<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRIME SUCCESSION, INC.
(FORMERLY KNOWN AS PRIME SUCCESSION ACQUISITION CORP.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7261 13-3904211
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
</TABLE>
------------------------
691 TEKULVE ROAD
BATESVILLE, INDIANA 47006
(812) 933-0222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY L. WRIGHT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRIME SUCCESSION, INC.
691 TEKULVE ROAD
BATESVILLE, INDIANA 47006
(812) 933-0222
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
WILSON S. NEELY, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
10 3/4% Senior Subordinated
Notes due 2004................ $100,000,000 100% $100,000,000 $30,303.03
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 22, 1996
PROSPECTUS
PRIME SUCCESSION, INC.
(FORMERLY KNOWN AS PRIME SUCCESSION ACQUISITION CORP.)
OFFER TO EXCHANGE $100,000,000 OF ITS 10 3/4% SENIOR SUBORDINATED NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR $100,000,000 OF ITS
OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED
(THE 'EXPIRATION DATE').
------------------------
Prime Succession, Inc. (formerly known as Prime Succession Acquisition
Corp.) ('New Prime') hereby offers to exchange (the 'Exchange Offer') up to
$100,000,000 aggregate principal amount of its new 10 3/4% Senior Subordinated
Notes due 2004 (the 'Exchange Notes') for $100,000,000 aggregate principal
amount of its outstanding 10 3/4% Senior Subordinated Notes due 2004 (the
'Notes').
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Notes for which they may be exchanged pursuant to this offer, except that the
Exchange Notes will be freely transferable by holders thereof (other than as
provided below) and are issued free from any covenant regarding registration.
The Exchange Notes will evidence the same indebtedness as the Notes and contain
terms which are identical in all material respects to the terms of the Notes
that are to be exchanged therefor.
The Notes were sold by New Prime to finance, in part, the Acquisition (as
defined herein) of Prime Succession Holdings, Inc., a Delaware corporation
(formerly known as Prime Succession, Inc.) ('Existing Prime'), by Blackstone
Capital Partners II Merchant Banking Fund L.P. and its affiliates (collectively,
'Blackstone') and Loewen Group International, Inc. ('Loewen'), a subsidiary of
The Loewen Group Inc. ('Loewen Group'). In connection with the Acquisition,
which was consummated on August 26, 1996 (the 'Acquisition Closing Date'), New
Prime became a wholly owned subsidiary of Existing Prime. See 'Summary--The
Acquisition.'
Interest on the Exchange Notes will be payable semi-annually on February 15
and August 15 of each year, commencing February 15, 1997. The Exchange Notes
will mature on August 15, 2004. The Exchange Notes will be unsecured senior
subordinated obligations of New Prime, will be subordinated in right of payment
to all existing and future Senior Indebtedness (as defined herein) of New Prime
(which includes all indebtedness of New Prime under the Bank Credit Facilities
(as defined herein)) and effectively subordinated to all existing and future
liabilities of New Prime's subsidiaries and will rank senior in right of payment
to all other subordinated indebtedness of New Prime. On a pro forma basis after
giving effect to the Acquisition (including borrowings made under the Bank
Credit Facilities) and the offering of the Notes, New Prime would have had $90
million of Senior Indebtedness outstanding as of June 30, 1996, and its
subsidiaries would have had approximately $54.2 million of liabilities
outstanding as of such date.
The Exchange Notes will be redeemable at the option of New Prime, in whole
or in part, at any time on or after August 15, 2000 at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the redemption date.
In the event of a Change of Control (as defined herein), New Prime will be
obligated to make an offer to purchase all of the then outstanding Exchange
Notes at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the purchase date. In addition, New
Prime will be obligated to make an offer to purchase Exchange Notes in the event
of certain asset sales. See 'Description of Exchange Notes.'
The Notes were issued and sold on August 20, 1996 in transactions not
registered under the Securities Act of 1933, as amended (the 'Securities Act'),
in reliance upon the exemption provided in Section 4(2) of the Securities Act.
Accordingly, the Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. The Exchange Notes are being offered hereunder in order to satisfy
certain of the obligations of New Prime under a registration rights agreement
relating to the Notes. See 'The Exchange Offer-- Purpose of the Exchange Offer.'
New Prime is making the Exchange Offer in reliance upon an interpretation by the
staff of the Securities and Exchange Commission set forth in a series of
no-action letters issued to third parties. Based on such interpretation, New
Prime believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for Notes may be offered for resale, resold and otherwise transferred
by any holder thereof (other than any such holder that is an 'affiliate' of New
Prime within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business, such holder has no arrangement with any person
to participate in the distribution of such Exchange Notes and neither such
holder nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. However, New Prime has not sought, and does
not intend to seek, its own no-action letter, and there can be no assurance that
the staff of the Securities and Exchange Commission would make a similar
determination with respect to the Exchange Offer. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal relating to the Exchange Offer
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an 'underwriter' within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. Each broker-dealer that received Notes from New Prime in the
offering of the Notes and not as a result of market-making or other trading
activities, in the absence of an exemption, must comply with the registration
requirements of the Securities Act. New Prime will, for a period of 180 days
after the Expiration Date (as defined herein), make copies of this Prospectus
available to any broker-dealer for use in connection with any such resale. See
'Plan of Distribution.'
The Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ('PORTAL') market. The Exchange Notes
constitute securities for which there is no established trading market. Any
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
New Prime does not currently intend to list the Exchange Notes on any securities
exchange. To the extent that any Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Notes could be adversely affected.
No assurance can be given as to the liquidity of the trading market for either
the Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange. The date of acceptance and exchange
of the Notes (the 'Exchange Date') will be the first business day following the
Expiration Date. Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. New Prime will pay all expenses
incident to the Exchange Offer. New Prime will not receive any proceeds from the
Exchange Offer.
SEE 'RISK FACTORS' BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
, 1996
<PAGE>
ADDITIONAL INFORMATION
New Prime has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-4 (together with all
amendments, exhibits, schedules and supplements thereto, the 'Registration
Statement') under the Securities Act with respect to the Exchange Notes being
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. For further information with respect to New Prime and the Exchange
Notes, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and, where such contract or other document is an exhibit
to the Registration Statement, each such statement is qualified in all respects
by the provisions in such exhibit, to which reference is hereby made. Copies of
the Registration Statement may be examined without charge at the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and the Commission's Regional Offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or
any portion of the Registration Statement can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of certain fees prescribed by the Commission. The
Registration Statement has been and will be filed through the Electronic Data
Gathering, Analysis and Retrieval ('EDGAR') system. Electronic registration
statements filed through the EDGAR system are publicly available through the
Commission Web Site (http:/www.sec.gov).
New Prime is not currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'). Upon
completion of the Exchange Offer, New Prime will be subject to the informational
requirements of the Exchange Act, and, in accordance therewith, will file
periodic reports and other information with the Commision at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of any material so filed can be obtained
from the Public Reference Section of the Commission, upon payment of certain
fees prescribed by the Commission. In addition, pursuant to the Indenture
covering the Notes and the Exchange Notes, New Prime has agreed to file with the
Commission and provide to the Noteholders the annual reports and the
information, documents and other reports otherwise required pursuant to Section
13 of the Exchange Act.
------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes 'forward-looking statements' within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Business--Company Overview,' '--Business Strategy Following Acquisition,'
'--Litigation,' and 'Management--Compensation of Executive Officers,' and
located elsewhere herein regarding the Company's financial position, plans to
increase revenues, reduce general and administrative expense and take advantage
of synergies, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Important
factors that could cause actual results to differ materially from the Company's
expectations ('Cautionary Statements') are disclosed in this Prospectus,
including, without limitation, in conjunction with the forward-looking
statements included in this Prospectus and under 'Risk Factors.' All subsequent
written and oral forward-looking statements attributable to the Company (as
defined herein) or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
2
<PAGE>
SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus. Unless the context otherwise requires, all references to the
'Company' shall mean, collectively, New Prime and its subsidiaries and, prior to
the Acquisition, Existing Prime and its subsidiaries. New Prime is a direct,
wholly owned subsidiary of Existing Prime. All references to 'Management' shall
mean the new management of the Company as of the Acquisition Closing Date.
THE COMPANY
The Company is the fourth-largest operator of funeral homes and cemeteries,
on the basis of revenues, in the United States and is the largest privately-held
company in the funeral and cemetery industry. The Company owns 146 funeral homes
and 16 cemeteries in 20 states. Existing Prime was founded in 1991, began
operations in 1992 and expanded rapidly through the aggressive acquisition of
funeral homes and cemeteries, primarily in non-urban areas of the United States.
The Company has focused on non-urban areas in order to take advantage of the
opportunities offered by such areas, including (i) the opportunity to establish
and maintain a higher market share as a result of the smaller number of death
care providers and (ii) the stronger preference for traditional full-service
funeral services and burials. Historically, the Company's primary growth
strategy has been to purchase properties that can serve as anchor locations and
subsequently to acquire additional funeral homes and cemeteries located near
those central assets.
Former and new management believe that historically, the Company had not
focused on maximizing profitability of the funeral homes and cemeteries which it
had acquired. Management intends to take advantage of (i) the quality and size
of the Company's portfolio of properties, (ii) the opportunity to operate more
efficiently those properties located in close proximity to one another, (iii)
the shift in focus from acquisitions to profit maximization at existing
locations and (iv) the cost reduction opportunities both at local sites and at
the corporate headquarters made possible by an administrative services agreement
with Loewen (the 'Administrative Services Agreement') to improve the Company's
present and long-term operating performance.
THE FUNERAL SERVICE INDUSTRY
The funeral service industry historically has been characterized by low
business risk compared with most other businesses. According to the Business
Failure Record published by The Dun & Bradstreet Corporation, the average
business failure rate in the United States in 1994 was 86 per 10,000. By
contrast, the 1994 failure rate of the funeral service and crematoria industry
was only 8 per 10,000, less than one-tenth the average rate and among the lowest
of all industries. This low failure rate can be attributed to a number of
factors, including the stable demand in the industry, positive demographic
trends and the low rate of new market entrants due to the length of time
required to establish the reputation necessary for community acceptance.
In the last fifteen years, demand has grown steadily at a 1% compound
annual growth rate while the aggregate number of funeral homes has remained
relatively constant. Future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The first members of the
'Baby Boom' generation began to turn 50 in 1996 and are advancing into the prime
savings and planning phases of their lives. The U.S. Department of Commerce,
Bureau of the Census (the 'Census Bureau') projects that the segment of the
United States population over 65 years old, which presently totals 33 million,
will double in size over the next 35 years. Over the next fifteen years, this
aging of the population is expected to outweigh the effects of increased life
expectancies. The Census Bureau projects that the number of deaths in the United
States will grow at approximately 1.0% annually through 2010.
A Wirthlin Group study conducted in 1995 concluded that the three most
important factors in selecting a funeral home are that it had previously served
the family, was close to the respondent's residence and had a strong reputation
in the community. Fewer than five percent of the respondents to the Wirthlin
study specified price as an important factor in selecting a funeral home. The
relationship between reputation and market share is an important competitive
advantage for existing funeral homes in that unless a new market entrant is able
to establish the community reputation necessary to gain market share, existing
homes will retain considerable pricing flexibility.
3
<PAGE>
BUSINESS STRATEGY
Overview. Management believes that opportunities exist to enhance the
revenues and profitability of the Company's existing locations both in the
short-term and over time. The Company's new senior management team is headed by
two former executives of Loewen Group, North America's second-largest operator
of funeral homes and cemeteries, one of whom has 29 years of experience and the
other of whom has 12 years of experience in the funeral industry. Existing
Prime's operations underperformed significantly compared to its peer group
companies in the funeral service industry. As a result, Management has
identified, and the Company intends to undertake, a number of initiatives that
Management believes will result in an improvement in both revenues and operating
profit, including planned reductions in both operating and general and
administrative expenses. Over time, the Company will continue to endeavor to
increase revenues and profitability by capitalizing on the location and
concentration of its properties, improved merchandising, enhanced pre-need
marketing, and a management structure that encourages an entrepreneurial
business culture.
Revenue Enhancement. The two key drivers behind consistent revenue growth
in the funeral home industry are price per funeral and funeral services per
home. In 1995, the Company's properties averaged $3,364 per funeral and 144
services per home. Both of these figures measured significantly below the
estimated 1995 national average of $4,150 per funeral and 170 services per
funeral home. (Sources: Business Trend Analysts, US Funeral/Cremation
Services/Supplies Report, April 1, 1995 and National Funeral Directors
Association, respectively; the average revenue per funeral for both the Company
and the industry exclude trust earnings and insurance commission revenues).
