manner specified in Section 4.2(h).
(f) ENVIRONMENTAL, OSHA AND STRUCTURAL REPORTS. There
shall have been conducted, at the Purchaser's expense, (i) a
Phase I (and, if deemed necessary by Purchaser, a Phase II)
environmental audit of each parcel of Real Property by an
environmental consulting firm selected by Purchaser, (ii) a
health and safety inspection of each Home and each building on
the Cemetery by a person (who may be an employee of the
Purchaser) or firm selected by the Purchaser and who is
qualified and experienced in such matters in the funeral
service indus try, and (iii) a structural inspection of each
Home and each building on the Cemetery by an engineering firm
selected by the Purchaser. The Shareholders agree to take the
action (and pay any costs in taking such action) as may be
reasonably recommended by such firms and/or persons, up to
$10,000 in the aggregate at any Home or at the Cemetery, as
the case may be. In any event, it shall be a condition to the
Purchaser's obligations hereunder that the results of the
reports of such firms or persons (together with any remedial
action, if any, taken by Shareholders, regardless of the cost,
in response there to) shall be satisfactory to Purchaser in
its sole discretion.
(g) TITLE INSURANCE. The Shareholders shall have
provided to the Acquisition Subsidiary a Leasehold Policy of
Title Insurance (with respect to the Greer Real Property) and
one or more Owner's Policies of Title Insurance (with respect
to all other Real Property) issued to the applicable
Subsidiary in agreed-upon amounts, issued by one or more title
companies with offices in Contra Costa or Alameda County,
California and reasonably acceptable to the Purchaser (whether
one or more, the "Title Company"), insuring the applicable
Subsidiary's leasehold or ownership interest (as the case may
be) in the Real Property, subject only to the Per mitted Liens
and any standard printed exceptions included in a California
standard form Policy of Title Insurance; provided, however,
that such policy shall have deleted any exception regarding
restrictions or be limited to restrictions that are Permitted
Liens, any standard exception pertaining to discrepancies,
conflicts or shortages in area shall be deleted except for
"shortages in area", and any standard exception for taxes
shall be limited to subsequent years. The Purchaser and the
Shareholders shall each bear one-half the cost of issuing such
policies of title insurance under this paragraph (g) and for
the surveys under paragraph (h) below, provided that in no
event shall the Shareholders' aggregate share of such costs
exceed $35,000.
(h) SURVEY. The Purchaser shall have received an
ALTA/ACSM survey prepared by a licensed surveyor approved by
the Purchaser and acceptable to the Title Company, with
respect to each parcel of Real Property, which survey shall
comply with any applicable standards under
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California law, be sufficient for Title Company to delete any
survey exception contained in each applicable policy of title
insurance referred to in Section 8.1(g), save and except for
the phrase "shortages in area", and otherwise be in form and
content acceptable to the Purchaser.
(i) ZONING. The Purchaser shall have received a
letter or other acceptable form of communication from a
responsible officer of each of the municipalities or other
governmental authorities having jurisdiction over zoning
ordinances or regulations of all or substantially all of the
Real Property, or an opinion of counsel for the Company,
indicating the zoning classification for each such parcel,
affirmatively stating that the use thereof as funeral homes or
as a cemetery, as the case may be, complies with such
classification.
(j) RELIANCE LETTERS. The Purchaser shall have
received a letter or other written instrument acceptable in
form and substance to the Purchaser from each of Alphonse
deRoo & Associates and Hood and Strong, pursuant to which such
firms permit the Purchaser to rely upon their respective
review or compilation reports (as the case may be) referred to
in Section 5.5 and waive any requirement or defense of privity
in connection therewith.
(k) LIEN RELEASES. The holders of the Liens against
any assets of the Company, including any of the Real Property
(other than Permitted Liens, the vehicle lease described on
Schedule 5.9 and any Liens securing Closing Date Liabilities
which are deducted from the Merger Consideration under Section
3.1(c)(A)) shall have executed and delivered written releases
of such Liens, all in recordable form and otherwise acceptable
to the Purchaser.
(l) SCHEDULE DELIVERY. The Purchaser shall have
received those schedules identified on the Exhibit/Schedule
Page as "To Be Delivered," together with a certificate of the
Shareholders certifying that the same are true and complete,
on or before the 15th business day after the date hereof, and
within ten (10) (10) business days thereafter the Purchaser
shall not have evidenced its disapproval of any of such
schedules (or the information disclosed therein) by written
notice to such effect delivered to the Shareholders.
(m) BROWN & WILSON. All of the assets of Brown &
Wilson shall have been conveyed and transferred to one or more
of the Shareholders (or another person designated by them),
and Brown & Wilson shall have been dissolved and liquidated,
in accordance with the laws of the State of California,
without any further liabilities or obligations continuing
after the Closing Date.
(n) STEINER SHARES. Wilson & Kratzer shall have duly
and validly acquired all of the Steiner Shares, for a
consideration payable solely in cash, with the result that
Wilson & Kratzer shall become a wholly owned Subsidiary of the
Company.
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8.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and the Share holders
under this Agreement shall be subject to the following conditions, any
of which may be expressly waived by the Shareholders in writing:
(a) REPRESENTATIONS AND WARRANTIES TRUE; COVENANTS
PERFORMED. The Shareholders shall not have discovered any
material error, misstatement or omission in the
representations and warranties made by the Purchaser and the
Acquisition Subsidiary in Section 6 hereof; the
representations and warranties made by the Purchaser and the
Acquisition Subsidiary herein shall be deemed to have been
made again at and as of the time of Closing and shall then be
true and correct; the Purchaser and the Acquisition Subsidiary
shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or
complied with by them at or prior to the Closing; and the
Shareholders shall have received a certificate, signed by an
executive officer of each of the Purchaser and the Acquisition
Subsidiary, to the effect of the foregoing provisions of this
Section 8.2(a).
(b) OPINION OF LEGAL COUNSEL. The Purchaser shall
have caused to be delivered to the Shareholders an opinion of
Snell & Smith, A Professional Corporation, legal counsel for
the Purchaser and the Acquisition Subsidiary, in substantially
the form attached as Exhibit G.
(c) OPINION OF TAX COUNSEL. The Purchaser shall have
caused to be delivered to the Shareholders an opinion of
Arthur Andersen, L.L.P., tax counsel for the Purchaser and the
Acquisition Subsidiary, in form and substance reasonably
acceptable to the Shareholders, to the effect that the Series
F Preferred Stock constitutes "stock" for purposes of Code
Section 368(a)(2)(D).
(d) CONSENTS AND APPROVALS. The Purchaser and the
Acquisition Subsidiary shall have obtained all consents and
approvals of other persons and governmental authori ties to
the transactions contemplated by this Agreement.
(e) NO MATERIAL ADVERSE CHANGE. Prior to the Closing
there shall not have occurred any event or condition, the
effect of which could reasonably be expected to have a
material adverse effect on the condition, business, operations
or prospects of the Purchaser and its consolidated
subsidiaries, taken as a whole. The foregoing shall not be
construed to include (i) events or conditions affecting the
United States economy or the funeral/cemetery industry in
general, or (ii) the consummation or failure to consummate any
transaction unrelated to this transaction.
(f) RELATED TRANSACTIONS. The Purchaser shall have
executed and delivered to the Shareholders the Registration
Agreement; the number of positions on the Purchaser's Board of
Directors shall have been increased by one (1) and Wilson
shall have been elected to the vacancy created by such
increase; the Acquisition Subsidiary shall have executed and
delivered the Employment Agreements and the Non-Competition
Agreements
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to each of Wilson and Boyer; the Acquisition Subsidiary shall
have established the Program and executed and delivered to
Wilson his plan adoption agreement thereunder; and the
Carriage Stockholders shall have executed and delivered the
Co-Sale Agreement.
(g) MARKET PRICE. The Trading Price (as defined in
the Series F Designation) as of the second trading day
immediately preceding the Closing Date shall not be less than
$15.00 per share of Class A Common Stock.
(h) NO CHANGE IN CONTROL. The Purchaser shall not
have announced, or entered into any agreement for, a
transaction involving the sale of all or substantially all of
its assets, the merger or consolidation of the Purchaser with
an unaffiliated entity in which the Purchaser will not be the
survivor, the sale of more than 50% of the voting control of
the Purchaser's fully diluted Class A Common Stock, or any
other equivalent change in control transaction.
(i) NO CHANGE IN TAX LAW. There shall not have been
between the date of this Agreement and the Closing Date (i)
any change in the Code or the Revenue Regulations promulgated
thereunder, or (ii) any pronouncement by the Internal Revenue
Service to the effect that a change in the interpretation of
the Code or such regulations has occurred, in any case which,
solely by virtue of such change, the Merger shall not qualify
as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code.
8.3. MUTUAL CONDITIONS TO CLOSING. The respective obli
gations of each of the parties under this Agreement shall be
subject to the following mutual conditions, which may be
waived only by the unanimous agreement of all parties:
(a) HSR ACT. Any person required in connection with
the transactions contemplated hereby to file a notification
and report form in compliance with the HSR Act shall have
filed such form and the applicable waiting period with respect
to each such form (including any extension thereof by reason
of a request for additional information) shall have expired or
been terminated.
(b) CLOSING CERTIFICATES. The Company, the Purchaser
and the Acquisition Subsidiary shall have executed and
delivered to each other such certificates as to the incumbency
of its officers who are executing and delivering documents
hereunder and as to the adoption of resolutions by its
directors and (where applicable) shareholders, and shall have
provided certificates of public officials certifying as to
their existence and good standing, all as shall be reasonably
requested by the other parties hereunder.
(c) NO INJUNCTIONS. There shall not have been
entered or issued any injunction, writ or order of a
court of competent jurisdiction which prohibits or
substantially limits the consummation of the transactions
contemplated by this Agreement.
9. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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9.1. NATURE OF STATEMENTS. All statements contained in this
Agreement or any Schedule or Exhibit hereto shall be deemed
representations and warranties of the party executing or delivering the
same.
9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regard less
of any investigation made at any time by or on behalf of any party
hereto, all covenants, agreements, representations and warranties made
hereunder or pursuant hereto or any Schedule or Exhibit hereto or in
connection with the trans actions contemplated hereby and thereby shall
not terminate but shall survive the Closing and continue in effect
thereafter.
10. INDEMNIFICATION.
10.1. INDEMNIFICATION BY THE SHAREHOLDERS. THE SHAREHOLDERS
JOINTLY AND SEVERALLY AGREE TO INDEMNIFY AND HOLD HARMLESS THE
PURCHASER AND (FOLLOWING THE EFFECTIVE TIME OF THE MERGER) THE
SURVIVING CORPORATION, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS,
FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, OBLIGATIONS,
COSTS OR EXPENSES (ANY ONE SUCH ITEM BEING HEREIN CALLED A "LOSS" AND
ALL SUCH ITEMS BEING HEREIN COLLECTIVELY CALLED "LOSSES") WHICH ARE
CAUSED BY OR ARISE OUT OF (I) ANY BREACH OR DEFAULT IN THE PERFORMANCE
BY THE COMPANY OR ANY SHAREHOLDER OF ANY COVENANT OR AGREEMENT OF THE
COMPANY OR THE SHAREHOLDERS CONTAINED IN THIS AGREE MENT, (II) ANY
BREACH OF WARRANTY OR INACCURATE OR ERRONEOUS REPRESENTATION MADE BY
ANY SHAREHOLDER HEREIN, IN ANY SCHEDULE DELIVERED TO THE PURCHASER
PURSUANT HERETO OR IN ANY CERTIFI CATE OR OTHER INSTRUMENT DELIVERED BY
OR ON BEHALF OF THE COMPANY OR ANY SHAREHOLDER PURSUANT HERETO, (III)
ANY CLOSING DATE LIABILITY OF THE COMPANY OR ANY SUBSIDIARY OF ANY KIND
OR NATURE, WHETHER ABSOLUTE OR CONTINGENT, KNOWN OR UNKNOWN, TO THE
EXTENT NOT PAID OR DISCHARGED PRIOR TO THE EFFECTIVE TIME OF THE MERGER
OR NOT DISCLOSED PURSUANT TO THE CERTIFICATE OF THE SHAREHOLDERS
DELIVERED TO THE PURCHASER AS PROVIDED IN SECTION 3.7, (IV) ANY CLAIMS,
ACTIONS, SUITES, PROCEEDINGS OR INVESTIGATIONS DISCLOSED ON SCHEDULE
5.18, (V) ANY LIABILITIES OR OBLIGATIONS OF ANY NATURE RELATING TO THE
OPERATION OR OWNERSHIP OF BROWN & WILSON, AND (VI) ANY AND ALL ACTIONS,
SUITS, PROCEEDINGS, CLAIMS, DEMANDS, JUDGMENTS, COSTS AND EXPENSES
(INCLUDING REASONABLE LEGAL FEES) INCIDENT TO ANY OF THE FOREGOING.
10.2. INDEMNIFICATION BY THE PURCHASER. THE PUR CHASER AND THE
ACQUISITION SUBSIDIARY JOINTLY AND SEVERALLY AGREE TO INDEMNIFY AND
HOLD HARMLESS THE SHAREHOLDERS AND THEIR HEIRS AND ASSIGNS FROM AND
AGAINST ANY LOSSES WHICH ARE CAUSED BY OR ARISE OUT OF (I) ANY BREACH
OR DEFAULT IN THE PERFORMANCE BY THE PURCHASER OR THE ACQUISITION
SUBSIDIARY OF ANY COVENANT OR AGREEMENT OF THE PURCHASER OR THE
ACQUISITION SUBSIDIARY CONTAINED IN THIS AGREEMENT, (II) ANY BREACH OF
WARRANTY OR INACCURATE OR ERRONEOUS REPRESENTATION MADE BY THE
PURCHASER OR THE ACQUISITION SUBSIDIARY HEREIN OR IN ANY
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CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY OR ON BEHALF OF THE
PURCHASER OR THE ACQUISITION SUBSIDIARY PURSUANT HERETO, (III) ANY
CLOSING DATE LIABILITY OF THE COMPANY OR ANY SUBSIDIARY WHICH HAS BEEN
DEDUCTED FROM THE CASH PORTION OF THE MERGER CONSIDERATION PURSUANT TO
SECTION 3.1(C) OR ANY LIABILITY OF THE COMPANY OR ANY SUBSIDIARY WHICH
IS DESCRIBED IN CLAUSES (I) THROUGH (IV) OF SECTION 3.7, AND (IV) ANY
AND ALL ACTIONS, SUITS, PROCEEDINGS, CLAIMS, DEMANDS, JUDGMENTS, COSTS
AND EXPENSES (INCLUDING REASONABLE LEGAL FEES) INCIDENT TO ANY OF THE
FOREGOING.