Management believes that the quality and location of the Company's funeral homes
offer substantial opportunity for both near-term and long-term revenue
enhancement. The Company will seek to capitalize on this opportunity through the
introduction of more sophisticated merchandising and the pricing of its services
more closely to the industry average. Based on 1995 aggregate call volume (the
number of services per funeral home multiplied by the total number of funeral
homes), every $100 increase in price per funeral could result in an approximate
$2 million increase per year in the Company's revenues, although there can be no
assurance that such price increases can be effectively implemented or that such
growth in revenues will be realized. At the Company's cemetery operations,
Management will undertake to increase revenues through an enhanced marketing
program to more effectively serve the needs of the growing number of people who
wish to plan their burial needs in advance.
Clustered Operations. More than 80 percent of the Company's funeral homes
and cemeteries are located in 'clusters.' A cluster consists of two or more
funeral homes in sufficient proximity to facilitate the sharing of resources and
facilities. The Company's major funeral home and cemetery clusters are in
Alabama, Florida, Illinois, California and Minnesota. Management believes that
the Company has not fully capitalized on the competitive advantages and scale
economies available to its clustered properties. Specifically, the Company
expects to expand the sharing within clusters of service personnel, vehicles,
preparation services, clerical staff and other key resources. Additionally,
Management plans to implement revenue enhancing cross-marketing programs that
will benefit proximate locations without increasing overhead expenses. The
Company also benefits from its Administrative Services Agreement with Loewen,
which will enable the Company to reduce costs through the elimination of certain
fixed expenses and the more efficient use of facilities and personnel. See
'Certain Related Transactions--Administrative Services Agreement.'
Reduced General & Administrative Expense. Management believes that
significant and immediate cost savings can be realized, at both the local site
and corporate levels, from the restructuring of the Company's general and
administrative staff to more appropriately reflect the Company's new focus on
existing operations. At the site level, Management intends to reduce excess
workforce and take advantage of the Company's funeral home and cemetery clusters
by pooling local resources to eliminate currently duplicative functions in the
areas of finance and administration. In addition, the Company has contracted
with Loewen to provide certain services pursuant to the Administrative Services
Agreement, thereby facilitating the reduction of excess resources. As the
Company's acquisition program will be substantially eliminated, the reduction of
acquisition-related functions at the corporate headquarters will offer further
opportunities for savings.
Pre-Need Marketing. The services offered by funeral homes and cemeteries
can be purchased at the time of death ('at-need') or in advance through a
prearranged funeral contract ('pre-need'). Individuals increasingly are
recognizing the benefits of purchasing funeral products and services in advance,
and the Company is
4
<PAGE>
committed to providing quality advanced funeral and cemetery planning to the
communities it serves. Management believes that such programs considerably
enhance long-term revenues for funeral homes by securing future market share. In
addition, the Company can realize significant current revenues from the sale,
through a commissioned sales force, of cemetery pre-need arrangements. To
capitalize on these opportunities, the Company intends to recruit experienced
senior managers who will focus exclusively on building a leading pre-need sales
program based on the foundation currently in place at the Company.
Management Structure. The Company's management structure and remuneration
practices will be designed to support and encourage entrepreneurial drive and
individual responsibility. Each funeral home and cemetery will be operated as a
distinct profit center, with monthly and annual financial performance monitored
by regional and corporate management in accordance with budgeted projections.
Local managers will be given a high degree of autonomy, as Management believes
that such managers, as members of the local community, are best able to judge
how to conduct day-to-day operations in a manner consistent with the established
character of the particular funeral home or cemetery and the needs of the
community. Additionally, senior management's compensation will be based in part
on the performance of the Company.
THE ACQUISITION
The Notes were sold by New Prime to finance, in part, the acquisition (the
'Acquisition') of Existing Prime by Blackstone and Loewen. The principal
components of the Acquisition, which was consummated on August 26, 1996,
included the following:
o The contribution by Blackstone, Loewen and PSI Management Direct L.P., a
Delaware limited partnership ('PSIM'), of $130 million and all of the
common stock of New Prime to Existing Prime (the 'Blackstone/Loewen
Contribution') in exchange for 100% of the capital stock of Existing
Prime (after giving effect to the Stock Repurchase referred to below).
New Prime thereby became a wholly owned subsidiary of Existing Prime.
o The transfer by Existing Prime of the shares of all of its directly held
subsidiaries and all of its other assets and liabilities to New Prime.
o The establishment of new senior secured credit facilities (the 'Bank
Credit Facilities') between the Company and a syndicate of financial
institutions (the 'Bank Lenders'), with Goldman Sachs Credit Partners,
L.P., formerly known as Pearl Street L.P. ('GSCP'), an affiliate of
Goldman, Sachs & Co. ('Goldman Sachs'), as arranging agent. The Bank
Credit Facilities provided the Company with a $90 million term loan
facility (the 'Bank Term Facility'), the proceeds of which were used to
finance the Acquisition and related transaction costs, to pre-fund
certain capital expenditures and to repay or defease existing
indebtedness of the Company, and a $25 million revolving credit facility
(the 'Revolving Credit Facility'), the proceeds of which are available
for general corporate purposes. Existing Prime and each of the Company's
subsidiaries (collectively, the 'Bank Guarantors') have guaranteed (the
'Bank Guarantees') all obligations of New Prime under the Bank Credit
Facilities. The Bank Credit Facilities and the Bank Guarantees are
secured by all of the assets of the Company and the Bank Guarantors
(other than real property and certificates of title on vehicles), 100% of
the capital stock of the Company and each of its subsidiaries and all
intercompany receivables. See 'Description of Bank Credit Facilities.'
o The repurchase by Existing Prime from its then existing stockholders (the
'Stock Repurchase'), using the proceeds of the Blackstone/Loewen
Contribution and a portion of the proceeds of the Offering and the Bank
Term Facility, of all of the then outstanding shares of capital stock of
Existing Prime for an aggregate purchase price of approximately $171.8
million. As of the Acquisition Closing Date, Blackstone and Loewen owned
75.8% and 23.5%, respectively, of the common stock of Existing Prime.
o The repayment or defeasance of existing indebtedness and the discharge of
certain other existing obligations of Existing Prime in an aggregate
amount of approximately $126.4 million.
5
<PAGE>
The following table sets forth a summary of the sources and uses of funds
associated with the Acquisition and the offering of the Notes:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES:
Bank Term Facility.............................................. $ 90.0
Notes........................................................... 100.0
Blackstone/Loewen Contribution.................................. 129.6
Existing cash................................................... 1.7
-------------
Total......................................................... $ 321.3
-------------
-------------
USES:
Stock Repurchase by Existing Prime.............................. $ 171.8
Repayment or defeasance of existing indebtedness and discharge
of certain other existing obligations of Existing Prime....... 126.4
Pre-funding of capital expenditures of New Prime................ 2.9
Payment of fees and expenses related to the Acquisition, the
offering of the Notes and the repayment of existing
indebtedness of Existing Prime................................ 20.2
-------------
Total......................................................... $ 321.3
-------------
-------------
</TABLE>
See 'Certain Related Transactions--Stock Purchase Agreement and
Acquisition.'
PUT/CALL AND OTHER ARRANGEMENTS
Pursuant to an agreement (the 'Put/Call Agreement') executed by Blackstone,
Loewen Group, Loewen and PSIM, in connection with the Acquisition, (i) Loewen
has a call option, exercisable from and after the fourth anniversary of the
Acquisition Closing Date until but excluding the sixth anniversary of the
Acquisition Closing Date, to purchase the shares of common stock of Existing
Prime held by Blackstone and/or PSIM and (ii) each of Blackstone and PSIM has a
put option, exercisable from and after the sixth anniversary of the Acquisition
Closing Date until but excluding the eighth anniversary of the Acquisition
Closing Date, to sell such shares of common stock of Existing Prime held by
Blackstone or PSIM, as the case may be, to Loewen. The option price in each case
is derived from a formula based on earnings before interest, taxes, depreciation
and amortization ('EBITDA'). In addition, pursuant to the terms of a
stockholders' agreement entered into by Existing Prime, Blackstone, Loewen and
PSIM on the Acquisition Closing Date, (x) neither Blackstone nor Loewen may
transfer its shares of Existing Prime common stock without the prior written
consent of the other party, subject to certain exceptions, and (y) PSIM may not
transfer its shares of Existing Prime common stock without the consent of
Blackstone and Loewen. See 'Certain Related Transactions.'
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer...... New Prime is offering to exchange pursuant to the
Exchange Offer up to $100,000,000 aggregate principal
amount of its new 10 3/4% Senior Subordinated Notes due
2004 (the 'Exchange Notes'), for $100,000,000 aggregate
principal amount of its outstanding 10 3/4% Senior
Subordinated Notes due 2004 (the 'Notes'). The terms of
the Exchange Notes are identical in all material
respects (including principal amount, interest rate and
maturity) to the terms of the Notes for which they may
be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable by
holders thereof (other than as provided herein), and
are not subject to any covenant regarding registration
under the Securities Act. See 'The Exchange
Offer--Terms of the Exchange' and '--Terms and
Conditions of the Letter of Transmittal' and
'Description of Exchange Notes.'
Interest Payments....... Interest on the Exchange Notes shall accrue from the
last Interest Payment Date (February 15 or August 15)
on which interest was paid on the Notes so surrendered
or, if no interest has been paid on such Notes, from
August 20, 1996.
Minimum Condition....... The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Notes being tendered for
exchange.
Expiration Date......... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1996, unless extended
(the 'Expiration Date'). Any Note not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
Exchange Date........... The date of acceptance for exchange of the Notes will
be the first business day following the Expiration
Date.
Conditions of the
Exchange Offer........ New Prime's obligation to consummate the Exchange Offer
will be subject to certain conditions. See 'The
Exchange Offer-- Conditions to the Exchange Offer.'
New Prime reserves the right to terminate or amend
the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
Withdrawal Rights....... The tender of Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date.
Procedures for Tendering
Notes................. See 'The Exchange Offer--Tender Procedure.'
Federal Income Tax
Consequences.......... The exchange of Notes for Exchange Notes will not be a
taxable exchange for federal income tax purposes. See
'Certain United States Federal Income Tax
Consequences.'
Effect on Holders of
Notes................. As a result of the making of, and upon acceptance or
exchange of all validly tendered Notes pursuant to the
terms of, this Exchange Offer, New Prime will have
fulfilled a covenant contained in
the Registration Rights Agreement (the 'Registration
Rights Agreement') dated as of August 15, 1996 between
New Prime and Smith Barney Inc. (the 'Initial
Purchaser') and, accordingly, there will be no increase
in the interest rate on the Notes pursuant to the terms
of the Registration Rights Agreement, and the holders
of the Notes will have no further registration or other
rights under the Registration Rights Agreement. Holders
of the Notes who do not tender their Notes in the
Exchange Offer will continue to hold such
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Notes and will be entitled to all the rights and
subject to all the limitations applicable thereto
(including the restrictions on transfer thereof) under
the Indenture, dated as of August 15, 1996, between New
Prime and United States Trust Company of New York, as
Trustee, relating to the Notes and the Exchange Notes
(the 'Indenture'), except for any such rights under the
Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a
result of the making of, and the acceptance for
exchange of all validly tendered Notes pursuant to, the
Exchange Offer. Except for the restrictions on
registrations and transfers, all untendered Notes and
the Exchange Notes will be treated as one class of
securities for purposes of the covenants and the other
terms contained in the Indenture.
Use of Proceeds......... There will be no cash proceeds to New Prime from the
exchange pursuant to the Exchange Offer.
Exchange Agent.......... United States Trust Company of New York is serving as
Exchange Agent in connection with the Exchange Offer.
Consequence of Failure
to Exchange........... Holders of Notes who do not exchange their Notes for
Exchange Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer
of such Notes as set forth in the legend thereon as a
consequence of the offer or sale of the Notes pursuant
to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the
Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws.
New Prime does not currently anticipate that it will
register the Notes under the Securities Act. To the
extent that Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Notes
could be adversely affected.
</TABLE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
Issuer.................. Prime Succession, Inc. (formerly known as Prime
Succession Acquisition Corp.).
Securities Offered...... $100 million principal amount of 10 3/4% Senior
Subordinated Notes due 2004.
Maturity Date........... August 15, 2004.
Interest Payment
Dates................. February 15 and August 15 of each year, commencing
February 15, 1997.
Ranking................. The Exchange Notes will be unsecured senior
subordinated obligations of the Company, will be
subordinated in right of payment to all existing and
future Senior Indebtedness of the Company (which
includes all indebtedness of the Company under the Bank
Credit Facilities) and effectively subordinated to all
existing and future liabilities of its subsidiaries and
will rank senior in right of payment to all other
subordinated indebtedness of the Company. On a pro
forma basis after giving effect to the Acquisition
(including borrowings made under the Bank Credit
Facilities) and the offering of the Notes, New Prime
would have had $90 million of Senior Indebtedness
outstanding as of June 30, 1996,
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
and its subsidiaries would have had approximately $54.2
million of liabilities outstanding as of such date. See
'Description of Exchange Notes--Subordination.'
Optional Redemption..... The Exchange Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after August 15, 2000 at a premium declining to par in
2003, plus accrued and unpaid interest, if any, to the
redemption date. See 'Description of Exchange
Notes--Redemption--Optional Redemption.'
Change of Control....... In the event of a Change of Control (as defined
herein), the Company will be obligated to make an offer
to purchase the then outstanding Exchange Notes at a
purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the purchase date. The Company's ability to purchase
the Exchange Notes if a Change of Control occurs will
be dependent upon obtaining third-party financing to
the extent it does not have available funds to meet its
purchase obligations. There can be no assurance that
the Company will be able to obtain such financing. The
term 'Change of Control' is limited to certain
specified transactions (which do not include the
purchase by Loewen of the shares of Existing Prime held
by Blackstone) and may not include other events that
might adversely affect the financial condition of the
Company or result in a downgrade of the credit rating
of the Exchange Notes. See 'Description of Exchange
Notes--Certain Covenants--Change of Control.'
Certain Covenants....... The Indenture contains certain covenants by the Company
and its Subsidiaries (as defined herein), including,
but not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii) certain
payments, including dividends and investments, (iii)
the creation of liens, (iv) sales of assets and
preferred stock, (v) transactions with interested
persons, (vi) payment restrictions affecting
subsidiaries, (vii) sale-leaseback transactions and
(viii) mergers and consolidations. See 'Description of
Exchange Notes--Certain Covenants.'
Absence of a Public
Market for the
Exchange Notes........ The Exchange Notes are new securities, and there is
currently no established market for the Exchange Notes.
The Exchange Notes will generally be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be new securities for which
there will not initially be a market. Accordingly,
there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. Smith
Barney Inc. (the 'Initial Purchaser') has advised the
Company that it currently intends to make a market in
the Exchange Notes. However, the Initial Purchaser is
not obligated to do so, and any market making with
respect to the Exchange Notes may be discontinued at
any time without notice. The Company does not intend to
apply for a listing of the Exchange Notes on a
securities exchange.
</TABLE>
RISK FACTORS
Holders of Notes should consider carefully the information set forth in
this Prospectus and, in particular, should evaluate the specific factors set
forth under 'Risk Factors' before tendering Notes in exchange for Exchange
Notes.
9
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain selected historical consolidated
financial data for the Company for and at the end of each of the years in the
four-year period ended December 31, 1995 and the six-month periods ended June
30, 1995 and 1996. The selected historical financial data for the four fiscal
years ended December 31, 1995 were derived from the Company's financial
statements which have been audited by Ernst & Young LLP ('E&Y'), independent
auditors of Existing Prime. KPMG Peat Marwick LLP have been appointed auditors
of New Prime. The selected historical financial data for the six months ended
June 30, 1995 and 1996 were derived from the unaudited financial statements of
the Company. The results for the six months ended June 30, 1995 and 1996 are not
necessarily indicative of the results for the full fiscal year. The selected pro
forma financial data give effect to (i) cost reductions associated with
elimination of specific and identifiable job functions, (ii) the acquisition of
eleven funeral homes in 1995 and three funeral homes in 1996 and related
financing transactions, (iii) the Acquisition and (iv) the offering of the
Notes, as if each such transaction or cost reduction, as the case may be, had
occurred on January 1, 1995.
The following table should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Pro Forma Financial Information' and the Consolidated Financial Statements,
including, in each case, the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------------------
1995 PRO 1996 PRO
1992 1993 1994 1995 FORMA(1) 1995(2) 1996(2) FORMA(1)
------ ------ ------ ------ -------- ------- ------- --------
(DOLLARS IN MILLIONS EXCEPT REVENUE PER FUNERAL SERVICE)
(UNAUDITED)
------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Funeral services............... $ 5.0 $ 33.0 $ 60.9 $ 68.6 $ 72.5 $ 34.1 $ 37.0 $ 37.2
Cemetery sales................. 0.2 8.9 11.3 12.9 12.9 6.2 6.8 6.8
------ ------ ------ ------ -------- ------- ------- --------
5.2 41.9 72.2 81.5 85.4 40.3 43.8 44.0
Cost of sales:
Funeral homes.................. 1.0 5.7 10.9 11.3 11.9 5.7 5.6 5.7
Cemetery....................... 0.1 1.4 2.7 2.4 2.8 1.1 1.4 1.6
Cumulative effect of change in
accounting estimate(3)....... -- -- -- (3.5) (3.5) -- -- --
------ ------ ------ ------ -------- ------- ------- --------
1.1 7.1 13.6 10.2 11.2 6.8 7.0 7.3
Operating expenses:
Funeral homes.................. 3.2 21.1 35.2 38.1 38.5 18.6 20.5 19.6
Cemetery....................... 0.1 4.7 6.7 7.5 6.7 3.6 3.9 3.5
------ ------ ------ ------ -------- ------- ------- --------
3.3 25.8 41.9 45.6 45.2 22.2 24.4 23.1
Corporate and regional general
and administrative expenses.... 1.6 2.9 4.6 6.1 4.6 2.7 3.7 2.8
Amortization of goodwill......... 0.1 0.7 1.8 1.9 5.3 0.9 1.0 2.6
Covenants not to compete......... 0.2 1.2 2.6 2.8 2.8 1.4 1.4 1.4
------ ------ ------ ------ -------- ------- ------- --------
Operating income (loss).......... (1.1) 4.2 7.7 14.9 16.3 6.3 6.3 6.8
Other income and expense:
Interest expense............... 0.8 6.4 12.4 15.4 23.3 7.6 7.6 10.9
Legal settlement............... -- -- -- -- -- -- 6.3 6.3
Other expense (income), net.... -- 0.3 (0.1) (0.1) (0.2) (0.4) (0.1) (0.1)
------ ------ ------ ------ -------- ------- ------- --------
0.8 6.7 12.3 15.3 23.1 7.2 13.8 17.1
------ ------ ------ ------ -------- ------- ------- --------
Loss before income taxes......... (1.9) (2.5) (4.6) (0.4) (6.8) (0.9) (7.5) (10.3)
Income tax benefit (expense)..... -- 0.2 0.3 (0.3) (0.3) (0.4) (0.2) (0.2)
------ ------ ------ ------ -------- ------- ------- --------
Net loss......................... $ (1.9) $ (2.3) $ (4.3) $ (0.7) $ (7.1) $ (1.3) $ (7.7) $(10.5)
------ ------ ------ ------ -------- ------- ------- --------
------ ------ ------ ------ -------- ------- ------- --------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------------------
1995 PRO 1996 PRO
1992 1993 1994 1995 FORMA(1) 1995(2) 1996(2) FORMA(1)
------ ------ ------ ------ -------- ------- ------- --------
(DOLLARS IN MILLIONS EXCEPT REVENUE PER FUNERAL SERVICE)
(UNAUDITED)
------------------------------------------
OTHER FINANCIAL DATA AND RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Depreciation and amortization(4):
Depreciation................... $ 0.2 $ 1.4 $ 2.2 $ 2.5 $ 3.0 $ 1.2 $ 1.4 $ 1.6
Amortization of goodwill....... 0.1 0.7 1.8 1.9 5.3 0.9 1.0 2.6
Amortization of covenants not
to compete................... 0.2 1.2 2.6 2.8 2.8 1.4 1.4 1.4
Amortization of consulting
agreements................... -- 0.2 0.3 0.3 0.3 0.2 0.2 0.2
------ ------ ------ ------ -------- ------- ------- --------
$ 0.5 $ 3.5 $ 6.9 $ 7.5 $ 11.4 $ 3.7 $ 4.0 $ 5.8
------ ------ ------ ------ -------- ------- ------- --------
------ ------ ------ ------ -------- ------- ------- --------
Capital expenditures............. 0.1 1.9 2.6 1.6 1.6 1.0 0.9 0.9
Cash interest expense(5)......... 0.7 6.1 11.9 14.9 21.5 7.3 7.3 10.0
EBITDA(6)........................ (0.6) 7.4 14.7 19.0 25.0 10.4 10.4 12.7
Ratio of EBITDA to cash interest
expense........................ -- 1.2x 1.2x 1.3x 1.2x 1.4x 1.4x 1.3x
Ratio of earnings to fixed
charges(7)..................... -- -- -- -- -- -- -- --
OPERATING DATA:
Number of funeral home
locations...................... 38 101 131 143 -- 135 146 --
Number of funeral services....... 1,700 10,889 17,590 19,776 -- 9,863 10,817 --
Total funeral service revenues
per funeral service............ $2,943 $3,027 $3,460 $3,470 -- $ 3,453 $ 3,420 --
Number of cemeteries............. 5 14 16 16 -- 16 16 --
</TABLE>
<TABLE>
<CAPTION>
AS AT JUNE 30,
AS AT DECEMBER 31, --------------------
------------------------------------ 1996 PRO
1992 1993 1994 1995 1996(2) FORMA(1)
------ ------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................... $ 67.6 $163.9 $195.3 $196.1 $ 194.1 $ 373.4
Total debt....................... 43.5 103.2 121.5 122.3 121.0 190.0
Shareholders' equity(8).......... 12.3 20.7 20.7 22.7 14.8 129.6
Ratio of total debt to total
capitalization(9).............. 78.0% 83.3% 84.3% 83.0% 89.1% 59.4%
</TABLE>
- ------------------
(1) The selected pro forma financial data give effect to the acquisitions of
funeral homes by the Company in 1995 and 1996 and to the Acquisition, the
offering of the Notes and certain cost reductions, as if each such
transaction or cost reduction, as the case may be, had occurred on January
1, 1995. See 'Unaudited Pro Forma Consolidated Financial Information' and
the notes thereto.
(2) The selected historical financial data for the six months ended June 30,
1995 and 1996 were derived from the unaudited financial statements of the
Company. The results for the six months ended June 30, 1995 and 1996 are not
necessarily indicative of the results for the full fiscal year.
(3) In 1995, the Company constructed a cemetery vault manufacturing facility in
Alabama that allows for the production of vaults at a significantly lower
cost than purchasing from independent manufacturers. As a result, Existing
Prime recorded a $3.5 million one-time gain related to the adjustment of a
deferred merchandise liability for pre-need cemetery vault sales.
(4) Does not include amortization of deferred financing costs, which are
included in interest expense.
(5) Cash interest expense is defined as interest expense less amortization of
deferred financing costs.
(6) EBITDA is defined as loss before income taxes plus interest expense,
depreciation and amortization, adjusted for (i) the one-time $3.5 million
and $2.9 million net change in accounting estimate for, respectively, the
historical and pro forma year ended December 31, 1995, and (ii) the $6.3
million one-time charge for the
(Footnotes continued on next page)
11
<PAGE>
(Footnotes continued from previous page)
settlement of certain litigation for the six months ended June 30, 1996.
These adjustments are described below:
o In December 1995, the Company constructed a cemetery vault manufacturing
facility in Alabama that allows for the production of vaults at a
significantly lower cost than purchasing from independent manufacturers.
The lower cost of sales from the new manufacturing plant allowed Existing
Prime to recognize a one-time gain of $3.5 million by reducing its
estimated deferred merchandise liability for pre-need cemetery vault
sales. On a pro forma basis for 1995, assuming the plant was in operation
since January 1, 1995, estimated savings were $0.6 million.
o The Company settled certain litigation in April 1996 and recorded a
one-time charge of $6.3 million in the first half of 1996 for the present
value of future cash payments due under the litigation settlement
agreements. See 'Business--Litigation--Gamble Settlement.'