10.3. THIRD PARTY CLAIMS. If any third person asserts a claim
against a party entitled to indemnification hereunder ("indemnified
party") that, if successful, might result in a claim for
indemnification against another party hereunder ("indemnifying party"),
the indemnifying party shall be given prompt written notice thereof and
shall have the right (i) to participate in the defense thereof and be
repre sented, at its own expense, by advisory counsel selected by it,
and (ii) to approve any settlement if the indemnifying party is, or
will be, required to pay any amounts in connec tion therewith, which
approval shall not be unreasonably withheld or delayed. Notwithstanding
the foregoing, if within ten (10) business days after delivery of the
indemnified party's notice described above, the indemnifying party
indicates in writing to the indemnified party that, as between such
parties, such claims shall be fully indemnified for by the indemnifying
party as provided herein, then the indem nifying party shall have the
right to control the defense of such claim, provided that the
indemnified party shall have the right (i) to participate in the
defense thereof and be repre sented, at its own expenses, by advisory
counsel selected by it, and (ii) to approve any settlement if the
indemnified party's interests are, or would be, affected thereby.
11. TERMINATION.
11.1. BEST EFFORTS TO SATISFY CONDITIONS. The Company and the
Shareholders agree to use their best efforts to bring about the
satisfaction of the conditions specified in Section 8.1 hereof; and the
Purchaser and the Acquisition Subsidiary agree to use their best
efforts to bring about the satisfaction of the conditions specified in
Section 8.2 hereof.
11.2. TERMINATION. This Agreement may be terminated prior to
Closing by:
(a) the mutual written consent of the Shareholders
and the Purchaser;
(b) the Purchaser if a material default shall be made
by the Company or any Shareholder in the observance or in the
due and timely performance by any of their covenants herein
contained, or if there shall have been a material breach or
misrepresentation by the Company or any Shareholder of any of
their warranties and representations herein contained, or if
the conditions of this Agreement to be complied with or
performed by the Company or any Shareholder at or before the
Closing shall not have been complied with or performed at the
time required for such compliance or performance and such
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noncompliance or nonperformance shall not have been expressly
waived by the Purchaser in writing;
(c) the Shareholders if a material default shall be
made by the Purchaser or the Acquisition Subsidiary in the
observance or in the due and timely performance by the
Purchaser or the Acquisition Subsidiary of any of their
covenants herein contained, or if there shall have been a
material breach or misrepresentation by the Purchaser or the
Acquisition Subsidiary of any of their warranties and
representations herein contained, or if the conditions of this
Agreement to be complied with or performed by the Purchaser
and the Acquisition Subsidiary at or before the Closing shall
not have been complied with or performed at the time required
for such compli ance or performance and such noncompliance or
nonper formance shall not have been expressly waived by the
Shareholders in writing; or
(d) either the Shareholders or the Purchaser, if the
Closing has not occurred by January 10, 1997.
11.3. LIABILITY UPON TERMINATION. If this Agreement is
terminated under paragraph (a) or (d) of Section 11.2, then no party
shall have any liability to any other parties here under. If this
Agreement is terminated under paragraph (b) or (c) of Section 11.2,
then (i) the party so terminating this Agreement shall not have any
liability to any other party hereto, provided the terminating party has
not breached any representation or warranty or failed to comply with
any of its covenants in this Agreement, and (ii) such termination shall
not prejudice the rights and remedies of the terminating party against
any other party which has breached any of its representations,
warranties or covenants herein prior to such termination.
12. POST-CLOSING COVENANTS.
12.1. TAX MATTERS. The Shareholders shall be fully responsible
for all federal, state and local taxes (including, but not limited to,
income taxes) of the Company accrued through the Closing and for
completing, filing and handling all tax returns and reports in respect
in of all periods through Closing and consummation of the Merger,
including responding to any inquiries, examinations or audits regarding
such taxes, returns and reports. Without limiting the generality of the
foregoing, the Shareholders will cause the preparation of a
short-period federal income tax return for the Company's current year
through the Closing Date (after which time the Surviving Corporation
and the Subsidiaries will be included as part of the consolidated group
of which the Purchaser is the parent corporation), and the Shareholders
shall pay or cause to be paid all federal income taxes in respect
thereof. Without limiting the generality of the "Losses" for which the
Purchaser and the Surviving Corporation shall be indemnified against
under Section 10.1, such indemnity shall additionally include all
Losses arising from (i) all federal, state and local taxes associated
with the operation of the Company and the Subsidiaries and the
ownership of their assets for all periods prior to the Effective Time
of the Merger, together with any fees, interest, fines or penalties
associated therewith, (ii) all returns and reports filed in respect of
all such taxes, and (iii) any federal and state income tax liability
(less the net
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present value of any realized net federal income tax benefits) arising
from any disallowance of the Merger as a "reorganization" within the
meaning of Code Section 368(a)(1)(A), other than resulting from a
violation of the Purchaser's covenants under Section 12.4.
12.2. EMPLOYEE MATTERS. At Closing, the Shareholders will
cause the Company to pay or satisfy all vacation, holiday and other
accrued benefits to employees of the Company and the Subsidiaries which
are then outstanding. Following the Closing, the Shareholders shall be
fully responsible for funding all necessary contributions to each
pension, profit sharing or other similar employee benefit plan
described on Schedule 5.22 that is required to be qualified under ERISA
(collectively, "Pension Plans") for all periods, and following the
Closing the Shareholders shall take all necessary action to terminate
the Pension Plans in accordance with applicable law, in connection with
which the Shareholders shall file all necessary forms and pay all
appropriate fees, fines, penalties and other sums due in respect
thereof and make any necessary distributions to plan beneficiaries.
Without limiting the generality of Section 10.1, the "Losses" against
which the Purchaser and the Surviving Corporation shall be indemnified
against shall include all such liabilities, obligations and
responsibilities arising in connection with the Pension Plans (whether
arising before or after the Closing). The Shareholders shall keep the
Purchaser reasonably informed regarding the progress of the
termination, winding up and distribution of the Pension Plans.
12.3. LOCK-UP AGREEMENT. The Shareholders agree with the
Purchaser and with the managing underwriters of the initial public
offering of the Purchaser's Class A Common Stock ("Underwriters") that,
during the period commencing on the Closing Date and ending on February
7, 1997, no Shareholder will, without the prior written consent of the
Purchaser and the Underwriters, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of Purchaser Stock, whether owned on
the date hereof or hereafter acquired by the Shareholders or with
respect to which the Shareholders have or thereafter acquire the power
of disposition, or file any registration statement under the Securities
Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Purchaser Stock, whether any such swap
or transaction is to be settled by delivery of Purchaser Stock or other
securities, in cash or otherwise.
12.4. NO SALE OF ASSETS. For a period of three (3) years
following the Closing, the Purchaser shall not cause or allow the
Surviving Corporation to dispose of a substantial interest in the stock
of any Subsidiary or cause or allow either Subsidiary to sell or
otherwise dispose of all or any material portion of its assets to any
person, other than (in any such case) to another subsidiary included in
the consolidated group of corporations of which the Purchaser is the
corporate parent, provided such transferee subsidiary is at the same
relative tier of ownership as the Subsidiary making such disposition,
unless the Purchaser shall have first delivered to the Shareholders (i)
the written opinion
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<PAGE>
(reasonably acceptable in form and substance to the Shareholders) of
Arthur Andersen L.L.P. or another "big six" public accounting firm that
such disposition should not cause a disallowance of the Merger as a
"reorganization" within the meaning of Code Section 368(a)(1)(A), and
(ii) the Purchaser's written agreement (reasonably acceptable in form
and substance to the Shareholders), to indemnify the Shareholders for
any Losses (including interest, fines, fees and penalties) they may
suffer as a result of such disallowance due to such disposition.
Without limiting the generality of the "Losses" for which the
Shareholders shall be indemnified against hereunder, such indemnity
shall include any federal and state income tax liability arising from
any disallowance of the Merger as a "reorganization" within the meaning
of Code Section 368(a)(1)(A), as a result of such disposition.
12.5. CURRENT PUBLIC INFORMATION. For so long after the
Closing as the Shareholders hold Purchaser Stock and are eligible to
dispose of Class A Common Stock in reliance on Rule 144 promulgated
under the Securities Act of 1933, as amended (except to the extent that
Rule 144(k) is available), the Purchaser shall maintain "current public
information" as required under Rule 144(c) (for as long as Rule 144
requires such current public information to be so maintained for
dispositions to be permitted under Rule 144).
13. MISCELLANEOUS.
13.1. EXPENSES. Regardless of whether the Closing occurs, the
parties shall pay their own expenses in connection with the
negotiation, preparation and carrying out of this Agreement and the
consummation of the transactions contem plated herein. If the
transactions contemplated by this Agreement and the Exhibits hereto are
consummated, the Company shall have no obligation for, nor shall the
Company be charged with, any such expenses of the Shareholders. All
finders' and similar fees and expenses of Thomas Pierce & Co. shall be
borne solely by the Purchaser, and in no event shall any Shareholder be
charged or responsible therefor. All sales, transfer, stamp or other
similar taxes, if any, which may be assessed or charged in connection
with the transactions hereunder shall be borne by the Shareholders.
13.2. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to
have been given when personally delivered or three business days
following the date, mailed, first class, registered or certified mail,
postage prepaid, as follows:
(i) if to the Company or any Shareholder, to:
Wilson & Kratzer Mortuaries
455 - 24th Street
Richmond, California 94804
Facsimile: (415) 233-4383
with a copy to:
Freeland, Cooper, LeHocky & Hamburg
150 Spear Street, Suite 1800
San Francisco, California 94105
Attention: Mr. Steven A. Cooper, or
Mrs. Kate C. Freeland
Facsimile: (415) 495-4332
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<PAGE>
(ii) if to the Purchaser or the Acquisition
Subsidiary, to:
Carriage Services, Inc.
1300 Post Oak Boulevard, Suite 1500
Houston, Texas 77056
Attention: Mr. Melvin C. Payne
Facsimile: (713) 556-7401
with a copy to:
Snell & Smith, A Professional Corporation
1000 Louisiana, Suite 3650
Houston, Texas 77002
Attention: Mr. W. Christopher Schaeper
Facsimile: (713) 651-8010
or to such other address as shall be given in writing by any party to
the other parties hereto.
13.3. ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties;
provided, however, that following the Closing the Purchaser or the
Surviving Corporation may assign its rights hereunder without the
consent of the Shareholders to a successor-in-interest to the Purchaser
or the Surviving Corporation, as the case may be (whether by merger,
sale of assets or otherwise).
13.4. SUCCESSORS BOUND. Subject to the provisions of Section
13.3, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, heirs and
personal representatives.
13.5. SECTION AND PARAGRAPH HEADINGS. The section and
paragraph headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.
13.6. AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by all of the parties hereto.
13.7. ENTIRE AGREEMENT. This Agreement and the Exhibits,
Schedules, certificates and other documents referred to herein,
constitute the entire agreement of the parties hereto, and supersede
all prior understandings with respect to the subject matter hereof and
thereof.
13.8. GOVERNING LAW. This Agreement shall be construed and
enforced under and in accordance with and governed by the law of the
State of California.
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13.9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
THE PURCHASER:
CARRIAGE SERVICES, INC.
By:__________________________
MELVIN C. PAYNE, President
THE ACQUISITION SUBSIDIARY:
CARRIAGE FUNERAL SERVICES
OF CALIFORNIA, INC.
By:__________________________
MELVIN C. PAYNE, President
THE COMPANY:
CNM
By:__________________________
MARK F. WILSON, President
THE SHAREHOLDERS:
_____________________________
MARK WILSON
_____________________________
WENDY WILSON BOYER
_____________________________
WARREN A. BROWN, IV
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THE BOYER FAMILY TRUST DATED
SEPTEMBER 22, 1986
By:__________________________
William Boyer, Trustee
By:__________________________
Wendy Wilson Boyer, Trustee
TRUST B UNDER AGREEMENT DATED
SEPTEMBER 9, 1977
By:__________________________
Marie Dietz, Trustee
By:__________________________
Mark F. Wilson, Trustee
TRUST C UNDER AGREEMENT DATED
SEPTEMBER 9, 1977
By:__________________________
Marie Dietz, Trustee
By:__________________________
Mark F. Wilson, Trustee
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EXHIBIT / SCHEDULE PAGE
EXHIBIT DESCRIPTION
A Registration Agreement
B-1 Employment Agreement (Mark Wilson)
B-2 Employment Agreement (Wendy Wilson Boyer)
C Carriage Partners Program
D-1 Non-Competition Agreement (Mark Wilson)
D-2 Non-Competition Agreement (Wendy Wilson Boyer)
E Co-Sale Agreement
F Opinion of Counsel for Company and Shareholders
G Opinion of Counsel for Purchaser and Acquisition Subsidiary
H Series F Designation
SCHEDULES DELIVERED HEREWITH
SCHEDULE DESCRIPTION
I Description of the Homes and the Cemetery
II The Shareholders
5.4 Subsidiaries
5.5 Financial Information
5.6(c) Danville Property
5.9 Liabilities
5.15 Intangible Rights
5.18 Pending or Threatened Litigation
5.20 Environmental Matters
5.23 Affiliated Party Transactions
5.26 Consents
7.1(a) Excluded Assets
SCHEDULES TO BE DELIVERED
SCHEDULE DESCRIPTION
5.6 Real Property
5.12 Fixed Assets
5.13 Contracts and Commitments
5.14 Preneed Contracts and Trust Accounts
5.17 Licenses
5.21 Employees
5.22 Employee Benefit Plans
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================================================================================
CARRIAGE SERVICES, INC.