The calculation of EBITDA is shown below.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------------------
1995 PRO 1996 PRO
1992 1993 1994 1995 FORMA(1) 1995(2) 1996(2) FORMA(1)
------ ------ ------ ------ -------- ------- ------ --------
(IN MILLIONS)
(UNAUDITED)
-----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss before income taxes........... $ (1.9) $ (2.5) $ (4.6) $ (0.4) $ (6.8) $ (0.9) $ (7.5) $(10.3)
Interest expense................... 0.8 6.4 12.4 15.4 23.3 7.6 7.6 10.9
Depreciation and amortization...... 0.5 3.5 6.9 7.5 11.4 3.7 4.0 5.8
Legal settlement (see 'Business--
Litigation')..................... -- -- -- -- -- -- 6.3 6.3
Cumulative effect of change in
accounting estimate, net......... -- -- -- (3.5) (2.9) -- -- --
------ ------ ------ ------ -------- ------- ------ --------
EBITDA............................. $ (0.6) $ 7.4 $ 14.7 $ 19.0 $ 25.0 $ 10.4 $ 10.4 $ 12.7
------ ------ ------ ------ -------- ------- ------ --------
------ ------ ------ ------ -------- ------- ------ --------
</TABLE>
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. However, EBITDA should not be
considered in isolation, as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability or liquidity.
(7) Earnings used in computing the ratio of earnings to fixed charges consist
of income before provision for income taxes plus fixed charges. Fixed
charges consist of interest expense, including amortization of debt
issuance costs, and a portion of operating lease rental expense deemed to
be representative of the interest factor. Earnings were insufficient to
cover fixed charges in the years ended December 31, 1992, 1993, 1994, 1995
and 1995 pro forma, and the six months ended June 30, 1995 and 1996 and
1996 pro forma, by $1.9 million, $2.5 million, $4.6 million, $0.4 million,
and $6.8 million, and $0.9 million, $7.5 million and $10.3 million,
respectively.
(8) Does not include redeemable preferred stock.
(9) Total capitalization includes redeemable preferred stock.
12
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, holders of Notes
should consider carefully the following factors before tendering their Notes in
exchange for Exchange Notes offered hereby. The risk factors set forth below are
generally applicable to the Notes as well as the Exchange Notes.
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the offer or sale of the Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Notes under the Securities Act or any state securities
laws. Based on interpretations by the staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an 'affiliate' of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See 'Plan of Distribution.'
SUBSTANTIAL LEVERAGE
The Company has incurred substantial indebtedness in connection with the
Acquisition and is highly leveraged. At June 30, 1996, the Company's pro forma
total debt after giving effect to the Acquisition and the offering of the Notes
and the application of the net proceeds therefrom would have been $190 million,
and its pro forma total debt to total capitalization ratio would have been
59.4%. In the ordinary course of business, the Company has incurred and, subject
to certain covenants and financial tests set out in the Bank Credit Agreement
(as defined herein) and the Indenture, will continue to incur additional
indebtedness to fund working capital requirements and for other corporate
purposes. See 'Capitalization,' 'Description of Bank Credit Facilities,'
'Description of Exchange Notes' and the Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Prospectus.
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including: (i) the Company's
ability to obtain financing in the future for working capital or other purposes
may be impaired; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness; (iii) the indebtedness outstanding under the Bank Credit
Facilities is secured and will mature prior to the maturity of the Exchange
Notes; (iv) certain of the Company's borrowings is at variable rates of
interest, which could result in higher interest expense in the event of
increases in interest rates; and (v) the Company's high degree of leverage may
make it more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures.
The Company believes that, based upon current levels of operations and
anticipated growth and availability under the Revolving Credit Facility, it will
be able to meet its principal and interest payment obligations. There can be no
assurance, however, that the Company's business will generate sufficient cash
flow from operations or that future working capital borrowings will be available
in an amount sufficient to enable the Company to service its indebtedness,
including the Exchange Notes. If the Company cannot generate sufficient cash
flow from operations or borrow under the Revolving Credit Facility to meet such
obligations, then the Company may be required to take certain actions, including
reducing capital expenditures, restructuring its debt, selling assets or seeking
additional equity in order to avoid an Event of Default (as defined herein).
There can be no assurance that such actions could be effected or would be
effective in allowing the Company to meet such obligations. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
13
<PAGE>
SUBORDINATION
The Exchange Notes will be unsecured obligations of the Company that are
subordinated in right of payment to all Senior Indebtedness of the Company,
including all indebtedness under the Bank Credit Facilities. As of June 30,
1996, giving pro forma effect to the Acquisition and the offering of the Notes
and the application of the net proceeds therefrom, approximately $90 million of
Senior Indebtedness would have been outstanding and the Company would have had
borrowing availability of approximately $25 million under the Revolving Credit
Facility. The Indenture and the Bank Credit Facilities permit the Company to
incur additional Senior Indebtedness, provided that certain conditions are met,
and the Company expects from time to time to incur additional Senior
Indebtedness. Furthermore, the Indenture does not limit the Company's ability to
secure Senior Indebtedness. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding up of the Company or upon a default
in payment with respect to, or the acceleration of, or if a judicial proceeding
is pending with respect to, any default under any Senior Indebtedness, the
lenders under the Bank Credit Facilities (the 'Lenders') and any other creditors
who are holders of Senior Indebtedness must be paid in full before a holder of
the Exchange Notes may be paid. Accordingly, there may be insufficient assets
remaining after such payments to pay principal of or interest on the Exchange
Notes. See 'Description of Exchange Notes-- Subordination.' In addition, the
Exchange Notes will be structurally subordinated to any liabilities or
obligations of the Company's subsidiaries as described below under '--Holding
Company Structure.'
The Company's obligations under the Bank Credit Facilities are secured by
substantially all of the assets of the Company and its subsidiaries. If a
default occurs under the Bank Credit Agreement and the Company is unable to
repay such borrowings, the Lenders would have the right to exercise the remedies
available to secured creditors under applicable law and pursuant to the Bank
Credit Agreement. Accordingly, the Lenders would be entitled to payment in full
out of the assets securing such indebtedness prior to payment to holders of the
Exchange Notes. If the Lenders or the holders of any other secured indebtedness
were to foreclose on the collateral securing the Company's obligations to them,
it is possible that there would be insufficient assets remaining after
satisfaction in full of all such indebtedness to satisfy in full the claims of
holders of the Exchange Notes.
RESTRICTIVE DEBT COVENANTS
The Bank Credit Agreement and the Indenture contain a number of significant
covenants that, among other things, restrict the ability of the Company to
dispose of assets, incur additional indebtedness, pay dividends, prepay
subordinated indebtedness (including, in the case of the Bank Credit Agreement,
the Exchange Notes), enter into sale-leaseback transactions, create liens, make
capital expenditures and make certain investments or acquisitions and otherwise
restrict corporate activities. In addition, under the Bank Credit Agreement, the
Company is required to satisfy specified financial ratios and tests, including,
without limitation, minimum fixed charge coverage, minimum interest coverage,
minimum net worth, maximum senior debt leverage and maximum total debt leverage
tests. The ability of the Company to comply with such provisions may be affected
by events beyond the Company's control. To the extent that the Company does not
achieve the pro forma estimates with respect to its operations, it may not be in
compliance with certain of the covenants included in the Bank Credit Agreement.
See 'Pro Forma Financial Information.' The breach of any of these covenants
could result in a default under the Bank Credit Agreement. See 'Description of
Bank Credit Facilities.' In the event of any such default, depending upon the
actions taken by the Lenders, the Company could be prohibited from making any
payments of principal of or interest on the Exchange Notes. See 'Description of
Exchange Notes-- Subordination.' In addition, the Lenders could elect to declare
all amounts borrowed under the Bank Credit Facilities, together with accrued
interest, to be due and payable or could proceed against the collateral securing
such indebtedness.
HISTORICAL NET LOSSES; WEAKNESS IN FINANCIAL ACCOUNTING CONTROLS
From the time that Existing Prime commenced operations in early 1992, it
grew dramatically through the acquisition of funeral homes and cemeteries.
Primarily as a result of this acquisition strategy, the Company has incurred net
losses in each of its four years of operations. There can be no assurance that
the Company will become profitable in the future or that it will be able to
implement successfully its planned changes in operating strategy. See
'--Potential Adverse Consequences of Planned Changes in Operating Strategy.'
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Existing Prime's rapid growth also placed a significant strain on the
Company's accounting systems and internal controls. The lack of sufficiently
skilled financial management at Existing Prime's Alabama subsidiary has had an
adverse impact on such subsidiary's ability to produce accurate and timely
financial information. In connection with the audit of Existing Prime's
financial statements for the year ended December 31, 1995 and the review of its
March 31, 1996 financial statements, Existing Prime's independent public
accountants, E&Y, issued a management letter enumerating certain reportable
conditions related to the Company's Alabama operations. Such conditions included
the failure to perform key account reconciliations and the lack of qualified
financial personnel at the Alabama subsidiary's operations.
During the latter half of 1995 and in 1996, management of Existing Prime
took steps designed to address the concerns raised by E&Y, including the
dedication of corporate personnel to work on site in Alabama to assist in the
processing and summarizing of financial data, the replacement of an outside
service bureau that had previously been responsible for funeral service
accounting at most of Existing Prime's locations and the institution of new and
automated accounting systems and procedures overall. No assurance can be given
that these steps have been sufficient to alleviate all the reportable conditions
identified by E&Y and the strains on the accounting systems and internal
controls. Management is undertaking an extensive review of the Company's
accounting controls and procedures and intends to implement any additional steps
deemed necessary. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--General.'
POTENTIAL ADVERSE CONSEQUENCES OF PLANNED CHANGES IN OPERATING STRATEGY
The implementation of the changes in operating strategy described under
'Business--Business Strategy Following Acquisition' could result in consequences
which could have an adverse effect on the Company's results of operations. For
example, the enactment of price increases may result in a reduction in market
share and the implementation of staff reductions intended to decrease general
and administrative expenses may lead to low morale and the further loss of
personnel. In addition, the Administrative Services Agreement may not result in
the realization of the expected savings from such agreement. See 'Certain
Related Transactions--Administrative Services Agreement.' There can be no
assurance that these consequences will not occur and, if they occur, that they
will not result in a material adverse effect on the Company's results of
operations and prevent the Company from increasing its revenues and operating
profit.
HOLDING COMPANY STRUCTURE
The Company is a holding company with no significant independent business
operations. Accordingly, its primary sources of cash to meet debt service and
other obligations (including payments on the Exchange Notes) are dividends and
other payments from its subsidiaries. Consequently, obligations of the Company
to its creditors, including holders of the Exchange Notes, are effectively
subordinated in right of payment and junior to all liabilities (including trade
payables) of the Company's subsidiaries. The Bank Credit Facilities are
guaranteed by each of the Company's subsidiaries. On a pro forma basis after
giving effect to the Acquisition (including borrowings made under the Bank
Credit Facilities) and the offering of the Notes, the aggregate amount of
liabilities of the Company's subsidiaries (excluding intercompany indebtedness)
as of June 30, 1996 would have been approximately $54.2 million.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if the
Company (a) had incurred such indebtedness with the intent to hinder, delay or
defraud creditors, or (b)(A) was insolvent at the time of such incurrence, (B)
was rendered insolvent by reason of such incurrence (and the application of the
proceeds thereof), (C) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital to carry on its business, or (D) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they mature, then, in each such case, a court of competent jurisdiction could
avoid, in whole or in part, the Exchange Notes or, in the alternative,
subordinate the Exchange Notes to existing and future indebtedness of the
Company. The measure of insolvency for purposes of the foregoing would likely
vary depending upon the law applied in such case. Generally, however, the
Company would be considered insolvent if the sum of its debts, including
contingent liabilities, were greater than all of its assets at a fair valuation,
or if the present fair saleable value of its assets were less than the amount
that would be required to pay
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the probable liabilities on its existing debts, including contingent
liabilities, as such debts became absolute and matured. The Company believes
that, for purposes of the United States Bankruptcy Code and state fraudulent
transfer or conveyance laws, the Company received equivalent value at the time
the indebtedness was incurred under the Notes. In addition, the Company believes
that it (i) is not and will not be insolvent, (ii) is not and will not be
engaged in a business or transaction for which its remaining assets constitute
unreasonably small capital, and (iii) does not intend and will not intend to
incur debt beyond its ability to repay such debts as they mature. However, there
can be no assurance that a court passing on such issues would agree with the
determination of the Company.
In rendering their opinions in connection with the offering of the Notes,
counsel for the Company and counsel for the Initial Purchaser did not express
any opinion as to the applicability of federal or state fraudulent transfer
laws.