1995 STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 7, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. GENERAL............................................................1
Section 1.1. PURPOSE..................................................1
Section 1.2. ADMINISTRATION...........................................1
Section 1.3. ELIGIBILITY FOR PARTICIPATION............................2
Section 1.4. TYPES OF AWARDS UNDER PLAN...............................2
Section 1.5. AGGREGATE LIMITATION ON AWARDS...........................2
Section 1.6. EFFECTIVE DATE AND TERM OF PLAN..........................3
ARTICLE II. STOCK OPTIONS.....................................................3
Section 2.1. AWARD OF STOCK OPTIONS...................................3
Section 2.2. STOCK OPTION AGREEMENTS..................................4
Section 2.3. STOCK OPTION PRICE.......................................4
Section 2.4. TERM AND EXERCISE........................................4
Section 2.5. MANNER OF PAYMENT........................................4
Section 2.6. DELIVERY OF SHARES.......................................4
Section 2.7. DEATH, RETIREMENT AND TERMINATION OF
EMPLOYMENT OF OPTIONEE...................................4
Section 2.8. TAX ELECTION.............................................4
Section 2.9. EFFECT OF EXERCISE.......................................5
ARTICLE III. INCENTIVE STOCK OPTIONS .........................................5
Section 3.1. AWARD OF INCENTIVE STOCK OPTIONS.........................5
Section 3.2. INCENTIVE STOCK OPTION AGREEMENTS........................5
Section 3.3. INCENTIVE STOCK OPTION PRICE.............................5
Section 3.4. TERM AND EXERCISE........................................5
Section 3.5. MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT...........5
Section 3.6. DEATH OF OPTIONEE........................................6
Section 3.7. RETIREMENT OR DISABILITY.................................6
Section 3.8. TERMINATION FOR OTHER REASONS............................6
Section 3.9. APPLICABILITY OF STOCK OPTIONS SECTIONS..................6
ARTICLE IV. RELOAD OPTIONS ...................................................6
Section 4.1. AUTHORIZATION OF RELOAD OPTIONS..........................6
Section 4.2. RELOAD OPTION AMENDMENT..................................6
Section 4.3. RELOAD OPTION PRICE......................................7
Section 4.4. TERM AND EXERCISE........................................7
Section 4.5. TERMINATION OF EMPLOYMENT................................7
Section 4.6. APPLICABILITY OF STOCK OPTIONS SECTIONS..................7
ARTICLE V. ALTERNATE APPRECIATION RIGHTS .....................................7
Section 5.1. AWARD OF ALTERNATE APPRECIATION RIGHTS...................7
Section 5.2. ALTERNATE APPRECIATION RIGHTS AGREEMENT..................7
Section 5.3. EXERCISE.................................................7
Section 5.4. AMOUNT OF PAYMENT........................................7
Section 5.5. FORM OF PAYMENT..........................................7
Section 5.6. EFFECT OF EXERCISE.......................................8
Section 5.7. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH
OR DISABILITY............................................8
(i)
<PAGE>
ARTICLE VI. LIMITED RIGHTS ...................................................8
Section 6.1. AWARD OF LIMITED RIGHTS..................................8
Section 6.2. LIMITED RIGHTS AGREEMENT.................................8
Section 6.3. EXERCISE PERIOD..........................................8
Section 6.4. AMOUNT OF PAYMENT........................................8
Section 6.5. FORM OF PAYMENT..........................................8
Section 6.6. EFFECT OF EXERCISE.......................................9
Section 6.7. RETIREMENT OR DISABILITY.................................9
Section 6.8. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.......9
Section 6.9. TERMINATION RELATED TO A CHANGE IN CONTROL...............9
ARTICLE VII. BONUS STOCK AWARDS...............................................9
Section 7.1. AWARD OF BONUS STOCK.....................................9
Section 7.2. STOCK BONUS AGREEMENTS...................................9
Section 7.3. TRANSFER RESTRICTION.....................................9
ARTICLE VIII. MISCELLANEOUS ..................................................9
Section 8.1. GENERAL RESTRICTION......................................9
Section 8.2. NON-TRANSFERABILITY.....................................10
Section 8.3. WITHHOLDING TAXES.......................................10
Section 8.4. RIGHT TO TERMINATE EMPLOYMENT...........................10
Section 8.5. NON-UNIFORM DETERMINATIONS..............................10
Section 8.6. RIGHTS AS A SHAREHOLDER.................................10
Section 8.7. DEFINITIONS.............................................10
Section 8.8. LEAVES OF ABSENCE.......................................11
Section 8.9. NEWLY ELIGIBLE EMPLOYEES................................11
Section 8.10. ADJUSTMENTS............................................11
Section 8.11. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.............11
Section 8.12. AMENDMENT OF THIS PLAN.................................12
(ii)
<PAGE>
CARRIAGE SERVICES, INC.
1995 STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 7,1997
ARTICLE I. GENERAL
Section 1.1. PURPOSE. The purposes of this Stock Incentive Plan (the
"Plan") are to: (1) closely associate the interests of the management of
Carriage Services, Inc., a Delaware corporation (the "Company"), and its
subsidiaries and affiliates (the Company, together with its subsidiaries and
affiliates, being hereafter collectively referred to as "Carriage") with the
stockholders of the Company to generate an increased incentive to contribute to
the Company's future success and prosperity, thus enhancing the value of the
Company for the benefit of its stockholders; (2) provide management with a
proprietary ownership interest in the Company commensurate with Carriage's
performance, as reflected in increased shareholder value; (3) maintain
competitive compensation levels thereby attracting and retaining highly
competent and talented directors and employees; and (4) provide an incentive to
management for continuous employment with Carriage. The Plan as set forth herein
constitutes an amendment and restatement, effective as of the date of the
adoption of this amendment and restatement (the "Restatement Effective Date") by
the Board of Directors of the Company (the "Board"), of the Plan as previously
adopted and as subsequently amended by the Company, and shall supersede and
replace in its entirety such prior plan.
Section 1.2. ADMINISTRATION.
(a) This Plan shall be administered by a committee (the
"Committee") of, and appointed by, the Board, which shall be comprised
solely of two or more "outside directors" within the meaning of section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
applicable interpretive authority thereunder.
(b) The Committee shall have the authority, in its sole
discretion and from time to time to:
(i) designate the employees or classes of employees of
Carriage and other persons who are eligible to participate in
this Plan;
(ii) grant awards ("Awards") provided in this Plan in
such form and amount as the Committee shall determine;
(iii) impose such limitations, restrictions, and
conditions, not inconsistent with this Plan, upon any such Award
as the Committee shall deem appropriate; and
(iv) interpret this Plan and any agreement, instrument, or
other document executed in connection with this Plan; adopt,
amend, and rescind rules and regulations relating to this Plan;
and make all other determinations and take all other action
necessary or advisable for the implementation and administration
of this Plan.
(c) Decisions and determinations of the Committee on all matters
relating to this Plan shall be in its sole discretion and shall be
final, conclusive, and binding upon all persons, including the Company,
any participant, any shareholder of the Company, and any employee of
Carriage. A majority of the members of the Committee may determine its
actions and fix the time and place of its meetings. No member of the
Committee shall be liable for any action taken or decision made in good
faith relating to this Plan or any Award thereunder.
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<PAGE>
Section 1.3. ELIGIBILITY FOR PARTICIPATION. Participants in this Plan
("Participants") shall be selected by the Committee from the directors,
executive officers and other employees of Carriage who are responsible for or
contribute to the management, growth, success and, profitability of Carriage,
and from persons (not otherwise specified above) who are former owners of
funeral homes or cemeteries that have been acquired by Carriage. In making this
selection and in determining the form and amount of Awards, the Committee shall
consider any factors deemed relevant, including the individual's functions,
responsibilities, value of services to Carriage, and past and potential
contributions to Carriage's profitability and growth.
Section 1.4. TYPES OF AWARDS UNDER PLAN. Awards under this Plan may be
in the form of any or more of the following:
(i) Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
(iii) Reload Options, as described in Article IV;
(iv) Alternate Appreciation Rights, as described in Article V;
(v) Limited Rights, as described in Article VI; and/or
(vi) Stock Bonus Awards, as described in Article VII.
Awards under this Plan shall be evidenced by an Award Agreement between the
Company and the recipient of the Award ("Award Agreement"), in form and
substance satisfactory to the Committee, and not inconsistent with this Plan.
Section 1.5. AGGREGATE LIMITATION ON AWARDS.
(a) Shares of stock which may be issued under this Plan shall be
authorized and unissued or treasury shares of either (i) Class A Common
Stock, $.01 par value, of the Company ("Class A Common Stock") or (ii)
Class B Common Stock, $.01 par value, of the Company ("Class B Common
Stock"). As used herein, the term 'Common Stock' shall mean both Class A
Common Stock and Class B Common Stock. The maximum number of shares of
Common Stock that may be issued under this Plan shall be 700,000. The
number of shares that may be issued under this Plan and as to which
options may be granted shall be subject to adjustment as provided in
Sections 8.10 and 8.11. Notwithstanding any provision in this Plan to
the contrary, (1) Awards under this Plan that were granted prior to the
date of the initial public offering of shares of Class A Common Stock
shall be satisfied in shares of Class B Common Stock and (2) Awards
under this Plan that are granted on or after the date of the initial
public offering of shares of Class A Common Stock shall be satisfied in
shares of Class A Common Stock. Further, upon the exercise of an Award,
any exercise payment which is made in shares of Common Stock in
accordance with Section 2.5 hereof shall be made (A) only in shares of
Class B Common Stock if such Award is to be satisfied in Class B Common
Stock or (B) only in shares of Class A Common Stock if such Award is to
be satisfied in shares of Class A Common Stock. Notwithstanding any
provision in the Plan to the contrary, the maximum number of shares of
Common Stock that may be subject to Awards granted to any one employee
during a calendar year is 200,000 shares of Common Stock subject to
adjustment as provided in Sections 8.10 and 8.11. The limitation set
forth in the preceding sentence shall be applied in a manner which will
permit compensation generated under the Plan to constitute
"performance-based" compensation for purposes of section 162(m) of the
Code, including, without limitation, counting against such maximum
number of shares, to the extent required under section 162(m) of the
Code and applicable interpretive authority thereunder, any shares
subject to Stock Options, Reload Options, Alternative Appreciation
Rights and, if applicable, Bonus Stock Awards, that are canceled or
repriced.
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(b) For purposes of calculating the maximum number of shares of
Common Stock that may be issued under this Plan:
(i) all the shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when
cash is used as full payment for shares issued upon exercise of a
Stock Option, Incentive Stock Option, or Reload Option;
(ii) only the shares issued (including the shares, if any,
withheld for tax withholding requirements) as a result of an
exercise of Alternate Appreciation Rights shall be counted; and
(iii) only the net shares issued (including the shares, if
any, withheld for tax withholding requirements) shall be counted
when shares of Common Stock or another Award under this Plan are
used or withheld as full or partial payment for shares issued
upon exercise of a Stock Option, Incentive Stock Option, or
Reload Option.
(c) In addition to shares of Common Stock actually issued
pursuant to the exercise of Stock Options, Incentive Stock Options,
Reload Options, or Alternate Appreciation Rights, there shall be deemed
to have been issued a number of shares equal to the number of shares of
Common Stock in respect of which Limited Rights (as described in Article
VI) shall have been exercised.
(d) Shares tendered by a participant or withheld as payment for
shares issued upon exercise of a Stock Option, Incentive Stock Option,
or Reload Option shall be available for issuance under this Plan. Any
shares of Common Stock subject to a Stock Option, Incentive Stock
Option, or Reload Option that for any reason is terminated unexercised
or expires shall again be available for issuance under this Plan, but
shares subject to a Stock Option, Incentive Stock Option, or Reload
Option that are not issued as a result of the exercise of Limited Rights
shall not again be available for issuance under this Plan.
Section 1.6. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan originally became effective on July 1, 1995. This
amendment and restatement of the Plan shall become effective upon the
Restatement Effective Date, provided that this amendment and restatement
of the plan is approved by the stockholders of the Company within twelve
(12) months thereafter.
(b) No Awards shall be made under this Plan after July 1, 2005;
provided, however, that this Plan and all Awards made under this Plan
prior to such date shall remain in effect until such Awards have been
satisfied or terminated in accordance with this Plan and the terms of
such Awards.
(c) Notwithstanding any provision herein to the contrary, if this
amendment and restatement of the Plan is not approved by the
stockholders of the Company within twelve (12) months after the
Restatement Effective Date, then any Award made on or after the
Restatement Effective Date shall be void and canceled in its entirety,
and the Plan shall terminate with respect to any shares of Common Stock
for which Awards were not granted prior to the Restatement Effective
Date.
ARTICLE II. STOCK OPTIONS
Section 2.1. AWARD OF STOCK OPTIONS. The Committee may from time to
time, and subject to the provisions of this Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in this Plan
one or more options to purchase the number of shares of Common Stock ("Stock
Options") allotted by the Committee. The date a Stock Option is granted shall
mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to this Plan.
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Section 2.2. STOCK OPTION AGREEMENTS. The grant of a Stock Option shall
be evidenced by a written Award Agreement, executed by the Company and the
holder of a Stock Option (the "Optionee"), stating the number of shares of
Common Stock subject to the Stock Option evidenced thereby, and in such form as
the Committee may from time to time determine.
Section 2.3. STOCK OPTION PRICE. The option price per share of Common
Stock deliverable upon the exercise of a Stock Option shall be an amount
selected by the Committee and shall not be less than 100% of the fair market
value of a share of Common Stock on the date the Stock Option is granted.
Section 2.4. TERM AND EXERCISE. A Stock Option shall not be exercisable
prior to six months from the date of its grant and unless a shorter period is
provided by the Committee or by another Section of this Plan, may be exercised
during a period of ten years from the date of grant thereof (the "Option Term").
No Stock Option shall be exercisable after the expiration of its Option Term.
Section 2.5. MANNER OF PAYMENT. Each Award Agreement providing for Stock
Options shall set forth the procedure governing the exercise of the Stock Option
granted thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the Optionee shall pay to the Company,
in full, the option price for such shares with cash, or with previously owned
Common Stock, or at the discretion of the Committee, in whole or in part with,
the surrender of another Award under this Plan, the withholding of shares of
Common Stock issuable upon exercise of such Stock Option, other property, or any
combination thereof (each based on the fair market value of such Common Stock,
Award or other property on the date the Stock Option is exercised as determined
by the Committee).
Section 2.6. DELIVERY OF SHARES. As soon as practicable after receipt of
payment, the Company shall deliver to the Optionee a certificate or certificates
for such shares of Common Stock. The Optionee shall become a shareholder of the
Company with respect to Common Stock represented by share certificates so issued
and as such shall be fully entitled to receive dividends, to vote and to
exercise all other rights of a shareholder.
Section 2.7. DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT OF
OPTIONEE. Unless otherwise provided in an Award Agreement or otherwise agreed to
by the Committee:
(a) Upon the death of the Optionee, any rights to the extent
exercisable on the date of death may be exercised by the Optionee's
estate, or by a person who acquires the right to exercise such Stock
Option by bequest or inheritance or by reason of the death of the
Optionee, provided that such exercise occurs within both the remaining
effective term of the Stock Option and one year after the Optionee's
death. The provisions of this Section shall apply notwithstanding the
fact that the Optionee's employment may have terminated prior to death,
but only to the extent of any rights exercisable on the date of death.
(b) Upon termination of the Optionee's employment by reason of
retirement or permanent disability (as each is determined by the
Committee), the Optionee may, within up to a maximum of 36 months from
the date of termination (or such shorter period of time as may be
determined by the Committee in any instance, as reflected in each
Optionee's Award Agreement), exercise any Stock Options to the extent
such options are exercisable during such 36-month period.