CONTROL BY BLACKSTONE; POSSIBLE FUTURE CONTROL BY LOEWEN
Blackstone owns, on a fully diluted basis, 75.8% of the issued and
outstanding common stock of Existing Prime, which in turn owns 100% of the
issued and outstanding common stock of the Company. Accordingly, Blackstone,
subject to certain exceptions described in the Stockholders' Agreement (as
defined herein), effectively exercises control over the election of a majority
of the Company's directors, the appointment of its management and decisions
concerning substantially all actions requiring the approval of the Company's
stockholders. There can be no assurance that the interests of Blackstone will
not conflict with the interests of holders of the Exchange Notes. Loewen may
acquire control of Existing Prime after the fourth anniversary of the
Acquisition Closing Date pursuant to various options contained in the Put/Call
Agreement. There can be no assurance that such options will be exercised or, if
Loewen does acquire control of Existing Prime, that its interests will not
conflict with the interests of the holders of the Exchange Notes. See 'Principal
Stockholders' and 'Certain Related Transactions--Put/Call Arrangement.'
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Notes. The Notes
were offered and sold in August 1996 to a small number of institutional
investors and are eligible for trading in the National Association of Securities
Dealers, Inc.'s PORTAL market.
There is currently no established market for the Exchange Notes and there
can be no assurance that a public market will develop or, if such a market
develops, as to the liquidity of such market, nor can there be any assurance as
to the ability of the holders of the Exchange Notes to sell their Exchange Notes
or the price at which such holders would be able to sell their Exchange Notes.
The Exchange Notes will not be listed on any securities exchange. If the
Exchange Notes are traded after their initial issuance, they may trade at a
discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, the performance of the Company and
other factors. Although there is currently no market for the Exchange Notes,
Smith Barney Inc. has advised the Company that it intends to make a market in
the Exchange Notes after consummation of the Exchange Offer, as permitted by
applicable laws and regulations; however, the Initial Purchaser is not obligated
to do so and any such market-making activity may be discontinued at any time
without notice.
USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer. The net proceeds from the offering of the Notes were used, together with
the proceeds of the Bank Term Facility and the Blackstone/Loewen Contribution,
as follows: (i) approximately $171.8 million was used to effect the Stock
Repurchase, (ii) approximately $121.0 million was used to repay or defease
outstanding indebtedness of Existing Prime under (a) a credit agreement with
Provident Services, Inc., maturing on various dates beginning in September 1999,
with a final maturity date in November 2002 and bearing interest at the prime
rate plus 1.5%, (b) a credit agreement with Heller Financial, Inc., maturing on
May 12, 1997 and bearing interest at the prime rate plus 1.75%, (c) certain
notes issued to the sellers in connection with the acquisition of certain of
Existing Prime's operations, with maturity dates ranging from January 1, 1998 to
October 26, 2015 and bearing interest at rates ranging from 8.0% to 9.5% and (d)
certain demand notes payable to Harris Trust and Savings Bank, bearing interest
at the prime rate, (iii) approximately $5.4 million was used to discharge the
obligation of Existing Prime under an agreement entered into to settle certain
litigation (see 'Business--Litigation--Gamble Settlement'),
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(iv) approximately $2.9 million was used to pre-fund certain capital
expenditures to be made by New Prime and (v) approximately $20.2 million was
used to pay other fees and expenses related to the Acquisition and such
repayment of indebtedness. See 'Summary--The Acquisition,' 'Capitalization' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Notes were originally issued and sold on August 20, 1996. The offer and
sale of the Notes was not required to be registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act. In
connection with the sale of the Notes, the Company agreed to use its best
efforts to cause to be filed with the Commission a registration statement
relating to an exchange offer pursuant to which new senior subordinated notes of
the Company covered by such registration statement and containing terms
indentical in all material respects to the terms of the Notes would be offered
in exchange for Notes tendered at the option of the holders thereof, or, if
applicable interpretations of the staff of the Commission did not permit the
Company to effect such an Exchange Offer, the Company agreed to file a shelf
registration statement covering resales of the Notes (the 'Shelf Registration
Statement') and use its best efforts to have such Shelf Registration Statement
become effective under the Securities Act and to keep effective the Shelf
Registration Statement for 180 days after the Effective Date thereof or such
shorter period ending when all Notes covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement.
The purpose of the Exchange Offer is to fulfill certain of the Company's
obligations under the Registration Rights Agreement. Except as otherwise
expressly set forth herein, this Prospectus may not be used by any holder of the
Notes or any holder of the Exchange Notes to satisfy the registration and
prospectus delivery requirements under the Securities Act that may apply in
connection with any resale of such Notes or Exchange Notes. See '-- Terms of the
Exchange.'
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See 'Plan of Distribution.'
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of Notes.
The terms of the Exchange Notes are identical in all material respects to the
terms of the Notes for which they may be exchanged pursuant to this Exchange
Offer, except that the Exchange Notes will generally be freely transferable by
holders thereof and will not be subject to any covenant regarding registration.
The Exchange Notes will evidence the same indebtedness as the Notes and will be
entitled to the benefits of the Indenture. See 'Description of Exchange Notes.'
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Notes
may be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Notes may be offered for resale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is an 'affiliate' or the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holder nor any other such person is
engaging in or intends to engage in the distribution of such Exchange Notes.
Since the
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Commission has not considered the Exchange Offer in the context of a no-action
letter, there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Any holder who is an
affiliate of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each holder must acknowledge that it has
no arrangement or understanding with any person to participate in the
distribution of Exchange Notes. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Notes, where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See '--Terms and Conditions of the
Letter of Transmittal' and 'Plan of Distribution.'
Interest on the Exchange Notes shall accrue from the last Interest Payment
Date on which interest was paid on the Notes so surrendered or, if no interest
has been paid on such Notes, from August 20, 1996.
Tendering holders of the Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Notes pursuant
to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
'Expiration Date' means 5:00 p.m., New York City time, on , 1996,
unless the Company in its sole discretion extends the period during which the
Exchange Offer is open, in which event the term 'Expiration Date' shall mean the
latest time and date on which the Exchange Offer, as so extended by the Company,
shall expire. The Company reserves the right to extend the Exchange Offer at any
time and from time to time by giving oral or written notice to United States
Trust Company of New York (the 'Exchange Agent') and by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Notes previously tendered and not withdrawn
pursuant to the Exchange Offer will remain subject to the Exchange Offer.
The term 'Exchange Date' means the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Notes if any of the events set
forth below under 'Conditions to the Exchange Offer' shall have occurred and
shall not have been waived by the Company and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to the holders of the Notes, whether before or after any tender of the Notes.
Unless the Company terminates the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date, the Company will exchange the Exchange Notes
for the Notes on the Exchange Date.
TENDER PROCEDURE
The tender to the Company of Notes by a holder thereof pursuant to one of
the procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent out on or about , 1996, to all holders of Notes
known to the Company and the Exchange Agent.
A holder of Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Notes being tendered and any required signature guarantees and
any other documents required by the Letter of Transmittal, to the Exchange Agent
at its address set forth on the Letter of Transmittal on or prior to the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Notes are registered in the name of the signer of the Letter of
Transmittal and the Exchange Notes to be issued in exchange therefor are to be
issued (and any untendered Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
'book-entry transfer facility') whose name appears on a
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security listing as the owner of Notes), the signature of such signer need not
be guaranteed. In any other case, the tendered Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder, and the signature on the
endorsement or instrument of transfer must be guaranteed by a commercial bank or
trust company located or having an office, branch, agency or correspondent in
the United States, or by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. (any of the
foregoing hereinafter referred to as an 'Eligible Institution'). If the Exchange
Notes and/or Notes not exchanged are to be delivered to an address other than
that of the registered holder appearing on the note register for the Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
THE METHOD OF DELIVERY OF NOTES AND ALL OTHER DOCUMENTS IS AT THE ELECTION
AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE OBTAINED, AND THE MAILING BE
MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR
NOTES SHOULD BE SENT TO THE COMPANY.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Notes at the book-entry
transfer facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility system may make book-entry
delivery of Notes by causing such book-entry transfer facility to transfer such
Notes into the Exchange Agent's account with respect to the Notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of Notes may be effected through book-entry transfer into the Exchange
Agent's accounts at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth on the Letter of Transmittal on or prior
to the Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Notes to reach the Exchange Agent before the Expiration
Date or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if the Exchange Agent has received at its office
listed on the Letter of Transmittal on or prior to the Expiration Date a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Notes are registered and, if possible, the certificate numbers of the Notes
to be tendered, and stating that the tender is being made thereby and
guaranteeing that three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Notes, in proper form for transfer (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at the
book-entry facility), will be delivered by such Eligible Institution together
with a properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Notes being tendered by the above-described method
are deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of a notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Notes (or a confirmation of book-entry transfer of such Notes
into the Exchange Agent's account at the book-entry transfer facility) is
received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Notes tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Notes will be determined
by the Company, whose determination will be final and binding. The Company
reserves the absolute right to reject any Notes not properly tendered or the
acceptance for exchange of
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which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Exchange
Offer or any defect or irregularity in the tender of any Notes. Unless waived,
any defects or irregularities in connection with tenders of Notes for exchange
must be cured within such reasonable period of time as the Company shall
determine. None of the Company, the Exchange Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See 'Plan of Distribution.'
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the 'Transferor') exchanges,
assigns and transfers the Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Notes and to acquire Exchange Notes issuable
upon the exchange of such tendered Notes, and that, when the same are accepted
for exchange, the Company will acquire good and unencumbered title to the
tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Notes or transfer ownership of
such Notes on the account books maintained by a book-entry transfer facility.
The Transferor further agrees that acceptance of any tendered Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of certain of its obligations under the
Registration Rights Agreement. All authority conferred by the Transferor will
survive the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
By tendering, each holder of Notes will represent to the Company that,
among other things, (i) such Holder is not an 'affiliate' of the Company within
the meaning of Rule 405 under the Securities Act, (ii) Exchange Notes to be
acquired by such holder of Notes in connection with the Exchange Offer are being
acquired by such holder in the ordinary course of business of such holder and
(iii) such holder has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes. If the holder is a
broker-dealer that will receive Exchange Notes for such holder's own account in
exchange for Notes that were acquired as a result of market-making activities or
other trading activities, such holder will be required to acknowledge in the
Letter of Transmittal that such holder will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act. See 'Plan of
Distribution.' This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of 180 days after the Expiration
Date, make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the Letter of Transmittal, and with respect to a facsimile
transmission, must be confirmed by telephone and an original delivered by
guaranteed overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Notes to be
withdrawn, the certificate numbers of Notes to be withdrawn, the principal
amount of Notes
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to be withdrawn, a statement that such holder is withdrawing his election to
have such Notes exchanged, and the name of the registered holder of such Notes,
and must be signed by the holder in the same manner as the original signature on
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Notes promptly
following receipt of notice of withdrawal. If Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Notes or otherwise comply with the book-entry
transfer procedure. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Company and such
determination will be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Notes tendered by
book-entry transfer into the Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
Notes will be credited to an account with such book-entry transfer facility
specified by the holder) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Notes may be
retendered by following one of the procedures described under '--Tender
Procedure' above, at any time on or prior to the Expiration Date.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the satisfaction or waiver of all the terms and conditions of the
Exchange Offer, the acceptance for exchange of Notes validly tendered and not
withdrawn and issuance of the Exchange Notes will be made on the Exchange Date.
For the purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Notes when, as and if the Company has
given oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Notes for
the purposes of receiving Exchange Notes from the Company and causing the Notes
to be assigned, transferred and exchanged. Upon the terms and subject to the
conditions of the Exchange Offer, delivery of Exchange Notes to be issued in
exchange for accepted Notes will be made by the Exchange Agent promptly after
acceptance of the tendered Notes. Tendered Notes not accepted for exchange by
the Company will be returned without expense to the tendering holders promptly
following the Expiration Date or, if the Company terminated the Exchange Offer
prior to the Expiration Date, promptly after the Exchange Offer is so
terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News
Service), or, at its option, modify or otherwise amend the Exchange Offer, if
any of the following events occur:
(a) any law, rule or regulation or applicable interpretations of the
staff of the Commission which, in the good faith determination of the
Company, do not permit the Company to effect the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Notes to be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder
that is an 'affiliate' of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes
are acquired in the ordinary course of such holders' business and such
holders have no arrangements with any person to participate in the
distribution of such Exchange Notes; or
(c) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the
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transactions contemplated by the Exchange Offer, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or any limitation by any governmental agency or authority
which adversely affects the extension of credit or (iv) a commencement of a
war, armed hostilities or other similar international calamity directly or
indirectly involving the United States, or, in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(d) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Notes or the Exchange Notes;
which, in the reasonable judgment of the Company in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or with
such acceptance for exchange or with such exchange.