(c) Except as provided in Subsections (a) and (b) of this Section
2.7, or except as otherwise determined by the Committee, all Stock
Options shall terminate three months after the date of the termination
of the Optionee's employment (or such shorter period of time as may be
determined by the Committee in any instance, as reflected in each
Optionee's Award Agreement).
Section 2.8. TAX ELECTION. Provided that the Company is a "reporting
company" under the Securities Exchange Act of 1934, as amended, at the time of
exercise of a Stock Option, recipients of Stock Options who are directors or
executive officers of the Company or who own more than 10% of the Common Stock
of the Company ("Section 16(a) Option Holders") at the time of exercise of a
Stock Option may elect, in lieu of paying to the
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Company an amount required to be withheld under applicable tax laws in
connection with the exercise of a Stock Option in whole or in part, to have the
Company withhold shares of Common Stock having a fair market value equal to the
amount required to be withheld. Such election may not be made prior to six
months following the grant of the Stock Option, except in the event of a Section
16(a) Option Holder's death or disability. The election may be made at the time
the Stock Option is exercised by notifying the Company of the election,
specifying the amount of such withholding and the date on which the number of
shares to be withheld is to be determined ("Tax Date"), which shall be either
(i) the date the Stock Option is exercised or (ii) a date six months after the
Stock Option was granted, if later. The number of shares of Common Stock to be
withheld to satisfy the tax obligation shall be the amount of such tax liability
divided by the fair market value of the Common Stock on the Tax Date (or if not
a business day, on the next closest business day). If the Tax Date is not the
exercise date, the Company may issue the full number of shares of Common Stock
to which the Section 16(a) Option Holder is entitled, and such option holder
shall be obligated to tender to the Company on the Tax Date a number of such
shares necessary to satisfy the withholding obligation. Certificates
representing such shares of Common Stock shall bear a legend describing such
Section 16(a) Option Holders obligation hereunder.
Section 2.9. EFFECT OF EXERCISE. The exercise of any Stock Option shall
cancel that number of related Alternate Appreciation Rights and/or Limited
Rights, if any, that is equal to the number of shares of Common Stock purchased
pursuant to said option unless otherwise agreed by the Committee in an Award
Agreement or otherwise.
ARTICLE III. INCENTIVE STOCK OPTIONS
Section 3.1. AWARD OF INCENTIVE STOCK OPTIONS. The Committee may, from
time to time and subject to the provisions of this Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in this Plan
one or more "incentive stock options" (intended to qualify as such under the
provisions of Section 422 of the Code ("Incentive Stock Options") to purchase
the number of shares of Common Stock allotted by the Committee. The date an
Incentive Stock Option is granted shall mean the date selected by the Committee
as of which the Committee allots a specific number of shares to a participant
pursuant to this Plan.
Section 3.2. INCENTIVE STOCK OPTION AGREEMENTS. The grant of an
Incentive Stock Option shall be evidenced by a written Award Agreement, executed
by the Company and the holder of an Incentive Stock Option (the "Optionee"),
stating the number of shares of Common Stock subject to the Incentive Stock
Option evidenced thereby, and in such form as the Committee may from time to
time determine.
Section 3.3. INCENTIVE STOCK OPTION PRICE. The option price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall be
at least 100% of the fair market value of a share of Common Stock on the date
the Incentive Stock Option is granted; provided, however, the option price per
share of Common Stock deliverable upon the exercise of an Incentive Stock Option
granted to any owner of 10% or more of the total combined voting power of all
classes of stock of the Company and its subsidiaries shall be at least 110% of
the fair market value of a share of Common Stock on the date the Incentive Stock
Option is granted.
Section 3.4. TERM AND EXERCISE. Each Incentive Stock Option shall not be
exercisable prior to six months from the date of its grant and, unless a shorter
period is provided by the Committee or another Section of this Plan, may be
exercised during a period of ten years from the date of grant thereof (the
"Option Term"). No Incentive Stock Option shall be exercisable after the
expiration of its Option Term.
Section 3.5. MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT. To the
extent that the aggregate fair market value (determined at the time the
respective Incentive Stock Option is granted) of stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its parent and subsidiary corporations exceeds $100,000, such excess
Incentive Stock Options shall be treated as options which do not constitute
Incentive Stock Options. The Committee shall determine, in accordance with
applicable provisions of the Code, Treasury Regulations and other administrative
pronouncements,
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which of an Optionee's Incentive Stock Options will not constitute Incentive
Stock Options because of such limitation and shall notify the Optionee of such
determination as soon as practicable after such determination.
Section 3.6. DEATH OF OPTIONEE.
(a) Upon the death of the Optionee, any Incentive Stock Option
exercisable on the date of death may be exercised by the Optionee's
estate or by a person who acquires the right to exercise such Incentive
Stock Option by bequest or inheritance or by reason of the death of the
Optionee, provided that such exercise occurs within both the remaining
option term of the Incentive Stock Option and one year after the
Optionee's death.
(b) The provisions of this Section shall apply notwithstanding
the fact that the Optionee's employment may have terminated prior to
death, but only to the extent of any Incentive Stock Options exercisable
on the date of death.
Section 3.7. RETIREMENT OR DISABILITY. Upon the termination of the
Optionee's employment by reason of permanent disability or retirement (as each
is determined by the Committee), the Optionee may, within 36 months from the
date of such termination of employment (or such shorter period of time as may be
determined by the Committee in any instance, as reflected in each Optionee's
Award Agreement), exercise any Incentive Stock Options to the extent such
Incentive Stock Options were exercisable at the date of such termination of
employment. Notwithstanding the foregoing, the tax treatment available pursuant
to Section 422 of the Code upon the exercise of an Incentive Stock Option will
not be available to an Optionee who exercises any Incentive Stock Options more
than (i) 12 months after the date of termination of employment due to permanent
disability or (ii) three months after the date of termination of employment due
to retirement.
Section 3.8. TERMINATION FOR OTHER REASONS. Except as provided in
Sections 3.6 and 3.7 or except as otherwise determined by the Committee, all
Incentive Stock Options shall terminate three months after the date of the
termination of the Optionee's employment (or such shorter period of time as may
be determined by the Committee in any instance, as reflected in each Optionee's
Award Agreement).
Section 3.9. APPLICABILITY OF STOCK OPTIONS SECTIONS. Sections 2.5,
Manner of Payment; 2.6, Delivery of Shares; 2.8, Tax Elections and 2.9, Effect
of Exercise, applicable to Stock Options, shall apply equally to Incentive Stock
Options. Such Sections are incorporated by reference in this Article III as
though fully set forth herein.
ARTICLE IV. RELOAD OPTIONS
Section 4.1. AUTHORIZATION OF RELOAD OPTIONS. Concurrently with or
subsequent to the award of Stock Options and/or the award of Incentive Stock
Options to any participant in this Plan, the Committee may authorize reload
options ("Reload Options") to purchase shares of Common Stock. The number of
Reload Options shall equal (i) the number of shares of Common Stock used to pay
the exercise price of the underlying Stock Options or Incentive Stock Options
and (ii) to the extent authorized by the Committee, the number of shares of
Common Stock withheld by the Company in payment of the exercise price underlying
the Stock Option or Incentive Stock Option or used to satisfy any tax
withholding requirement incident to the exercise of the underlying Stock Options
or Incentive Stock Options. The grant of a Reload Option will become effective
upon the exercise of underlying Stock Options, Incentive Stock Options, or
Reload Options through the use of shares of Common Stock held by the Optionee or
the withholding of shares by the Company in payment of the exercise price of the
underlying Stock Option or Incentive Stock Option held by the Optionee.
Notwithstanding the fact that the underlying option may be an Incentive Stock
Option, a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Code.
Section 4.2. RELOAD OPTION AMENDMENT. Each Award Agreement shall state
whether the Committee has authorized Reload Options with respect to the Stock
Options and/or Incentive Stock Options covered by such Agreement. Upon the
exercise of an underlying Stock Option, Incentive Stock Option, or other Reload
Option, the
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Reload Option will be evidenced by an amendment to the underlying Award
Agreement in such form as the Committee shall approve.
Section 4.3. RELOAD OPTION PRICE. The option price per share of Common
Stock deliverable upon the exercise of a Reload Option shall be the fair market
value of a share of Common Stock on the date the grant of the Reload Option
becomes effective.
Section 4.4. TERM AND EXERCISE. Each Reload Option is fully exercisable
six months from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Stock Option
and/or Incentive Stock Option.
Section 4.5. TERMINATION OF EMPLOYMENT. Unless otherwise determined by
the Committee in an Award Agreement or otherwise, no additional Reload Options
shall be granted to Optionees when Stock Options, Incentive Stock Options,
and/or Reload Options are exercised pursuant to the terms of this Plan following
termination of the Optionee's employment.
Section 4.6. APPLICABILITY OF STOCK OPTIONS SECTIONS. Sections 2.5,
Manner of Payment; 2.6 Delivery of Shares; 2.7, Death, Retirement and
Termination of Employment of Optionee; 2.8, Tax Elections; and 2.9, Effect of
Exercise, applicable to Stock Options, shall apply equally to Reload Options.
Such Sections are incorporated by reference in this Article IV as though fully
set forth herein.
ARTICLE V. ALTERNATE APPRECIATION RIGHTS
Section 5.1. AWARD OF ALTERNATE APPRECIATION RIGHTS. Concurrently with
or subsequent to the award of any Stock Option, Incentive Stock Option, or
Reload Option to purchase one or more shares of Common Stock, the Committee may,
subject to the provisions of this Plan and such other terms and conditions as
the Committee may prescribe, award to the Optionee with respect to each share of
Common Stock covered by an Option, a related alternate appreciation right
permitting the Optionee to be paid the appreciation on the Option in lieu of
exercising the Option ("Alternate Appreciation Right").
Section 5.2. ALTERNATE APPRECIATION RIGHTS AGREEMENT. Alternate
Appreciation Rights shall be evidenced by written Award Agreements in such form
as the Committee may from time to time determine.
Section 5.3. EXERCISE. An Optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an equal
number of Options, elect to exercise one or more Alternate Appreciation Rights
and thereby become entitled to receive from the Company payment in Common Stock
of the number of shares determined pursuant to Sections 5.4 and 5.5. Alternate
Appreciation Rights shall be exercisable only to the same extent and subject to
the same conditions as the Options related thereto are exercisable, as provided
in this Plan. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any Alternate Appreciation Rights.
Section 5.4. AMOUNT OF PAYMENT. The amount of payment to which an
Optionee shall be entitled upon the exercise of each Alternate Appreciation
Right shall be equal to 100% of the amount, if any, by which the fair market
value of a share of Common Stock on the exercise date exceeds the option price
per share on the Option related to such Alternate Appreciation Right. A Section
16(a) Option Holder may elect to withhold shares of Common Stock issued under
this Section to pay taxes as described in Section 2.8.
Section 5.5. FORM OF PAYMENT. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section 5.4
by the fair market value of a share of Common Stock on the exercise date of such
Alternate Appreciation Rights. As soon as practicable after exercise, the
Company shall deliver to the Optionee a certificate or certificates for such
shares of Common Stock.
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Section 5.6. EFFECT OF EXERCISE. Unless otherwise provided in an Award
Agreement or agreed to by the Committee, the exercise of any Alternate
Appreciation Rights shall cancel an equal number of Stock Options, Incentive
Stock Options, Reload Options, and Limited Rights, if any, related to said
Alternate Appreciation Rights.
Section 5.7. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH OR DISABILITY.
Unless otherwise provided in an Award Agreement or agreed to by the Committee:
(a) Upon termination of the Optionee's employment (including
employment as a director of the Company after an Optionee terminates
employment as an officer or key employee of the Company) by reason of
permanent disability or retirement (as each is determined by the
Committee), the Optionee may, within six months from the date of such
termination (or such shorter period of time as may be determined by the
Committee in any instance, as reflected in each Optionee's Award
Agreement), exercise any Alternate Appreciation Rights to the extent
such Alternate Appreciation Rights are exercisable during such period.
(b) Except as provided in Section 5.7(a), all Alternate
Appreciation Rights shall terminate three months after the date of the
termination of the Optionee's employment or upon the death of the
Optionee.
ARTICLE VI. LIMITED RIGHTS
Section 6.1. AWARD OF LIMITED RIGHTS. Concurrently with or subsequent to
the award of any Stock Option, Incentive Stock Option, Reload Option, or
Alternate Appreciation Right, the Committee may, subject to the provisions of
this Plan and such other terms and conditions as the Committee may prescribe,
award to the Optionee with respect to each share of Common Stock covered by an
Option, a related limited right permitting the Optionee, during a specified
limited time period, to be paid the appreciation on the option in lieu of
exercising the option ("Limited Right").
Section 6.2. LIMITED RIGHTS AGREEMENT. Limited Rights granted under this
Plan shall be evidenced by written Award Agreements in such form as the
Committee may from time to time determine.
Section 6.3. EXERCISE PERIOD. Limited Rights are exercisable in full for
a period of seven months following the date of a Change in Control of the
Company (the "Exercise Period"); provided, however, that Limited Rights may not
be exercised under any circumstances until the expiration of the six-month
period following the date of grant. As used in this Plan, a "Change in Control"
shall be deemed to have occurred if (a) the Company shall not be the surviving
entity in any merger, consolidation or other reorganization (or survives only as
a subsidiary of an entity), (b) the Company sells, leases or exchanges, or
agrees to sell, lease or exchange, all or substantially all of its assets to any
other person or entity, (c) the Company is to be dissolved and liquidated, (d)
any person or entity, including a "group" as contemplated by Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(e) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board.
Section 6.4. AMOUNT OF PAYMENT. The amount of payment to which an
Optionee shall be entitled upon the exercise of each Limited Right shall be
equal to 100% of the amount, if any, which is equal to the difference between
the option price per share of Common Stock covered by the related option and the
Market Price of a share of such Common Stock. "Market Price" is defined to be
the greater of (i) the highest price per share of the Company's Common Stock
paid in connection with any Change in Control and (ii) the fair market value per
share of the Company's Common Stock determined in accordance with Section
8.7(c).
Section 6.5. FORM OF PAYMENT. Payment of the amount to which an Optionee
is entitled upon the exercise of Limited Rights, as determined pursuant to
Section 6.4, shall be made solely in cash.
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Section 6.6. EFFECT OF EXERCISE. If Limited Rights are exercised, the
Stock Options, Incentive Stock Options, Reload Options, and Alternate
Appreciation Rights, if any, related to such Limited Rights shall cease to be
exercisable to the extent of the number of shares with respect to which the
Limited Rights were exercised. Upon the exercise or termination of the Stock
Options, Incentive Stock Options, Reload Options, and Alternate Appreciation
Rights, if any, related to such Limited Rights, the Limited Rights granted with
respect thereto terminate to the extent of the number of shares as to which the
related options and Alternate Appreciation Rights were exercised or terminated.
Section 6.7. RETIREMENT OR DISABILITY. Upon termination of the
Optionee's employment (including employment as a director of the Company after
an Optionee terminates employment as an officer or key employee of the Company)
by reason of permanent disability or retirement (as each is determined by the
Committee), the Optionee may, within six months from the date of termination,
exercise any Limited Right to the extent such Limited Right is exercisable
during such six-month period.
Section 6.8. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS. Except
as provided in Sections 6.7 and 6.9, or except as otherwise determined by the
Committee, all Limited Rights granted under this Plan shall terminate upon the
termination of the Optionee's employment or upon the death of the Optionee.
Section 6.9. TERMINATION RELATED TO A CHANGE IN CONTROL. The requirement
that an Optionee be terminated by reason of retirement or permanent disability
or be employed by Carriage at the time of exercise pursuant to Sections 6.7 and
6.8 respectively, is waived during the Exercise Period as to an Optionee who (i)
was employed by Carriage at the time of the Change in Control and (ii) is
subsequently terminated by Carriage other than for just cause or who voluntarily
terminates if such termination was the result of a good faith determination by
the Optionee that as a result of the Change in Control he is unable to
effectively discharge his present duties or the duties of the position which he
occupied just prior to the Change in Control. As used herein "just cause" shall
mean willful misconduct or dishonesty or conviction of or failure to contest
prosecution for a felony, persistent failure or refusal to attend to duties or
follow Company policy, or excessive absenteeism unrelated to illness.
ARTICLE VII. BONUS STOCK AWARDS
Section 7.1. AWARD OF BONUS STOCK. The Committee may from time to time,
and subject to the provisions of this Plan and such other terms and conditions
as the Committee may prescribe, grant to any participant in this Plan shares of
Common Stock ("Stock Bonus").
Section 7.2. STOCK BONUS AGREEMENTS. The grant of a Stock Bonus shall be
evidenced by a written Award Agreement, executed by the Company and the
recipient of a Stock Bonus, in such form as the Committee may from time to time
determine, providing for the terms of such grant, including any vesting
schedule, restrictions on the transfer of such Common Stock or other matters.
Specifically, the Committee may provide that the restrictions on the transfer of
such Common Stock shall lapse upon (i) the attainment of targets established by
the Committee that are based on (1) the price of a share of Stock, (2) the
Company's earnings per share, (3) the Company's revenue, (4) the revenue of a
business unit of the Company designated by the Committee, (5) the return on
stockholders' equity achieved by the Company, or (6) the Company's pre-tax cash
flow from operations (ii) the Participant's continued employment with the
Company for a specified period of time, or (iii) a combination of any two or
more of the factors listed in clauses (i) and (ii) of this sentence.
Section 7.3. TRANSFER RESTRICTION. Any Award Agreement providing for the
issuance of Bonus Stock to any person who, at the time of grant, is a person
described in Section 16(a) under the Securities Exchange Act of 1934 shall
provide that such Common Stock cannot be resold for a period of six months
following the grant of such Bonus Stock.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. GENERAL RESTRICTION. Each Award under this Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration, or qualification of the shares of Common
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Stock subject or related thereto upon any securities exchange or under any state
or Federal law, or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the grantee of an Award with respect to the
disposition of shares of Common Stock, is necessary or desirable as a condition
of, or in connection with, the granting of such Award or the issue or purchase
of shares of Common Stock thereunder, such Award may not be consummated in whole
or in part unless such listing, registration, qualification, consent, approval
or agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
Section 8.2. NON-TRANSFERABILITY. An Incentive Stock Option and all
rights granted thereunder shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), as amended, or the rules thereunder,
and shall be exercisable during the Optionee's lifetime only by the Optionee or
the Optionee's guardian or legal representative. An Award (other than an
Incentive Stock Option) shall not be transferable otherwise than (i) by will or
the laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of ERISA or (iii) with the
consent of the Committee.
Section 8.3. WITHHOLDING TAXES. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under this Plan, the
Company shall have the right to require the grantee to remit to the Company an
amount sufficient to satisfy any Federal, state, and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue or transfer such shares of the
Company net of the number of shares sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of Common Stock shall be
valued on the date the withholding obligation is incurred.
Section 8.4. RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Plan or in
any agreement entered into pursuant to this Plan shall confer upon any
participant the right to continue in the employment of Carriage or affect any
right which Carriage may have to terminate the employment of such participant.
Section 8.5. NON-UNIFORM DETERMINATIONS. The Committee's determinations
under this Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under this Plan, whether or not such persons are
similarly situated.
Section 8.6. RIGHTS AS A SHAREHOLDER. The recipient of any Award under
this Plan shall have no rights as a shareholder with respect thereto unless and
until certificates for shares of Common Stock are issued to him or her.
Section 8.7. DEFINITIONS. In this Plan the following definitions shall
apply:
(a) "Subsidiary" means any corporation of which, at the time more
than 50% of the shares entitled to vote generally in an election of
directors are owned directly or indirectly by the Company or any
subsidiary thereof.
(b) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with the Company.
(c) "Fair market value" as of any date and in respect or any
share of Common Stock means (i) until such time as the Common Stock is
traded on a national securities exchange or over-the-counter and
reported on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), then the price per share determined in
good faith by the Committee, taking into consideration all factors it
deems relevant, including liquidity, priority, minority interest
discount, and the price per share at which other securities of the
Company have been issued; (ii) if the Common Stock is traded on a
national securities exchange, then the closing price on such date or on
the next business day, if such date is not a business day, of a share of
Common Stock reflected in the consolidated trading tables of THE WALL
STREET JOURNAL or any other publication selected by the Committee; or
(iii) if the Common Stock is traded over-the-counter and
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reported on NASDAQ, then the average of the high and low sales prices on
such trading day as reported in such publication or, if not so
published, then as reported by NASDAQ, and if the Common Stock is not in
the NASDAQ National Market System on such trading day, then the
representative bid and asked prices at the end of such trading day in
such market as reported by NASDAQ. In no event shall the fair market
value of any share of Common Stock be less than its par value.
(d) "Option" means Stock Option, Incentive Stock Option, or
Reload Option.
(e) "Option price" means the purchase price per share of Common
Stock deliverable upon the exercise of a Stock Option, Incentive Stock
Option, or Reload Option.
Section 8.8. LEAVES OF ABSENCE. The Committee shall be entitled to make
such rules, regulations, and determinations as it deems appropriate under this
Plan in respect of any leave of absence taken by the recipient of any Award.
Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (i) whether or not any such leave of absence shall
constitute a termination of employment within the meaning of this Plan and (ii)
the impact, if any, of any such leave of absence on Awards under this Plan
theretofore made to any recipient who takes such leave of absence.
Section 8.9. NEWLY ELIGIBLE EMPLOYEES. The Committee shall be entitled
to make such rules, regulations, determinations and awards as it deems
appropriate in respect of any employee who becomes eligible to participate in
this Plan or any portion thereof after the commencement of an award or incentive
period.
Section 8.10. ADJUSTMENTS. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common Stock that
may be issued under this Plan, the number of shares of Common Stock subject to
Options theretofore granted under this Plan, and any and all other matters
deemed appropriate by the Committee.
Section 8.11. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options, Alternate Appreciation
Rights, or Limited Rights shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) If, while there are outstanding Options, the Company shall
effect a subdivision or consolidation of shares or other increase or
reduction of the number of shares of the Common Stock outstanding
without receiving compensation therefor in money, services or property,
then (a) in the event of an increase in the number of such shares
outstanding, the number of shares of Common Stock then subject to
Options hereunder shall be proportionately increased; and (b) in the
event of a decrease in the number of such shares outstanding the number
of shares then available for Option hereunder shall be proportionately
decreased.
(c) After a merger of one or more corporations into the Company,
or after a consolidation of the Company and one or more corporations in
which the Company shall be the surviving corporation, which transaction
alters the outstanding capital structure of the Company, then each
holder of an outstanding Option shall, at no additional cost, be
entitled upon exercise of such Option to receive (subject to any
required action by stockholders) in lieu of the number of shares as to
which such Option shall then be so exercisable, the number and class of
shares of stock or other securities to which such holder would have been
entitled to receive pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such
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merger or consolidation, such holder had been the holder of record of a
number of shares of the Company equal to the number of shares as to
which such Option had been exercisable.
(d) If the Company is merged into or consolidated with another
corporation or other entity under circumstances where the Company is not
the surviving corporation, or if the Company sells or otherwise disposes
of substantially all of its assets to another corporation or other
entity while unexercised Options remain outstanding, then the Committee
may direct that any of the following shall occur:
(i) If the successor entity is willing to assume the
obligation to deliver shares of stock or other securities after
the effective date of the merger, consolidation or sale of
assets, as the case may be, each holder of an outstanding Option
shall be entitled to receive, upon the exercise of such Option
and payment of the option price, in lieu of shares of Common
Stock, such shares of stock or other securities as the holder of
such Option would have been entitled to receive had such Option
been exercised immediately prior to the consummation of such
merger, consolidation or sale, and any related Alternate
Appreciation Right and Limited Right associated with such Option
shall apply as nearly as practicable to the shares of stock or
other securities purchasable upon exercise of the Option
following such merger, consolidation or sale of assets.
(ii) The Committee may waive any limitations set forth in
or imposed pursuant to this Plan or any Award Agreement with
respect to such Option and any related Alternate Appreciation
Right or Limited Option such that such Option and related
Alternate Appreciation Right and Limited Right shall become
exercisable prior to the record or effective date of such merger,
consolidation or sale of assets.
(iii) The Committee may cancel all outstanding Options and
Alternate Appreciation Rights (but not Limited Rights) as of the
effective date of any such merger, consolidation, or sale of
assets provided that prior notice of such cancellation shall be
given to each holder of an Option at least 30 days prior to the
effective date of such merger, consolidation, or sale of assets,
and each holder of an Option shall have the right to exercise
such Option and any related Alternate Appreciation Right in full
during a period of not less than 30 days prior to the effective
date of such merger, consolidation, or sale of assets. No action
taken by the Committee under this subsection shall have the
effect of terminating, and nothing in this subsection shall
permit the Committee to terminate, any Limited Right held by an
Optionee.
(e) Except as herein provided, the issuance by the Company of
Common Stock or any other shares of capital stock or securities
convertible into shares of capital stock, for cash property, labor done
or other consideration, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding Options.
Section 8.12. AMENDMENT OF THIS PLAN.
(a) The Committee may, without further action by the stockholders
and without receiving further consideration from the participants, amend
this Plan or condition or modify Awards under this Plan in response to
changes in securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with stock
exchange rules or requirements.
(b) The Committee may at any time and from time to time terminate
or modify or amend this Plan in any respect, except that without
shareholder approval the Committee may not (i) increase the maximum
aggregate number of shares of Common Stock which may be issued under
this Plan (other than increases pursuant to Sections 8.10 and 8.11) or
(ii) change the class of employees eligible to receive Awards under the
Plan. The termination or any modification or amendment of this Plan,
except as provided in subsection (a), shall not, without the consent of
a participant, affect his or her rights under an Award previously
granted to him or her.
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CARRIAGE SERVICES, INC.
1996 STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 7, 1997
I. PURPOSE OF THE PLAN
The CARRIAGE SERVICES, INC. 1996 STOCK OPTION PLAN (the "Plan") is
intended to provide a means whereby certain employees of CARRIAGE SERVICES,
INC., a Delaware corporation (the "Company"), and its subsidiaries may develop a
sense of proprietorship and personal involvement in the development and
financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. Accordingly, the Company may
grant to certain employees ("Optionees") the option ("Option") to purchase
shares of the Class A common stock of the Company ("Stock"), as hereinafter set
forth. Options granted under the Plan may be either incentive stock options,
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), ("Incentive Stock Options") or options which do not
constitute Incentive Stock Options.
The Plan as set forth herein constitutes an amendment and restatement,
effective as of the date of the adoption of this amendment and restatement (the
"Restatement Effective Date") by the Board of Directors of the Company (the
"Board"), of the Plan as previously adopted by the Company, and shall supersede
and replace in its entirety such prior plan.
II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of, and
appointed by, the Board, which shall be comprised solely of two or more "outside
directors" within the meaning of section 162(m) of the Code and applicable
interpretive authority thereunder. The Committee shall have sole authority to
select the Optionees from among those individuals eligible hereunder and to
establish the number of shares which may be issued under each Option; provided,
however, that, notwithstanding any provision in the Plan to the contrary, the
maximum number of shares that may be subject to Options granted under the Plan
to an individual Optionee during any calendar year may not exceed 200,000
(subject to adjustment in the same manner as provided in Paragraph VIII hereof
with respect to shares of Stock subject to Options then outstanding). The
limitation set forth in the preceding sentence shall be applied in a manner
which will permit compensation generated under the Plan to constitute
"performance-based" compensation for
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purposes of section 162(m) of the Code, including, without limitation, counting
against such maximum number of shares, to the extent required under section
162(m) of the Code and applicable interpretive authority thereunder, any shares
subject to Options that are canceled or repriced. In selecting the Optionees
from among individuals eligible hereunder and in establishing the number of
shares that may be issued under each Option, the Committee may take into account
the nature of the services rendered by such individuals, their present and
potential contributions to the Company's success and such other factors as the
Committee in its discretion shall deem relevant. The Committee is authorized to
interpret the Plan and may from time to time adopt such rules and regulations,
consistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan. All decisions made by the Committee in selecting the Optionees, in
establishing the number of shares which may be issued under each Option and in
construing the provisions of the Plan shall be final.
III. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of the
respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the surrender of the right to purchase shares under
the Option in return for a payment in cash or shares of Stock or a combination
of cash and shares of Stock equal in value to the excess of the fair market
value of the shares with respect to which the right to purchase is surrendered
over the option price therefor ("Stock Appreciation Rights"), on such terms and
conditions as the Committee in its sole discretion may prescribe; provided,
that, except as provided in Subparagraph VIII(c) hereof, the Committee shall
retain final authority (i) to determine whether an Optionee shall be permitted,
or (ii) to approve an election by an Optionee, to receive cash in full or
partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement
may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock (i) reported by the National Market System of NASDAQ on that
date or (ii) if the Stock is listed on a national stock exchange, reported on
the stock exchange composite tape on that date; or, in either case, if no prices
are reported on that date, on the last preceding date on which such prices of
the Stock are so reported. If the Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Stock on the most
recent date on which Stock was publicly traded. In the event Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
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Notwithstanding the foregoing, the fair market value of a share of Stock on the
date of an initial public offering of Stock shall be the offering price under
such initial public offering.