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Notes). In addition, the Company
may amend the Exchange Offer at any time prior to the Expiration Date if any of
the conditions set forth above occur. Moreover, regardless of whether any of
such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the
Notes.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in the reasonable judgment of the
Company. Any determination made by the Company concerning an event, development
or circumstance described or referred to above will be final and binding on all
parties.
The Company is not aware of the existence of any of the foregoing events.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the Letter of Transmittal. United
States Trust Company of New York also acts as Trustee and Registrar (the
'Registrar') under the Indenture.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this and related documents to the
beneficial owners of the Notes and in handling or forwarding tenders for their
customers.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Notes in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as
22
<PAGE>
it may deem necessary to make the Exchange Offer in any such jurisdiction and
extend the Exchange Offer to holders of Notes in such jurisdiction. In any
jurisdiction in which the securities laws or blue sky laws of which require the
Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is
being made on behalf of the Company by one or more registered brokers or dealers
which are licensed under the laws of such jurisdiction.
TRANSFER TAXES
Holders who tender their Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register Exchange Notes in the name of, or request that Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the offer or sale of the Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Notes under the Securities Act. Based on interpretations by
the staff of the Commission, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an 'affliate' of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See 'Plan of Distribution.'
OTHER
Participation in the Exchange Offer is voluntary, and holders of Notes
should carefully consider whether to participate. Holders of the Notes are urged
to consult their financial and tax advisors in making their own decisions on
which action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled certain covenants contained in the Registration
Rights Agreement. Holders of Notes who do not tender their Notes in the Exchange
Offer will continue to hold such Notes and will be entitled to all the rights,
and limitations applicable thereto, under the Indenture, except for such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effectiveness as a result of the making of this Exchange Offer.
See 'Description of Exchange Notes.' All untendered Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture. To the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered Notes could be adversely affected.
The Company may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Notes which are not
tendered in the Exchange Offer.
23
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of June 30, 1996 and the pro forma capitalization of the Company after giving
effect to the Acquisition and the offering of the Notes. This table should be
read in conjunction with 'Pro Forma Financial Information' and the Consolidated
Financial Statements of the Company and the related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Short-term debt, including current portion of
long-term debt.................................. $112.3 $ --
Long-term debt (less current portion)
Notes and mortgages payable..................... 8.7 --
Bank Term Facility.............................. -- 90.0
Notes........................................... -- 100.0
---------- ---------
Total long-term debt(1)........................... 8.7 190.0
Redeemable preferred stock........................ 2.5 --
Shareholders' equity:
Common stock.................................... -- --
Additional paid-in capital...................... 31.7 129.6
Retained earnings............................... (16.9) --
---------- ---------
Total stockholders' equity........................ 14.8 129.6
---------- ---------
Total capitalization.............................. $138.3 $ 319.6
---------- ---------
---------- ---------
</TABLE>
- ------------------
(1) As of June 30, 1996, after giving effect to the Acquisition, the Company
would have had the ability, subject to customary borrowing conditions, to
borrow $25 million for general corporate purposes pursuant to the Revolving
Credit Facility.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
'Pro Forma Financial Information') of the Company has been derived by the
application of pro forma adjustments to the historical consolidated financial
statements of Existing Prime, and has been prepared to illustrate the effects of
the acquisitions described below. The adjustments, which are based upon
available information and upon certain assumptions that Management believes are
reasonable, are described in the accompanying notes. The Pro Forma Financial
Information should be read in conjunction with the Consolidated Financial
Statements of Existing Prime and the accompanying notes thereto and the other
financial information included elsewhere in this Prospectus.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1995 and for the six months ended June 30, 1996 give effect
to (i) cost reductions associated with elimination of specific and identifiable
job functions, (ii) the acquisition of eleven funeral homes in 1995 and three
funeral homes in 1996 and related financing transactions, (iii) the Acquisition
and (iv) the offering of the Notes, as if each such transaction or cost
reduction, as the case may be, had occurred on January 1, 1995. The pro forma
balance sheet as of June 30, 1996 has been prepared as if the Acquisition had
occurred on that date.
The funeral homes acquired in 1995 and 1996 and the Acquisition were
accounted for using the purchase method of accounting. The total purchase cost
of the Acquisition was allocated to the tangible and intangible assets acquired
and liabilities assumed based on their respective fair values. The excess of
purchase cost over the historical basis of the net assets acquired has been
allocated in the accompanying Pro Forma Financial Information based upon
preliminary appraisal estimates and other valuation studies which are in process
and certain assumptions that Management believes are reasonable. The actual
allocation is subject to the finalization of these studies; however, Management
does not expect that the differences between the preliminary and final
allocations will have a material impact on the Company's financial position or
results of operations.
The Pro Forma Financial Information is not necessarily indicative of either
future results of operations or the results that might have occurred if the
foregoing transactions had been consummated on the indicated dates.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
PRO FORMA
ADJUSTMENTS FOR
ACQUISITION AND
1995/1996 OFFERING OF
HISTORICAL ACQUISITIONS(A) NOTES TOTAL
---------- --------------- ---------------- -----
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Funeral services............................. $ 68.6 $ 3.9 $ -- $72.5
Cemetery sales............................... 12.9 -- -- 12.9
---------- ----- ------ -----
81.5 3.9 -- 85.4
---------- ----- ------ -----
Cost of sales:
Funeral homes................................ 11.3 0.6 -- 11.9
Cemetery..................................... 2.4 -- 0.4(B) 2.8
Cumulative effect of change in accounting
estimate................................... (3.5) -- -- (3.5)
---------- ----- ------ -----
10.2 0.6 0.4 11.2
---------- ----- ------ -----
Operating expenses:
Funeral homes................................ 38.1 2.1 (1.7)(C) 38.5
Cemetery..................................... 7.5 -- (0.8)(C) 6.7
---------- ----- ------ -----
45.6 2.1 (2.5) 45.2
---------- ----- ------ -----
Corporate and regional general and
administrative expenses...................... 6.1 -- (1.5)(C,D) 4.6
Amortization of goodwill........................ 1.9 0.1 3.3 (E) 5.3
Covenants not to compete........................ 2.8 -- -- 2.8
---------- ----- ------ -----
Operating income (loss)......................... 14.9 1.1 0.3 16.3
---------- ----- ------ -----
Other income and expense:
Interest expense............................. 15.4 0.6 7.3 (F) 23.3
Other expense (income), net.................. (0.1) -- (0.1)(D) (0.2)
---------- ----- ------ -----
15.3 0.6 7.2 23.1
---------- ----- ------ -----
Income (loss) before income taxes............... (0.4) 0.5 (6.9) (6.8)
Income tax benefit (expense).................... (0.3) (0.2) 0.2 (G) (0.3)
---------- ----- ------ -----
Net income (loss)............................... $ (0.7) $ 0.3 $ (6.7) $(7.1)
---------- ----- ------ -----
---------- ----- ------ -----
OTHER DATA:
Depreciation and amortization:
Depreciation................................. $ 2.5 $ 0.1 $ 0.4 $ 3.0
Amortization of goodwill..................... 1.9 0.1 3.3 5.3
Amortization of covenants not to compete..... 2.8 -- -- 2.8
Amortization of consulting agreements........ 0.3 -- -- 0.3
---------- ----- ------ -----
7.5 0.2 3.7 11.4
---------- ----- ------ -----
Capital expenditures............................ 1.6 -- -- 1.6
Cash interest expense (H)....................... 14.9 0.6 6.0 21.5
EBITDA (I)...................................... 19.0 1.3 4.7 25.0
Ratio of EBITDA to cash interest expense........ 1.3x 1.2x
Ratio of earnings to fixed charges (J).......... -- --
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
26
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
1996 FOR ACQUISITION AND
HISTORICAL ACQUISITIONS(A) OFFERING OF NOTES TOTAL
---------- --------------- ------------------- ------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Funeral services............................. $ 37.0 $ 0.2 $ -- $ 37.2
Cemetery sales............................... 6.8 -- -- 6.8
---------- ----- ------ ------
43.8 0.2 -- 44.0
---------- ----- ------ ------
Cost of sales:
Funeral homes................................ 5.6 0.1 -- 5.7
Cemetery..................................... 1.4 -- 0.2(B) 1.6
---------- ----- ------ ------
7.0 0.1 0.2 7.3
---------- ----- ------ ------
Operating expenses:
Funeral homes................................ 20.5 -- (0.9)(C) 19.6
Cemetery..................................... 3.9 -- (0.4)(C) 3.5
---------- ----- ------ ------
24.4 -- (1.3) 23.1
---------- ----- ------ ------
Corporate and regional general and
administrative expenses...................... 3.7 -- (0.9)(C,D) 2.8
Amortization of goodwill........................ 1.0 -- 1.6(E) 2.6
Covenants not to compete........................ 1.4 -- -- 1.4
---------- ----- ------ ------
Operating income................................ 6.3 0.1 0.4 6.8
---------- ----- ------ ------
Other income and expense:
Interest expense............................. 7.6 -- 3.3(F) 10.9
Legal settlement............................. 6.3 -- -- 6.3
Other expense, net........................... (0.1) -- -- (0.1)
---------- ----- ------ ------
13.8 -- 3.3 17.1
---------- ----- ------ ------
Income (loss) before income taxes............... (7.5) 0.1 (2.9) (10.3)
Income tax (expense)............................ (0.2) -- --(G) (0.2)
---------- ----- ------ ------
Net income (loss)............................... $ (7.7) $ 0.1 $(2.9) $(10.5)
---------- ----- ------ ------
---------- ----- ------ ------
OTHER DATA:
Depreciation and amortization:
Depreciation................................. $ 1.4 $ -- $ 0.2 $ 1.6
Amortization of goodwill..................... 1.0 -- 1.6 2.6
Amortization of covenants not to compete..... 1.4 -- -- 1.4
Amortization of consulting agreements........ 0.2 -- -- 0.2
---------- ----- ------ ------
4.0 -- 1.8 5.8
---------- ----- ------ ------
Capital expenditures............................ 0.9 -- -- 0.9
Cash interest expense (H)....................... 7.3 -- 2.7 10.0
EBITDA (I)...................................... 10.4 0.1 2.2 12.7
Ratio of EBITDA to cash interest expense........ 1.4x 1.3x
Ratio of earnings to fixed charges (J).......... -- --
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACQUISITION AND
OFFERING OF
HISTORICAL NOTES TOTAL
---------- --------------- ------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 3.4 $ 1.2(K) $ 4.6
Accounts receivable, net........................ 9.8 (2.2)(L) 7.6
Inventories..................................... 3.7 0.4(L) 4.1
Prepaids and other current assets............... 1.2 -- 1.2
------ ------- ------
Total current assets......................... 18.1 (0.6) 17.5
Property and equipment............................ 58.1 9.2(L) 67.3
Developed cemetery property....................... 5.3 8.3(L) 13.6
Undeveloped cemetery property..................... 7.6 23.5(L) 31.1
Names and reputations, net........................ 21.3 (4.9)(L) 16.4
Goodwill, net..................................... 74.3 131.0(L) 205.3
Other intangible assets, net...................... 2.1 (2.1)(L) --
Deferred financing costs.......................... -- 14.1(L) 14.1
Long-term receivables, net........................ 6.4 0.8(L) 7.2
Other assets...................................... 0.9 -- 0.9
------ ------- ------
Total assets................................. $194.1 $ 179.3 $373.4
------ ------- ------
------ ------- ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 2.2 $ -- $ 2.2
Accrued salaries, commissions and
withholdings.................................... 2.1 -- 2.1
Other accrued expenses.......................... 10.4 (3.2)(L,M) 7.2
Current maturities of obligations under
agreements with former owners................... 2.5 -- 2.5
Current maturities of long-term debt............ 112.3 (111.3)(M) 1.0
------ ------- ------
Total current liabilities.................... 129.5 (114.5) 15.0
Deferred merchandise liabilities, less trust fund
deposits........................................ 8.4 -- 8.4
Deferred revenues, less trust fund deposits....... 8.1 -- 8.1
Bank debt......................................... -- 89.0(M) 89.0
Subordinated debt................................. -- 100.0(M) 100.0
Obligations under agreements with former owners,
less current maturities......................... 17.5 0.4 17.9
Long term debt, less current maturities........... 8.7 (8.7)(M) --
Deferred income taxes............................. 0.9 -- 0.9
Other long-term liabilities....................... 3.7 0.8(L) 4.5
Redeemable preferred stock........................ 2.5 (2.5)(L) --
Common stock...................................... -- -- --
Additional paid-in-capital........................ 31.7 97.9(L,N) 129.6
Retained earnings................................. (16.9) 16.9(L) --
------- ------- ------
14.8 114.8 129.6
------- ------- ------
Total liabilities and shareholders' equity........ $194.1 $ 179.3 $373.4
------- ------- ------
------- ------- ------
Ratio of total debt to total capitalization....... 87.5% 59.4%
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
A) Represents the impact of annualizing 1995 and 1996 acquisitions. Existing
Prime acquired 11 funeral home locations in 1995 and 3 locations in 1996. Pro
forma results were adjusted to reflect a full year of results for these
acquisitions. In calculating pro forma results, the 1995 and 1996
acquisitions were included in the pro forma results as though the
acquisitions had taken place on January 1, 1995.