(c) Each Incentive Stock Option and all rights granted thereunder shall
not be transferable other than by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), as amended, or the rules thereunder, and shall be exercisable during
the Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative. Each Option that does not constitute an Incentive Stock Option
and all rights granted thereunder shall not be transferable otherwise than (i)
by will or the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined by the Code or Title I of ERISA or (iii)
with the consent of the Committee.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any parent or
subsidiary corporation (as defined in section 424 of the Code) of the Company at
the time the Option is granted. Options may be granted to the same individual on
more than one occasion. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporation, within the
meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is
granted the option price is at least 110% of the fair market value of the Stock
subject to the Option and (ii) such Option by its terms is not exercisable after
the expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of stock with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
Optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Optionee of such determination
as soon as practicable after such determination.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 600,000 shares of Stock. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
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shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan to the extent permitted under
Rule 16b-3. The aggregate number of shares which may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph VIII
hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option in any manner, including an exercise involving a Stock
Appreciation Right, shall result in a decrease in the number of shares of Stock
which may thereafter be available, both for purposes of the Plan and for sale to
any one individual, by the number of shares as to which the Option is exercised.
Separate stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of an Incentive Stock Option and for those
shares acquired pursuant to the exercise of any Option which does not constitute
an Incentive Stock Option.
VI. OPTION PRICE
The purchase price of Stock issued under each Option shall be determined
by the Committee, but such purchase price shall not be less than the fair market
value of Stock subject to the Option on the date the Option is granted.
VII. TERM OF PLAN
The Plan originally became effective on July 18, 1996. This amendment
and restatement of the Plan shall become effective upon the Restatement
Effective Date, provided that this amendment and restatement of the plan shall
be effective upon the date of its adoption by the Board, provided the Plan is
approved by the stockholders of the Company within twelve months thereafter.
Except with respect to Options then outstanding, if not sooner terminated under
the provisions of Paragraph IX, the Plan shall terminate upon and no further
Options shall be granted after July 18, 2006. Notwithstanding any provision
herein to the contrary, if this amendment and restatement of the Plan is not
approved by the stockholders of the Company within twelve months after the
Restatement Effective Date, then any Option granted on or after the Restatement
Effective Date shall be void and canceled in its entirety, and the Plan shall
terminate with respect to any shares of Stock for which Options were not granted
prior to the Restatement Effective Date.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
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(b) The shares with respect to which Options may be granted are shares
of Stock as presently constituted, but if, and whenever, prior to the expiration
of an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges, or agrees to sell, lease or exchange, all or substantially all of its
assets to any other person or entity, (iii) the Company is to be dissolved and
liquidated, (iv) any person or entity, including a "group" as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of the Company's
voting stock (based upon voting power), or (v) as a result of or in connection
with a contested election of directors, the persons who were directors of the
Company before such election shall cease to constitute a majority of the Board
(each such event is referred to herein as a "Corporate Change"), no later than
(a) ten days after the approval by the stockholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (b) thirty days after a change of
control of the type described in Clause (iv), the Committee, acting in its sole
discretion without the consent or approval of any Optionee, shall act to effect
one or more of the following alternatives, which may vary among individual
Optionees and which may vary among Options held by any individual Optionee: (1)
accelerate the time at which Options then outstanding may be exercised so that
such Options may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the Committee,
after which specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (2) require the mandatory surrender to the Company
by selected Optionees of some or all of the outstanding Options held by such
Optionees (irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date, before or after such Corporate Change,
specified by the Committee, in which event the Committee shall thereupon cancel
such Options and the Company shall pay to each Optionee an amount of cash per
share equal to the excess, if any, of the amount calculated in Subparagraph (d)
below (the "Change of Control Value") of the shares subject to such Option over
the exercise price(s) under such
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Options for such shares, (3) make such adjustments to Options then outstanding
as the Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding) or (4) provide that the
number and class of shares of Stock covered by an Option theretofore granted
shall be adjusted so that such Option shall thereafter cover the number and
class of shares of stock or other securities or property (including, without
limitation, cash) to which the Optionee would have been entitled pursuant to the
terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution, the Optionee had been the holder of record of the number
of shares of Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In the
event that the consideration offered to stockholders of the Company in any
transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c) above shall
be subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the purchase
price per share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the
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consent of such Optionee; and provided, further, that the Board may not make any
alteration or amendment which would increase the aggregate number of shares
which may be issued pursuant to the provisions of the Plan or change the class
of individuals eligible to receive Options under the Plan without the approval
of the stockholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to
any Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of 1934 Act meet all of the requirements of Rule
16b-3 promulgated under the 1934 Act, as currently in effect or as hereinafter
modified or amended ("Rule 16b-3"). If any provision of the Plan or any such
Option would disqualify the Plan or such Option under, or would otherwise not
comply with, Rule 16b-3, such provision or Option shall be construed or deemed
amended to conform to Rule 16b-3.
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CARRIAGE SERVICES, INC.
1996 DIRECTORS' STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 7, 1997
(1) PURPOSE OF THE PLAN
The CARRIAGE SERVICES, INC. 1996 DIRECTORS' STOCK OPTION PLAN (the "Plan")
is intended to promote the interests of CARRIAGE SERVICES, INC., a Delaware
corporation (the "Company"), and its stockholders by helping to award and retain
highly-qualified independent directors, and allowing them to develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company. Accordingly, the Company shall grant to directors of the Company
who are not executive officers of the Company ("Eligible Directors") the option
("Option") to purchase shares of the Class A common stock of the Company
("Stock"), as hereinafter set forth. Options granted under the Plan shall be
options which do not constitute incentive stock options, within the meaning of
section 422(b) of the Internal Revenue Code of 1986, as amended.
The Plan as set forth herein constitutes an amendment and restatement,
effective as of the date this amendment and restatement of the Plan is approved
by stockholders of the Company (the "Restatement Effective Date"), of the
Carriage Services, Inc. 1996 Nonemployee Directors' Stock Option Plan, as
previously approved by the stockholders of the Company, and shall supersede and
replace in its entirety such plan.
(2) OPTION AGREEMENTS
Each Option shall be evidenced by a written agreement (an "Option
Agreement"). Options shall not be exercisable after the expiration of ten years
from the date of grant thereof unless otherwise specified in an Option
Agreement. Each Option Agreement shall provide that an Option and all rights
granted thereunder shall not be transferable otherwise than (i) by will or the
laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended or (iii) with the consent of the Board
of Directors of the Company (the "Board").
1. ELIGIBILITY OF OPTIONEE; OPTION AWARDS
A. Options may be granted only to individuals who are Eligible Directors
of the Company and who do not currently participate in any other stock incentive
plan of the Company.
A director who had previously received options under another stock
incentive plan of the Company which are still outstanding, but who does not
receive options during the current calendar year under
<PAGE>
any other stock incentive plan of the Company, shall be eligible to participate
in the Plan during the current calendar year.
B. Each Eligible Director who is elected or appointed to the Board for the
first time after the Restatement Effective Date of the Plan shall receive, as of
the date of his or her election or appointment and without the exercise of the
discretion of any person or persons, an Option exercisable for (i) 15,000 shares
of Stock (subject to adjustment in the same manner as provided in Paragraph VII
hereof with respect to shares of Stock subject to Options then outstanding) if
such Eligible Director is not also appointed to the Company's Executive
Committee on such date or (ii) 25,000 shares of Stock (subject to adjustment in
the same manner as provided in Paragraph VII hereof with respect to shares of
Stock subject to Options then outstanding) if such Eligible Director is also
appointed to the Company's Executive Committee on such date.
C. As of the date of the annual meeting of the stockholders of the Company
in each year that the Plan is in effect as provided in Paragraph VI hereof, each
Eligible Director then in office or elected to the Board on such date shall
receive, without the exercise of the discretion of any person or persons, an
Option exercisable for 6,000 shares of Stock (subject to adjustment in the same
manner as provided in Paragraph VII hereof with respect to shares of Stock
subject to Options then outstanding).
D. If, as of any date that the Plan is in effect, there are not sufficient
shares of Stock available under the Plan to allow for the grant to each Eligible
Director of an Option for the number of shares provided herein, each Eligible
Director shall receive an Option for his or her pro-rata share of the total
number of shares of Stock then available under the Plan. All Options granted
under the Plan shall be at the Option price set forth in Paragraph V hereof and
shall be subject to adjustment as provided in Paragraph VII hereof.
a. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 200,000 shares of Stock. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. Exercise of an Option shall
result in a decrease in the number of shares of Stock which may thereafter be
available, both for purposes of the Plan and for sale to any one individual, by
the number of shares as to which the Option is exercised.
(a) OPTION PRICE
The purchase price of Stock issued under each Option described in
Paragraphs IIIB and IIIC hereof after the Restatement Effective Date of the Plan
shall be the fair market value of the Stock
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<PAGE>
subject to the Option as of the date the Option is granted. For all purposes
under the Plan, the fair market value of a share of Stock on a particular date
shall be equal to the mean of the high and low sales prices of the Stock (i)
reported by the National Market System of NASDAQ on that date or (ii) if the
Stock is listed on a national stock exchange, reported on the stock exchange
composite tape on that date; or, in either case, if no prices are reported on
that date, on the last preceding date on which such prices of the Stock are so
reported. If the Stock is traded over the counter at the time a determination of
its fair market value is required to be made hereunder, its fair market value
shall be deemed to be equal to the average between the reported high and low or
closing bid and asked prices of Stock on the most recent date on which Stock was
publicly traded. In the event Stock is not publicly traded at the time a
determination of its value is required to be made hereunder, the determination
of its fair market value shall be made by the Board in such manner as it deems
appropriate.
(1) TERM OF PLAN
The Plan originally became effective on July 18, 1996. This amendment and
restatement of the Plan shall be effective on the Restatement Effective Date.
Except with respect to Options then outstanding, if not sooner terminated under
the provisions of Paragraph VIII, the Plan shall terminate upon and no further
Options shall be granted after July 18, 2006.
b. RECAPITALIZATION OR REORGANIZATION
A. The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
B. The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
C. If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the optionee would have been entitled
pursuant to the terms
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<PAGE>
of the recapitalization if, immediately prior to the recapitalization, the
optionee had been the holder of record of the number of shares of Stock then
covered by such Option.
D. Any adjustment provided for in Subparagraphs B or C above shall be
subject to any required stockholder action.
E. Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
F. For purposes of the Plan, a "Corporate Change" shall occur if (i) the
Company is to be dissolved or liquidated, (ii) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization, (iii) the
Company sells, leases, or exchanges, or agrees to sell, lease, or exchange, all
or substantially all of its assets, (iv) any person or entity, including a
"group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board.
1. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the optionee without the consent of such
optionee.
(1) SECURITIES LAWS
F. The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of
1933, as amended, and such other state and federal laws, rules or regulations as
the Company deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
G. It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act, meet all of the requirements of
Rule 16b-3, as currently in effect or as
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<PAGE>
hereinafter modified or amended ("Rule 16b-3"), promulgated under the 1934 Act.
If any provision of the Plan or any such Option would disqualify the Plan or
such Option under, or would otherwise not comply with, Rule 16b-3, such
provision or Option shall be construed or deemed amended to conform to Rule
16b-3.
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EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the 8th day of October,
1996, is between CARRIAGE SERVICES, INC., a Delaware corporation (the
"Company"), and GARY O'SULLIVAN, a resident of Harris County, Texas (the
"Employee").
1. EMPLOYMENT TERM. The Company hereby employs the Employee for a
term commencing on the date hereof and, subject to earlier termination as
provided in Section 7 hereof, continuing for a period of five (5) years
thereafter (such term being herein referred to as the "term of this Agreement").
The Employee agrees to accept such employment and to perform the services
specified herein, all upon the terms and conditions hereinafter stated.
2. DUTIES. The Employee shall serve the Company and shall report
to, and be subject to the general direction and control of, the Executive Vice
President of Operations of the Company. The Employee shall perform the
management and administrative duties of Senior Vice President - Marketing of the
Company. The Employee shall also serve in such capacity on subsidiaries of the
Company and shall perform such other duties as are from time to time assigned to
him by the Executive Vice President - Operations of the Company and as are not
inconsistent with the provisions hereof.
3. EXTENT OF SERVICE. The Employee shall devote his full business
time and attention to the business of the Company, and, except as may be
specifically permitted by the Company, shall not be engaged in any other
business activity during the term of this Agreement. The foregoing shall not be
construed as preventing the Employee from making passive investments in other
businesses or enterprises, provided, however, that such investments will not
require services on the part of the Employee which would in any way impair the
performance of his duties under this Agreement.
4. COMPENSATION. During the term of this Agreement, the Company
shall pay the Employee a salary of $15,833.33 per full calendar month of service
completed, appropriately prorated for partial months at the commencement and end
of the term of this Agreement. The salary set forth herein shall be payable in
bi-weekly installments in accordance with the payroll policies of the Company in
effect from time to time during the term of this Agreement. The Company shall
have the right to deduct from any payment of all compensation to the Employee
hereunder (x) any federal, state or local taxes required by law to be withheld
with respect to such payments, and (y) any other amounts specifically authorized
to be withheld or deducted by the Employee.
5. BENEFITS. In addition to the base salary under
Section 4, the Employee shall be entitled to participate in the
following benefits during the term of this Agreement:
<PAGE>
(a) A performance-based bonus payable in respect of each fiscal
year of the Company, equal to (i) $40,000.00 if the Company's
consolidated net revenues (as hereafter defined) from cemetery
activities for such year is at least the Budgeted Amount (as hereafter
defined) and (ii) $25,000.00 if the Company's consolidated net revenues
from funeral activities for such year is at least the Budgeted Amount.
For purposes hereof, "consolidated net revenues" means for any fiscal
year the gross revenues of the Company and its consolidated subsidiaries
from cemetery or funeral activities (as the case may be) for such year,
less cancellations, discounts and returns, determined in accordance with
generally accepted accounting principles, and "Budgeted Amount" means an
amount determined from year to year by the Chief Executive Officer of
the Company, in consultation with the Chief Financial Officer and the
Executive Vice President of Operations, and communicated to the
Employee, it being understood, however, that the Budgeted Amount may be
subject to adjustment during any year based upon the Company's
determination of its growth in relation to its assumptions upon which
the original Budgeted Amount was set;
(b) Options under the Company's 1996 Stock Option Plan for 30,000
shares, at an exercise price of $18.00 per share, subject to vesting in
the same manner as other options heretofore granted under such Plan; and
(c) Such other employee benefits as are available
generally to employees of the Company.
6. CERTAIN ADDITIONAL MATTERS. The Employee agrees
that at all times during the term of this Agreement:
(a) The Employee will not knowingly or intentionally do or say
any act or thing which will or may impair, damage or destroy the
goodwill and esteem for the Company of its suppliers, employees,
patrons, customers and others who may at any time have or have had
business relations with the Company.
(b) The Employee will not reveal to any third person any
difference of opinion, if there be such at any time, between him and the
management of the Company as to its personnel, policies or practices.