B) Represents incremental depreciation of developed and undeveloped cemetery
land which is amortized over the estimated life of the land, assumed to be 80
years. See Note (L).
C) Represents reductions of costs and expenses resulting from a number of
initiatives including elimination of overstaffing at selected funeral homes,
elimination of redundant staffing at site-level made possible by automation
of certain tasks and by sharing of resources of selected homes in close
proximity to one another, reduction of labor at the regional administrative
centers made possible by the consolidation of certain accounting and
administrative functions into the corporate headquarters and the reduction of
labor at the corporate headquarters made possible by the elimination of
acquisition functions. Certain costs and expenses are being eliminated and
replaced, in part, by the Administrative Services Agreement. See 'Certain
Related Transactions--Administrative Services Agreement.' These costs
include:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Elimination of salaries and benefits
(1)................................... $(5.1) $ (2.6)
Administrative Services Agreement (2)... 0.3 0.1
Monitoring fees (3)..................... 0.3 0.1
Costs of new management
compensation (4)...................... 0.9 0.5
------ ------
Net adjustment.......................... $(3.6) $ (1.9)
------ ------
------ ------
Allocation of net adjustment:
Operating expenses:
Funeral expenses................... $(1.7) $ (0.9)
Cemetery expenses.................. (0.8) (0.4)
Corporate and regional general and
administrative expenses............ (1.1) (0.6)
------ ------
Net adjustment........................ $(3.6) $ (1.9)
------ ------
------ ------
</TABLE>
- ------------------
(1) Represents cost savings resulting from the elimination of specific and
identifiable job positions and functions at both the corporate and local
site-levels. The Unaudited Pro Forma Consolidated Financial Information
does not reflect certain additional cost savings expected to be achieved
from the implementation of the changes in operating strategy described
under 'Business--Business Strategy Following Acquisition' or $0.3
million relating to severance costs. See 'Business--Business Strategy
Following Acquisition' and 'Risk Factors--Potential Adverse Consequences
of Changes in Operating Strategy.'
(2) Represents fees payable to Loewen pursuant to the Administrative
Services Agreement that the Company entered into on the Acquisition
Closing Date. See 'Certain Related Transactions--Administrative Services
Agreement.'
(3) Represents monitoring fees payable to an affiliate of Blackstone
pursuant to the Stockholders' Agreement that the Company entered into
prior to the Closing Date. See 'Certain Related Transactions--Payment of
Certain Fees and Expenses.'
(4) Represents estimate of salaries and bonuses for the Company's new senior
management team.
D) Represents the elimination of the historic costs relating to former owners
under employment and other agreements which have been recorded as a liability
under purchase accounting. See Note (L). The adjustment is allocated as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Corporate and regional general and
administrative expenses............... $ 0.4 $ 0.3
Other expense, net...................... 0.1 --
------ ------
Total adjustment........................ $ 0.5 $ 0.3
------ ------
------ ------
</TABLE>
29
<PAGE>
E) Represents incremental goodwill amortization. For purposes of this pro forma
presentation, goodwill is being amortized over a 40-year period. See Note
(L).
F) Interest expense based on the pro forma capitalization of the Company is
summarized in the table below.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Notes (1)............................... $10.8 $ 5.4
Revolving Credit Facility (2)........... -- --
Bank Term Facility (3).................. 7.8 3.8
Commitment fees (4)..................... 0.1 0.1
Interest expense on former owners'
liability (5)......................... 0.3 0.1
------ ------
19.0 9.4
Less historical interest on debt
repaid................................ (13.0) (6.7)
------ ------
Increase in cash interest expense....... 6.0 2.7
Amortization of deferred financing costs
(6)................................... 1.8 0.9
Less historical amortization of deferred
financing costs....................... (0.5) (0.3)
------ ------
Total increase in interest expense...... $ 7.3 $ 3.3
------ ------
------ ------
</TABLE>
- ------------------
(1) Assumes an interest rate of 10.75%.
(2) Assumes an interest rate of 8.4375% on drawn-down balance. The pro forma
average balance drawn-down was zero.
(3) Pro forma average balances for the Bank Term Facility were determined
based on the scheduled maturities. The pro forma average balance for the
Bank Term Facility was $89.5 million for the year ended December 31,
1995 and $89.0 million for the six months ended June 30, 1996. Assumes
an interest rate of 8.6693%.
(4) Represents a commitment fee of 0.5% applied to the $25.0 million unused
portion of the Revolving Credit Facility.
(5) Assumes the liability for future payments due to former owners under
employment and other agreements recorded in purchase accounting is based
on a present value calculated at an interest rate of 13.0%. See Note
(L).
(6) Deferred financing costs are amortized over the life of the related
debt, seven years for the Revolving Credit Facility and the Bank Term
Facility and eight years for the Notes.
A change of 0.125% in the interest rate shown above would change interest
expense on the Bank Credit Facilities by $112,000 and $56,000 for the year
ended December 31, 1995 and the six months ended June 30, 1996,
respectively.
G) The adjustment represents the additional income tax expense that the Company
would have had to record on the annualized income for 1995/1996 acquisitions,
offset by net operating losses. The Company has a valuation allowance for the
net deferred tax asset generated from loss carry forwards and other timing
differences for the current and prior periods. While the Company currently
expects that its long term profitability should ultimately be sufficient to
enable it to realize full benefit of its future tax deductions, considering
all relevant factors, the Company believes that the gross deferred tax assets
may not satisfy the 'more likely than not' test of Statement of Financial
Accounting Standards No. 109, 'Accounting for Income Taxes' required to be
satisfied in order to reverse the valuation allowance.
H) Cash interest expense is defined as interest expense less amortization of
deferred financing costs.
I) EBITDA is defined as loss before income taxes plus interest expense,
depreciation and amortization, adjusted for (i) the one-time $3.5 million and
$2.9 million net change in accounting estimate for, respectively, the
historical and pro forma year ended December 31, 1995, and (ii) the $6.3
million one-time charge for the settlement of certain litigation for the six
months ended June 30, 1996. These adjustments are described below:
o In December 1995, the Company constructed a cemetery vault manufacturing
facility in Alabama that allows for the production of vaults at a
significantly lower cost than purchasing from independent manufacturers.
The lower cost of sales from the new manufacturing plant allowed Existing
Prime to
30
<PAGE>
recognize a one-time gain of $3.5 million by reducing its estimated
deferred merchandise liability for pre-need cemetery vault sales. On a pro
forma basis for 1995, assuming the plant was in operation since January 1,
1995, estimated savings were $0.6 million.
o The Company settled certain litigation in April 1996 and recorded a
one-time charge of $6.3 million in the first half of 1996 for the present
value of future cash payments due under the litigation settlement
agreements. See 'Business--Litigation--Gamble Settlement.'
The calculation of EBITDA is shown below:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------------- -----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Loss before income taxes...... $ (0.4) $(6.8) $ (7.5) $ (10.3)
Interest expense.............. 15.4 23.3 7.6 10.9
Depreciation and
amortization................ 7.5 11.4 4.0 5.8
Legal settlement (see
'Business--Litigation')..... -- -- 6.3 6.3
Cumulative effect of change in
accounting estimate, net.... (3.5) (2.9) -- --
---------- --------- ---------- ---------
EBITDA........................ $ 19.0 $25.0 $ 10.4 $ 12.8
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to incur and service debt. However, EBITDA should not
be considered in isolation, as a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting principles
or as a measure of a company's profitability or liquidity.
J) Earnings used in computing the ratio of earnings to fixed charges consist
of income before provision for income taxes plus fixed charges. Fixed
charges consist of interest expense, including amortization of debt
issuance costs, and a portion of operating lease rental expense deemed to
be representative of the interest factor. Earnings were insufficient to
cover fixed charges by $0.4 million, $6.8 million, $7.5 million and $10.3
million for the historical and pro forma years ended December 31, 1995 and
for the historical and pro forma six months ended June 30, 1996,
respectively.
K) Reflects $2.9 million of cash raised to pre-fund capital expenditures net
of $1.7 million of existing cash used to finance the Acquisition.
L) Reflects adjustments to assets acquired and liabilities assumed based on
their estimated fair values under the purchase method of accounting. The
allocation of the aggregate purchase cost below is based on preliminary
appraisal estimates and other valuation studies which are in process and
certain assumptions that Management believes are reasonable. The actual
allocation is subject to the finalization of these studies; however,
Management does not expect that the differences between the preliminary and
final allocations will have a material impact on the Company's financial
position or results of operations.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------
(IN MILLIONS)
<S> <C>
Stock repurchase by Existing Prime (1)................. $ 171.8
Direct acquisition costs............................... 6.1
--------
Total consideration and direct acquisition costs..... 177.9
Less: Existing Prime's shareholders' equity............ (14.8)
Redeemable preferred stock....................... (2.5)
--------
160.6
Debt issuance costs.................................... 14.1
--------
Net adjustment......................................... $ 174.7
--------
--------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------
(IN MILLIONS)
<S> <C>
Allocation of net adjustment:
ASSETS
Decrease in fair value of receivables(2)............... $ (2.2)
Increase in fair value of inventories(2)............... 0.4
Increase in fair value of land, property and
equipment(2) and (3)................................. 9.2
Increase in fair value of developed cemetery
properties(2)........................................ 8.3
Increase in fair value of undeveloped cemetery
properties(2)........................................ 23.5
Decrease in fair value of names and reputations(2)..... (4.9)
Increase in fair value of intangible assets(4)......... 12.0
Increase in fair value of long term receivables(2)..... 0.8
Increase in goodwill(5)................................ 131.0
LIABILITIES
Increase in fair value of other accrued expenses(6).... (2.2)
Increase in fair value of obligations under CNCs and
consulting agreements(7)............................. (0.4)
Increase in fair value of other long term
liabilities(2)....................................... (0.8)
--------
$ 174.7
--------
--------
</TABLE>
- ------------------
(1) Net of stockholders' notes repaid July 1, 1996.
(2) Based on Management's estimates and preliminary appraisal studies.
(3) Principally relates to land (excluding cemetery properties), therefore,
no additional depreciation is reflected in the pro forma statements of
operations.
(4) Reflects new deferred financing costs relating to the Acquisition of
$14.1 million less the write-off of $2.1 million of historical deferred
financing costs of Existing Prime which relate to prior financings.
(5) Represents incremental goodwill arising on the Acquisition.
(6) Represents accrued expenses relating to the Acquisition such as
professional fees, printing costs and severance.
(7) Records the present value of cash payments due to former owners of
acquired funeral homes under employment and other agreements computed at
a 13% discount rate.
M) These adjustments record (i) the issuance of the Notes ($100.0 million),
(ii) new borrowing under the Bank Term Facility ($90.0 million), and (iii)
the use of a portion of the net proceeds to repay and defease existing
indebtedness and discharge certain other existing obligations of Existing
Prime. See 'Use of Proceeds' and 'Business--Litigation--Gamble Settlement.'
The table below reflects the financing transactions.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------
(IN MILLIONS)
<S> <C>
Issuance of Notes...................................... $ 100.0
Borrowings under Bank Term Facility
Current.............................................. 1.0
Non-current.......................................... 89.0
--------
$ 190.0
--------
--------
Repayment and defeasance of existing indebtedness and
payments
of certain other obligations
Debt:
Current........................................... $ (112.3)
Non-current....................................... (8.7)
Other accrued expenses................................. (5.4)
--------
$ (126.4)
--------
--------
</TABLE>
N) Represents the fair value ($171.8 million) of the contribution by Existing
Prime of 100% of the shares of its directly held subsidiaries and all of its
other assets and liabilities to New Prime, net of $41.8 million advanced by
New Prime to Existing Prime to finance a portion of its Stock Repurchase and
$0.4 million advanced to PSIM to finance its purchase of Existing Prime's
common stock. See 'Summary--The Acquisition' and 'Use of
Proceeds.'