(c) The Employee will not knowingly or intentionally do
any act or thing detrimental to the Company or its business.
7. TERMINATION.
(a) DEATH. If the Employee dies during the term of this
Agreement and while in the employ of the Company, this Agree-
ment shall automatically terminate and the Company shall have
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<PAGE>
no further obligation to the Employee or his estate except that the
Company shall pay the Employee's estate that portion of the Employee's
base salary under Section 4 accrued through the date on which the
Employee's death occurred. Such payment of base salary to the Employee's
estate shall be made in the same manner and at the same times as they
would have been paid to the Employee had he not died.
(b) DISABILITY. If during the term of this Agreement, the
Employee shall be prevented from performing his duties hereunder by
reason of disability, and such disability shall continue for a period of
six months, then the Company may terminate this Agreement at any time
after the expiration of such six-month period. For purposes of this
Agreement, the Employee shall be deemed to have become disabled when the
Company, upon the advice of a qualified physician, shall have determined
that the Employee has become physically or mentally incapable (excluding
infrequent and temporary absences due to ordinary illness) of performing
his duties under this Agreement. In the event of a termination pursuant
to this paragraph (b), the Company shall be relieved of all its
obligations under this Agreement, except that the Company shall pay to
the Employee, or his estate in the event of his subsequent death, the
Employee's base salary under Section 4 through the date on which such
termination shall have occurred, reduced during such period by the
amount of any benefits received under any disability policy maintained
by the Company. All such payments to the Employee or his estate shall be
made in the same manner and at the same times as they would have been
paid to the Employee had he not become disabled.
(c) DISCHARGE FOR CAUSE. Prior to the end of the term of this
Agreement, the Company may discharge the Employee for Cause and
terminate this Agreement. In such case this Agreement shall
automatically terminate and the Company shall have no further obligation
to the Employee or his estate other than to pay to the Employee or his
estate in the event of his subsequent death that portion of the
Employee's salary accrued through the date of termination. For purposes
of this Agreement, the Company shall have "Cause" to discharge the
Employee or terminate the Employee's employment hereunder upon (i) the
Employee's commission of any felony or any other crime involving moral
turpitude, (ii) the Employee's failure or refusal to perform all of his
duties, obligations and agreements herein contained or imposed by law,
including his fiduciary duties, to the reasonable satisfaction of the
Executive Vice President of Operations, (iii) the Employee's commission
of acts amounting to gross negligence or willful misconduct to the
material detriment of the Company, or (iv) the Employee's breach of any
provision of this Agreement.
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<PAGE>
(d) DISCHARGE WITHOUT CAUSE. Prior to the end of the term of this
Agreement, the Company may discharge the Employee without Cause (as
defined in paragraph (c) above) and terminate this Agreement. In such
case this Agreement shall automatically terminate and the Company shall
have no further obligation to the Employee or his estate, except that
the Company shall continue to pay to the Employee or his estate in the
event of his subsequent death the Employee's base salary under Section
4, and shall continue to include the Employee in any group health and
hospitalization insurance program on the same terms as other employees
of the Company, for the remainder of the term of this Agreement. All
such payments to the Employee or his estate shall be made in the same
manner and at the same times as they would have been paid to the
Employee had he not been discharged.
8. RESTRICTIVE COVENANT. If the employment of the
Employee is terminated for any reason (including voluntary
resignation), then the Employee agrees that for a period of two (2)
years thereafter, he will not, directly or indirectly:
(i) alone or for his own account, or as a partner, member,
employee, advisor, or agent of any partnership or joint venture, or as a
trustee, officer, director, shareholder, employee, advisor, or agent of
any corporation, trust, or other business organization or entity,
encourage, support, finance, be engaged in, interested in, or concerned
with any business having an office or being conducted within a radius of
fifty (50) miles of any funeral home or cemetery business owned or
operated by the Company or any of its subsidiaries at the time of such
termination, which business is directly or indirectly in competition
with the business of the Company;
(ii) induce or assist anyone in inducing in any way
any employee of the Company to resign or sever his or her
employment or to breach an employment contract with the
Company; or
(iii) own, manage, advise, encourage, support, finance, operate,
join, control, or participate in the ownership, management, operation,
or control of or be connected in any manner with any business which is
or may be in the funeral, mortuary, crematory, cemetery or burial
insurance business or in any business related thereto within a radius of
fifty (50) miles of any funeral home or cemetery business owned or
operated by the Company or any of its subsidiaries at the time of such
termination.
The foregoing covenants shall not be held invalid or unen- forceable
because of the scope of the territory or actions subject hereto or restricted
hereby, or the period of time within which such covenants respectively are
operative, but the maximum
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<PAGE>
territory, the action subject to such covenants and the period of time they are
enforceable are subject to any determination by a final judgment of any court
which has jurisdiction over the parties and subject matter.
9. CONFIDENTIAL INFORMATION. The Employee acknowledges that in
the course of his employment by the Company he has received and will continue to
receive certain trade secrets, lists of customers, management methods, operating
techniques, prospective acquisitions, employee lists, training manuals and
procedures, personnel evaluation procedures, financial reports and other
confidential information and knowledge concerning the business of the Company
and its affiliates (hereinafter collectively referred to as "Information") which
the Company desires to protect. The Employee understands that the Information is
confidential and he agrees not to reveal the Information to anyone outside the
Company so long as the confidential or secret nature of the Information shall
continue. The Employee further agrees that he will at no time use the
Information in competing with the Company. Upon termination of this Agreement,
the Employee shall surrender to the Company all papers, documents, writings and
other property produced by his or coming into his possession by or through his
employment or relating to the Information and the Employee agrees that all such
materials will at all times remain the property of the Company. The Employee
further agrees to maintain as confidential, and to not disclose to any other
person (including other employees of the Company), the terms of this Agreement
(including the compensation and benefits described in Sections 4 and 5), except
that such terms may be disclosed to the Company's payroll clerk responsible for
paying the Employee's compensation, appropriate taxing authorities, and
otherwise as authorized by the Company. The Employee acknowledges that a remedy
at law for any breach or attempted breach of the foregoing provisions of this
Section 9 or under Section 8 above will be inadequate, and agrees that the
Company shall be entitled to specific performance and injunctive and other
equitable relief in case of any such breach or attempted breach.
10. NOTICES. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or three business days
after the date mailed, postage prepaid, by certified mail, return receipt
requested, or when sent by telex or telecopy and receipt is confirmed, if
addressed to the respective parties as follows:
If to the Employee: Mr. Gary O'Sullivan
15 North Meadowmist
The Woodlands, Tx 77381
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<PAGE>
If to the Company: Carriage Services, Inc.
1300 Post Oak Boulevard, Suite 1500
Houston, Texas 77056
Attn: President
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
11. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such provision or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12. ASSIGNMENT. This Agreement may not be assigned by
the Employee. Neither the Employee nor his estate shall have any
right to commute, encumber or dispose of any right to receive pay-
ments hereunder, it being agreed that such payments and the right
thereto are nonassignable and nontransferable.
13. BINDING EFFECT. Subject to the provisions of Sec-
tion 12 of this Agreement, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, the Employee's heirs
and personal representatives, and the successors and assigns of the
Company.
14. CAPTIONS. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
15. COMPLETE AGREEMENT. This Agreement represents the
entire agreement between the parties concerning the subject hereof
and supersedes all prior agreements and arrangements between the
parties concerning the subject thereof.
16. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the
State of Texas.
17. COUNTERPARTS. This Agreement may be executed in
multiple original counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
CARRIAGE SERVICES, INC.
By:______________________________________
MELVIN C. PAYNE,
Chief Executive Officer
___________________________________________
GARY O'SULLIVAN
-7-
CARRIAGE SERVICES, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between CARRIAGE SERVICES, INC., a Delaware
corporation (hereinafter called the "Company"), and THOMAS C. LIVENGOOD
(hereinafter called the "Executive"), a resident of Spring, Texas,
W I T N E S S E T H:
That for and in consideration of TEN and NO/100 DOLLARS ($10.00) and
other good and valuable consideration the receipt and sufficiency of which are
hereby confessed and acknowledged by the Executive, the Company does hereby
agree to employ the Executive, and the Executive hereby agrees to be an employee
of the Company, under the following terms and conditions, to-wit:
1. DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified in Paragraph 1:
A. "Company" means Carriage Services, Inc.
B. "Affiliate" means any corporation, general or limited
partnership, limited liability company or joint venture that (i) is
owned by or (ii) owns the Company. For the purposes of this definition,
ownership, directly or indirectly, of 50% or more of the capital stock
having the right to vote for directors of a corporation, or 50% or more
of the equity interest of a general or limited partnership, joint
venture or other business entity, shall constitute ownership thereof.
C. "Confidential Information" means trade secrets and business
information of the Company or any Affiliate which is not generally known
by others, including, by way of illustration and not limitation, all
such information relating to corporate opportunities, research,
financial and sales data, pricing and trading terms, evaluations,
opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contracts within
the customer's organization or within the organization of acquisition
prospects, or marketing and merchandising techniques, prospective names
and marks, whether or not such information has been reduced to
documentary form.
D. "Conflicting Product or Service" means any product or service
which competes with or is designed to compete with a product or service
sold by the Company or any Affiliate, about which Executive has acquired
or acquires Confidential Information.
E. "Conflicting Organization" means any person, firm,
association or corporation which is engaged in or is about to become
engaged in development,
<PAGE>
production, marketing or selling of, a Conflicting Product or Service in
a market or territory in which the Company or any Affiliate offers or
intends to offer products or services that would compete with the
Conflicting Product or Service.
F. "Cause" shall mean that the Executive has
(a) failed to cure, after reasonable notice of not less
than thirty (30) days, a material breach of any of the terms of
this Agreement;
(b) been convicted of a felony involving moral turpitude,
fraud, theft, embezzlement, assault, battery, rape or other
violent act or another crime;
(c) engaged in willful misconduct in the performance of
the duties and services required of the Executive pursuant to
this Agreement that has a material adverse effect on the Company;
provided, however, no act or failure to act shall be deemed
"willful" if due primarily to an error in judgment or negligence
or if made in good faith and with reasonable belief that such act
is in the best interest of the Company;
(d) committed any act that constitutes a material or
repeated failure to perform his duties in a manner consistent
with his position of employment; or
(e) been excessively absent from his employment not
related to illness.
G. "Board of Directors" means the board of directors of the
Company.
H. "Monthly Severance Payment" with respect to the Executive
shall be equal the quotient resulting from dividing (a) the aggregate
sum of all salary paid to, and incentive bonuses earned by, the
Executive pursuant to this Agreement and prior employment with the
Company during the three year period ended December 31 of the year prior
to the date of termination of the Executive's employment by (b) 36.
I. "Expiration Date" shall be December 31, 2001.
2. TERM AND TERMINATION
A. Subject to the termination provisions herein contained, the
employment of Executive by the Company pursuant to this Agreement shall commence
on the 13th day of December, 1996, and continue thereafter until terminated in
accordance with this paragraph 2 or, if not earlier so terminated, until the
Expiration Date (the "Employment Term").
B. If the Executive dies during the term of the Agreement and while in
the employ of the Company, this Agreement shall automatically terminate and the
Company shall have no further obligation to the Executive or his estate except
that the Company shall pay to the
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<PAGE>
Executive's estate (i) on the next regular payroll payment date the unpaid
salary through the date of death, and (ii) on or before April 15 of the next
succeeding year a proportionate part of the incentive bonus as provided in
paragraph 3A hereof as is in the same ratio to the full bonus as the number of
days in the year until the date of death is to 365.
C. If, during the term of this Agreement, the Executive, by reason of a
disability, (I.E., a physical or mental impairment), cannot perform each of the
essential functions of his position, with reasonable accommodation, for a period
of one hundred eighty consecutive days, the Company, on thirty days prior
written notice to the Executive, may terminate this Agreement as of the date
specified in the notice. In the event of a termination pursuant to this
paragraph 2C, the Company shall be relieved of all of its obligations under this
Agreement, except that the Company shall pay to the Executive, or his estate in
the event of his subsequent death: (i) that portion of the Executive's salary
through the 30th day after notice of termination and (ii) on or before April 15
of the next succeeding year, the Company shall pay to the Executive a
proportionate part of the incentive bonus as provided in paragraph 3A hereof as
is in the same ratio to the full bonus as the number of days in the year until
the date of termination is to 365.
D. At any time prior to the Expiration Date of this Agreement the
Company may terminate this Agreement for Cause (as herein defined) without
further obligation or liability hereunder to the Executive, his spouse, estate,
heirs or assignees except for the obligation of the Company to pay to the
Executive his salary earned through the date of discharge.
E. The Executive may give written notice of voluntary termination of
employment at any time, and upon giving of the notice, the employment shall
terminate on the earlier of the date set forth in the notice or 30 days after
the notice is received by the Company ("Voluntary Termination Date"). Upon the
Voluntary Termination Date, the Company shall have no further obligation or
liability hereunder to the Executive, his spouse, heirs or estate, except to pay
to the Executive any unpaid salary earned through the Voluntary Termination Date
(subject to the terms of any other employee benefit plan of the Company in which
the Executive participates).
F. The Company may terminate the employment of the Executive at any time
WITHOUT CAUSE upon written notice to the Executive of such termination, which
notice shall set forth the date of termination ("Without Cause Termination
Date"). Upon the Without Cause Termination Date, the Company shall have no
further obligation or liability hereunder to the Executive or his spouse, heirs
or estate, except that (i) after the Without Cause Termination Date and
continuing monthly until the later of the Expiration Date or two years after the
termination date, or if earlier the last day of the month following the date of
death of the Executive, the Company shall pay to the Executive each month, in
accordance with the Company's payroll policies then in effect, an amount equal
to the Monthly Severance Payment, (ii) on or before April 15 of the next
succeeding year following the Without Cause Termination Date the Company shall
pay to the Executive a proportionate part of the incentive bonus as provided in
paragraph 3A hereof as is in the same ratio to the full bonus as the number of
days in the calendar year up to the Without Cause Termination Date is to 365 and
(iii) after the Without Cause Termination Date and continuing monthly during the
period the Executive is receiving the
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<PAGE>
Monthly Severance Payments specified in subparagraph F(i) above, Executive and
his family shall be entitled to participate in any welfare benefit plans,
programs, or policies in which Executive and his family were participating at
the time of his termination of employment for group and/or executive life,
accident, health, dental, or medical/hospital insurance (whether funded by
actual insurance or self insured by the Company); provided, however, that the
rights of the Executive and his family thereunder shall be governed by the terms
thereof and shall not be enlarged hereunder.
G. Any termination of the employment relationship, whether termination
is effected by the Company or the Executive, shall be without prejudice to or
waiver of the obligations of the Executive to maintain in secrecy and confidence
all Confidential Information, pursuant to paragraph 5 hereof, and not to render
prohibited services to any Conflicting Organization, pursuant to paragraph 6
hereof.
3. EMPLOYMENT AND SALARY
A. During the Employment Term, the Company shall employ the Executive
and the Executive shall serve in the employ of the Company at a continuing
salary of One Hundred Seventy-Five Thousand Dollars ($175,000.00) per year,
subject to increases as provided below (the "Annual Base Salary"), payable in
accordance with the Company's payroll policies applicable to executives as
established by the Company from time to time. The Board of Directors shall
review and in its sole discretion may increase Executive's Annual Base Salary
annually commencing for 1998. Once established at a specified increased rate,
the Annual Base Salary shall not thereafter be reduced.
B. During the Employment Term, the Executive shall also be entitled to
be paid an incentive bonus in an amount, if any, as shall be determined by the
Board of Directors in its sole discretion. The incentive bonus, if any, shall be
paid prior to the close of business on April 15 of each year. Except for
termination by reason of death or disability or termination WITHOUT CAUSE, the
incentive bonus shall not be earned in whole or in part, until the close of
business on December 31 of each year ("Bonus Entitlement Date") and shall be
paid annually prior of the close of business on April 15 following the Bonus
Entitlement Date. Termination for Cause pursuant to paragraph 2D or voluntary
termination pursuant to paragraph 2E shall terminate the right of the Executive
to receive any incentive bonus under this Section 3A that has not yet been
earned; provided that any termination of employment after the incentive bonus
has been earned, but prior to its payment, shall not terminate the Executive's
right to receive such incentive bonus.
C. The Executive shall receive such further benefits as may be accorded
other executives under the established plans and programs of the Company to the
extent the executive is eligible for participation therein based on the
eligibility criteria applicable to other Executives, all as determined by the
Company from time to time in its sole discretion.
D. The Executive shall be entitled to receive reimbursement for, or seek
payment directly by the Company of, all reasonable expenses incurred by the
Executive in the performance
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<PAGE>
of his duties under this Agreement. The Executive shall use his best efforts to
obtain approval prior to incurring any expenses. Unreasonable expenses or
expenses out of the ordinary course of business not approved in advance shall
not be reimbursed by the Company. Neither shall the Company be obligated to
reimburse expenses if reimbursement is not sought on a timely basis.
4. DUTIES
The Executive shall serve the Company in an executive capacity and shall
report to, and be subject to the general direction and control of the Chief
Executive Officer of the Company. The Executive shall perform such duties and
responsibilities and in such capacities as may be established by the Board of
Directors and the Chief Executive Officer from time to time. The Executive shall
perform his duties and discharge his obligations well and faithfully and to the
utmost of his ability, and shall use his best efforts to promote the success,
reputation and good will of the Company and its Affiliates. The Executive also
agrees to perform, without additional compensation, such services for any
Affiliate as the Board of Directors may designate; provided that the Executive's
performance of duties and services for any Affiliate shall not unreasonably be
added to the time required for performance of his assigned duties and services
for the Company. The Company agrees that it will assign to the Executive only
those duties and responsibilities of the type, nature and dignity normally
assigned to an executive employee of his position in an enterprise of the size,
stature and nature of the Company. The Executive agrees to devote his full
business time, attention, skill and effort exclusively to the performance of his
duties and responsibilities hereunder during the term of his employment and any
extension or renewal thereof. In addition, except for such personal and business
investment activities as are essentially passive in nature and do not involve
any breach of fiduciary duty or duty of loyalty to the Company or its
Affiliates, the Executive shall not, during the term of his employment
hereunder, engage in any other activity, whether or not such activity is
conducted or pursued for gain, profit or other pecuniary advantage, if it
conflicts or interferes with or adversely affects in any material respect the
performance or discharge of Executive's duties and responsibilities hereunder.
Without the prior written consent of the Company the Executive shall not, during
the term of his employment hereunder, serve as a principal, partner, employee,
officer, consultant, advisor or director of any other business concern
conducting business for profit except for such personal and business investment
activities as are essentially passive in nature.
The Executive acknowledges that the Executive is employed in an
executive and administrative position that is not subject to overtime pay under
the federal wage and hour law.
5. COVENANT OF SECRECY
The Executive agrees that, except as required by his duties to the
Company, he will not:
A. disclose or use for himself or others Confidential Information
during or after his employment with the Company, except as required by
law (provided that the Executive shall first advise the Company of any
proposed disclosure to afford the Company the opportunity to take any
protective measures); or
-5-
<PAGE>
B. except as is necessary in the performance of his duties, take
any documents or physical objects constituting or containing
Confidential Information from facilities of the Company or its
Affiliates, without first obtaining written authorization from the
Company. The Executive agrees to return to the Company all documents or
other physical objects constituting or containing Confidential
Information and all reproductions thereof upon request, and in any event
immediately upon termination by either party for any reason of his
employment with the Company.
6. RESTRICTIVE COVENANT
A. In consideration for the agreement to employ the Executive and to
provide Monthly Severance Payments under the conditions described in paragraph
2F, in consideration of the options granted to the Executive under the Incentive
Stock Option Agreement of even date herewith, and the other valuable
consideration provided to the Executive hereunder: (1) during the term hereof,
the Executive shall not: (i) either directly or indirectly, for himself or any
third party, divert or attempt to divert any existing business of the Company,
or (ii) either directly or indirectly, for himself or any third party, cause or
induce any present or future employee of the Company to accept employment with
another employer; or (2) during the two-year period commencing upon the
termination of the Executive's employment hereunder by either party for any
reason and during the period the Executive is to receive the Monthly Severance
Payments the Executive shall not, within 50 miles of any facility owned or
operated by the Company or any Affiliate, render advice or service to, or
otherwise assist a Conflicting Organization. The Company and Executive expressly
agree that in the event that Executive is entitled to receive Monthly Severance
Payments pursuant to paragraph 2F, Executive in his sole discretion may
irrevocably elect to forego such payments and thereafter shall not be prevented
from rendering advice or service to, or otherwise assist a Conflicting
Organization following Executive's termination of employment; provided, however,
Executive shall not be relieved his obligations contained in paragraph 5.
B. Both parties recognize that the services to be rendered under this
Agreement by the Executive are special, unique, and of extraordinary character,
and that in the event of the breach by the Executive of the terms and conditions
of the covenants contained in paragraphs 5 and/or 6, the Company shall be
entitled, if it so elects, to suspend (if applicable) salary payments, Monthly
Severance Payments and bonus payments and/or to institute and prosecute
proceedings in any court of competent jurisdiction to enforce through injunctive
relief such covenants. The Executive acknowledges and agrees that there is no
adequate remedy at law for his violation of such covenants and that in light of
the numerous years and the scope of his Executive-level responsibilities with
the Company, the restrictions as to time, geographic scope and scope of
activities restrained in paragraph 6A and 6C are both reasonable and necessary
to protect the goodwill and other legitimate business interests of the Company.
Indeed, the Executive acknowledges that the term of his employment hereunder,
the post employment Monthly Severance Payments and bonus payments and the amount
of salary and bonus provided by the Company hereunder are in significant part
provided by the Company to secure the Executive's agreement to such covenants.
The Executive agrees to waive and hereby waives any requirement
-6-
<PAGE>
for the Company to secure any bond in connection with the obtaining of such
injunction or other equitable relief.
C. Both parties recognize that the covenants set forth in paragraph 6
constitute a restraint on the future employment opportunities of the Executive
and as such are enforceable only to the extent necessary to protect and preserve
to the Company its valuable goodwill and other legitimate business interests
including but not limited to Confidential Information ("Protectable Interests"),
as they now exist and may be developed and expanded prior to the termination of
the Executive's employment hereunder. The Company and the Executive recognize
that the business of the Company and its Protectable Interests are not
restricted to a single market or geographic area but extend to many different
markets and geographic areas and that the duties and the Executive-level
activities of the Executive are applicable to all such markets and geographic
areas. The Company and the Executive have entered into this Agreement with the
expectation that as the business of the Company and the duties and activities of
the Executive expand, the Executive may acquire relationships and Confidential
Information that will constitute a part of the evolving Protectable Interests of
the Company. It is the parties' mutual intent that the covenants contained in
paragraph 6 be limited to only those time, geographic and activity restrictions
that are necessary to protect the Protectable Interests of the Company.
D. During the period that Executive may not render advice or service to,
or otherwise assist a Conflicting Organization, Executive shall refrain from
making any statement, except for an isolated idle comment made in a non-business
contact, which has the effect of demeaning the name or business reputation of
the Company or any Affiliate, or which materially adversely affects the best
interests (economic or otherwise) of the Company or any Affiliate.
7. NOTICE
Any notice or communication to the parties to this contract shall be
deemed to have been sufficiently given for all purposes hereof if mailed by
United States Mail, postage prepaid, Return Receipt Requested, addressed as
follows, to-wit:
To the Executive: Thomas C. Livengood
8002 Hertfordshire Circle
Spring, Texas 77379
To the Company: Carriage Services, Inc.
1300 Post Oak Blvd., Suite 1500
Houston, Texas 77056-3012
Attention: Chief Executive Officer
or such other address as may be set forth in a notice given in accordance with
the provisions hereof.
-7-
<PAGE>
8. MISCELLANEOUS
A. This Agreement supersedes all prior agreements and understandings
between the Company and the Executive with respect to the subject matter hereof
and may not be changed or terminated except by an instrument in writing duly
authorized by the Board of Directors and executed by the Executive and the
President of the Company.
B. This Agreement shall be interpreted and construed in accordance with
the laws of the State of Texas or any other jurisdiction in which the Company
seeks to enforce paragraph 5 or 6 hereof. Should any portion of this Agreement
be adjudged or held to be invalid, unenforceable or void, such holdings shall
not have the effect of invalidating or voiding the remainder of this Agreement,
and the parties hereto agree that the portion so held invalid, unenforceable or
void shall, if possible, be deemed amended or reduced in scope, or to otherwise
be stricken from this Agreement to the extent required for the purposes of
validity and enforcement thereof.
C. This Agreement may not be assigned by the Executive. The Executive
and his spouse, heirs and estate shall not have any right to commute, encumber
or dispose of any right to receive payments hereunder, it being understood that
such payments and the right thereto are nonassignable and nontransferable.
Subject to the limitation in the immediate preceding sentence, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, the
Executive's spouse, heirs and estate, and the successors and assigns of the
Company. It is specifically agreed that in the event that the Company's business
or any part thereof should be sold in any fashion and this Agreement is assigned
to the purchaser, the purchaser shall be entitled to specifically enforce the
terms and provisions of this Agreement.
D. The Executive represents and warrants to the Company that (i) he has
fulfilled all of the terms and conditions of all prior employment agreements to
which he was or has been a party and that he is not violating and will not
violate any term or provision of any employment agreement or confidentiality
agreement to which he is or has been a party by entering into or performing his
obligations under this Agreement and (ii) he is not violating and will not
violate his fiduciary duty to any prior employer by entering into or performing
his obligations under this Agreement.
E. The waiver by the Company of the breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent or continuing breach of this Agreement by the Executive.
F. Except for disputes regarding the Executive's failure to comply with
paragraph 5 or 6 hereof, if a dispute arises out of or relates to this Agreement
or its breach, and if the dispute cannot be settled through direct discussions,
then the Company and the Executive agree first to endeavor to settle the dispute
in an amicable manner by mediation, under the applicable provisions of Section
154.002, ET SEQ., Texas Civil Practices and Remedies Code, as
-8-
<PAGE>
supplemented by the rules of the American Arbitration Association, before having
recourse to any other proceeding or forum.
G. This Agreement has been entered into by the parties in Harris County,
Texas where the parties agree venue will lie for any action brought to enforce
or interpret the provisions hereof.
H. This Agreement may be executed in multiple original counterparts each
of which shall be deemed an original, but all of which together shall constitute
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in Houston, Texas, effective for all purposes as of the 13th day of
December, 1996.
CARRIAGE SERVICES, INC.
By:_________________________________
MELVIN C. PAYNE, Chairman and
Chief Executive Officer
EXECUTIVE:
------------------------------------
THOMAS C. LIVENGOOD
-9-
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Carriage Funeral Holdings, Inc.
CFS Funeral Services, Inc.
Carriage Holding Company, Inc.
Carriage Funeral Services of Michigan, Inc.
Carriage Funeral Services of Ohio, Inc.
CFS Funeral Services of Ohio, Inc.
The Lusk Funeral Home, Incorporated
James E. Drake Funeral Home, Inc.
Hennessy-Bagnoli Funeral Home, Inc.
Carriage Funeral Services of Idaho, Inc.
Dwayne R. Spence Funeral Home, Inc.
Carriage Funeral Services of Kentucky, Inc.
Ceballos-Diaz Funeral Home, Incorporated
Carriage Funeral Services of South Carolina, Inc.
Palms Memorial Park, Inc.
Carriage Funeral Services of Connecticut, Inc.
CFS Funeral Services of Connecticut, Inc.
CSI Funeral Services of Connecticut, Inc.
Carriage Funeral Services of Indiana, Inc.
Carriage Funeral Services of Texas, Inc.
Watson & King Co.
Frank J. Calcaterra Funeral Home, Inc.
Carriage Funeral Services of California, Inc.
Dakan Funeral Chapel, Inc.
Hillcrest Memorial Gardens, Inc.
Richmond County Memorial Park, Inc.
Bryan Funeral Home, Inc.
Cox Funeral Home, Incorporated
Wilson & Kratzer Mortuaries
Rolling Hills Memorial Park
Stevens Funeral Homes, Inc.
Grandview Memorial Gardens, Inc.
Carriage Funeral Services of Kansas, Inc.
CFS Funeral Services of Kansas, Inc.
CFS Services of Kentucky, Inc.
CFS Services of Illinois, Inc.
CFS Funeral Services of New York, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,712
<SECURITIES> 53
<RECEIVABLES> 6,195
<ALLOWANCES> 530
<INVENTORY> 2,344
<CURRENT-ASSETS> 953
<PP&E> 50,207
<DEPRECIATION> 4,095
<TOTAL-ASSETS> 131,308
<CURRENT-LIABILITIES> 6,311
<BONDS> 0
0
0
<COMMON> 85
<OTHER-SE> 56,958
<TOTAL-LIABILITY-AND-EQUITY> 131,308
<SALES> 40,348
<TOTAL-REVENUES> 40,348
<CGS> 33,182
<TOTAL-COSTS> 33,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,347
<INCOME-PRETAX> 345
<INCOME-TAX> 138
<INCOME-CONTINUING> 207
<DISCONTINUED> 0
<EXTRAORDINARY> (498)
<CHANGES> 0
<NET-INCOME> (913)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