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is the fourth-largest operator of funeral homes and cemeteries,
on the basis of revenues, in the United States and is the largest privately-held
company in the funeral and cemetery industry. The Company owns 146 funeral homes
and 16 cemeteries in 20 states. Existing Prime commenced operations in 1992 and
expanded rapidly through the aggressive acquisition of funeral homes and
cemeteries, primarily in non-urban areas of the United States. The Company's
consolidated revenues and operating income were $81.5 million and $14.9 million,
respectively, for the year ended December 31, 1995. Sales of funeral services
and cemetery sales accounted for approximately 84% and 16%, respectively, of
total net sales for 1995.
Management believes that the Company has not focused on maximizing
operating profitability of the funeral homes and cemeteries which it has
acquired. Management intends to take advantage of (i) the quality and size of
the Company's portfolio of properties, (ii) the opportunity to operate more
efficiently those properties located in close proximity to one another, (iii)
the shift in focus from acquisitions to profit maximization at existing
locations and (iv) the benefits at both local sites and the corporate
headquarters from the Administrative Services Agreement with Loewen to improve
the Company's present and long-term operating performance. The Company's future
results of operations will depend in large part on the ability of Management to
successfully implement its business strategy.
E&Y, Existing Prime's independent auditors, advised Existing Prime's Board
of Directors that, during the course of its audit of the Company's 1995
financial statements and during their review of the March 31, 1996 consolidated
financial statements, 'reportable conditions' were identified with respect to
Existing Prime's Alabama operations. (The Alabama operations accounted for
approximately 19.5% of the Company's consolidated revenues during 1995.)
Reportable conditions involve matters relating to significant deficiencies in
the design or operation of a company's internal control structure that, in the
judgment of the auditors, could adversely affect the company's ability to
record, process, summarize and report financial data consistent with the
assertions of management in the consolidated financial statements. Such
reportable conditions at the Alabama subsidiary included the failure to perform
key account reconciliations and the lack of qualified financial personnel at
such subsidiary's operations.
During the latter half of 1995 and in 1996, management of Existing Prime
took steps designed to address the concerns raised by E&Y, including the
dedication of corporate personnel to work on site in Alabama to assist in the
processing and summarizing of financial data, the replacement of an outside
service bureau that had previously been responsible for funeral service
accounting at most of Existing Prime's locations and the institution of new and
automated accounting systems and procedures overall. Management is undertaking
an extensive review of the Company's accounting controls and procedures and
intends to implement any additional steps deemed necessary.
On April 11, 1996, the Company settled a lawsuit with Jeffrey Gamble, the
former owner of a business acquired by a subsidiary of the Company, alleging the
breach of a pre-need funding agreement. The Company paid Mr. Gamble
approximately $6,600,000 for the dismissal of the lawsuit and the termination of
the pre-need funding agreement.
RESULTS OF OPERATIONS
First Half 1996 Compared with First Half 1995
Consolidated revenues increased 8.6% to $43.8 million for the six months
ended June 30, 1996 from $40.3 milliion for the six months ended June 30, 1995,
with funeral service revenues increasing 8.6% to $37.0 million and cemetery
revenues increasing 8.7% to $6.8 million. Consolidated operating income remained
unchanged for the six months ended June 30, 1996 and for the six months ended
June 30, 1995, with funeral contribution increasing 11.7% to $10.9 million and
cemetery contribution decreasing 2.5% to $1.5 million. Contribution is defined
as funeral revenues or cemetery revenues, as the case may be, less related cost
of sales and related direct operating expenses. Funeral revenues increased
primarily as a result of three 1996 acquisitions and a full six months of 1995
acquisitions. On same-store business, excluding 1995 and 1996 acquisitions,
total calls increased by 137 calls from 9,635 calls for the six months ended
June 30, 1995 to 9,772 calls for the six months ended June 30, 1996 and average
revenue per call decreased by $15 from $3,433 for the six
33
<PAGE>
months ended June 30, 1995 to $3,418 for the six months ended June 30, 1996.
Cemetery revenues increased because of increased pre-need sales efforts in
Alabama and Florida.
As a percentage of revenues, consolidated operating margin decreased to
14.6% at June 30, 1996 from 15.6% at June 30, 1995, with funeral contribution
margin increasing to 29.5% from 28.9% and cemetery contribution margin
decreasing to 23.4% from 26.1%. Contribution margin is defined as contribution
as a percentage of funeral revenues or cemetery revenues, as the case may be.
Cemetery contribution margin decreased as a result of increased cost of cemetery
merchandise.
Corporate and regional general and administrative expense increased to $3.7
million at June 30, 1996 from $2.7 million at June 30, 1995. As a percentage of
consolidated revenue, general and administrative expense increased to 8.4% in
1996 from 6.8% in 1995. Corporate and regional general and administrative
expense increased because of additional corporate and regional staff as well as
expenses associated with new information and accounting systems.
On April 11, 1996, the Company settled a lawsuit with Jeffrey Gamble, the
former owner of a business acquired by a subsidiary of the Company, alleging the
breach of a pre-need funding agreement. The Company paid Mr. Gamble
approximately $6,600,000 for the dismissal of the lawsuit and the termination of
the pre-need funding agreement.
Interest expense of $7.6 million at June 30, 1996 remained constant
compared to $7.6 million at June 30, 1995.
Consolidated net loss before legal settlement of $6.3 million was $1.4
million at June 30, 1996, compared to a consolidated net loss of $1.3 million at
June 30, 1995.
1995 Compared with 1994
Consolidated revenues increased 12.9% to $81.5 million in 1995 from $72.2
million in 1994, with funeral service revenues increasing 12.8% to $68.6
million, and cemetery revenues increasing 13.9% to $12.9 million. Consolidated
operating income, including the impact of a change in an accounting estimate of
$3.5 million for pre-need vaults (see below), increased 93.4% to $14.9 million
in 1995 from $7.7 million in 1994, with funeral contribution increasing 30.4% to
$19.2 million and cemetery contribution, excluding the change in accounting
estimate, increasing 46.6% to $3.0 million. Contribution is defined as funeral
revenues or cemetery revenues, as the case may be, less related cost of sales
and less related direct operating expenses. Funeral revenues increased primarily
as a result of 1995 acquisitions and a full year of 1994 acquisitions. On
same-store business, excluding 1994 and 1995 acquisitions, total calls decreased
by 213 from 15,624 calls in 1994 to 15,411 calls in 1995 while average revenue
per call increased by $61 from $3,332 per call in 1994 to $3,393 per call in
1995. Cemetery revenues increased due to increased pre-need sales efforts in
Alabama and Florida.
In 1995, the Company completed construction of a vault manufacturing
facility in Alabama that allows for production of vaults at a significantly
lower cost than the purchase of vaults from independent manufacturers. As a
result of the availability of this new facility, the Company was able to reduce
the deferred merchandise liability, resulting in a one-time reduction to cost of
sales of approximately $3.5 million. The Company recognized the adjustment as a
non-recurring gain in 1995.
As a percentage of revenues, consolidated operating margin, including the
change in accounting estimate, increased to 18.2% in 1995 from 10.7% in 1994,
with funeral contribution margin increasing to 28.0% from 24.2% and cemetery
contribution margin, excluding the change in accounting estimate, increasing to
22.5% from 17.5%. Contribution margin is defined as contribution as a percentage
of funeral revenues or cemetery revenues, as the case may be. Funeral home
contribution margin increased in part because of a new merchandising program
implemented in 1995 which produced higher retail sales and lower casket costs.
Cemetery contribution margin increased as a result of improved efficiencies at
Alabama cemeteries and new pre-need merchandising programs.
Corporate and regional general and administrative expense increased to $6.1
million in 1995 from $4.6 million in 1994. As a percentage of consolidated
revenue, general and administrative expense increased to 7.5% in 1995 from 6.4%
in 1994. Corporate and regional general and administrative expense increased due
to additional corporate and regional staff as well as expenses associated with
new information and accounting systems.
34
<PAGE>
Interest expense increased by $3.0 million in 1995, primarily as a result
of additional borrowings by the Company to finance its acquisitions.
Consolidated net loss was $0.7 million in 1995 compared to a consolidated
net loss of $4.3 million in 1994.
1994 Compared with 1993
Consolidated revenues increased 72.4% to $72.2 million in 1994 from $41.9
million in 1993, with funeral service revenues increasing 84.6% to $60.9
million, and cemetery revenues increasing 27.0% to $11.3 million. Consolidated
operating income increased 83.7% to $7.7 million in 1994 from $4.2 million in
1993, with funeral contribution increasing 140.7% to $14.7 million and cemetery
contribution decreasing 32.2% to $2.0 million. Funeral revenues increased
primarily as a result of 1994 acquisitions and the full-year impact of
acquisitions completed in 1993. On same-store business, excluding 1993 and 1994
acquisitions, total calls increased by 123 from 7,041 calls in 1993 to 7,164
calls in 1994 and average revenue per call increased by $173 from $2,762 per
call in 1993 to $2,935 per call in 1994. Cemetery revenues increased largely as
a result of the group of acquisitions in Alabama being included for a full year
as compared to less than two months in 1993.
As a percentage of revenues, consolidated operating margin increased to
10.7% in 1994 from 10.0% in 1993, with funeral contribution margin increasing to
24.2% from 18.5% and cemetery contribution margin decreasing to 17.5% from
32.7%. Funeral home contribution margin increased as a result of improved
efficiencies in operations and the utilization of Regional Directors to monitor
the budgets of individual homes. Cemetery contribution margin decreased
primarily as a result of higher costs at the 1993 acquired cemeteries compared
with the Company's then existing cemeteries.
Corporate and regional general and administrative expense increased to $4.6
million in 1994 from $2.9 million in 1993. However, as a percentage of
consolidated revenues, general and administrative expense decreased to 6.4% in
1994 from 6.9% in 1993 as a result of certain economies of scale realized at the
corporate level from the Company's rapid expansion through acquisitions.
Interest expense increased by $6.0 million in 1994, primarily as a result
of higher interest rates and additional borrowings by the Company to finance its
acquisitions.
Consolidated net loss after taxes was $4.3 million in 1994 compared to a
consolidated net loss after taxes of $2.3 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash since 1993 have been funds provided
by operating activities, proceeds from additional long-term debt and capital
contributions by its majority shareholder. For the six months ended June 30,
1996, operating activities generated $3.5 million of cash compared to $4.3
million of cash for the six months ended June 30, 1995. Operating activities
generated $6.0 million of cash in 1995 compared with $2.7 million in 1994 and
$2.0 million in 1993.
For the six months ended June 30, 1996, long-term debt proceeds provided
$0.6 million of cash compared to $1.5 million of cash for the six months ended
June 30, 1995. Long-term debt proceeds provided $10.0 million of cash in 1995
compared with $27.2 million in 1994 and $59.3 million in 1993. In 1994 and 1993,
capital contributions contributed $6.3 million and $10.7 million in cash,
respectively. For the six months ended June 30, 1996, the disposal of assets
provided cash of $0.1 million compared to $0.7 million for the six months ended
June 30, 1995. The disposal of assets in 1995, 1994 and 1993 provided cash of
$1.4 million, $0.3 million and $0.1 million, respectively.
The primary uses of cash since 1993 have been for the acquisition of
funeral homes and cemeteries, principal payments on long-term debt and capital
expenditures. For the six months ended June 30, 1996, the Company purchased
three funeral homes for an aggregate purchase price of $0.7 million compared to
two funeral home purchases for an aggregate purchase price of $1.7 million for
the six months ended June 30, 1995. In 1995, the Company purchased 11 funeral
homes for an aggregate purchase price of $8.9 million. In 1994, the Company
purchased 31 funeral homes and two cemeteries for an aggregate purchase price of
$23.4 million. In 1993, the Company purchased 61 funeral homes and nine
cemeteries for an aggregate purchase price of $67.7 million.
For the six months ended June 30, 1996 the Company used $0.9 million for
capital expenditures compared to $1.0 million for the six months ended June 30,
1995. In 1995, 1994 and 1993, the Company used $1.6 million,
35
<PAGE>
$2.6 million and $1.9 million for capital expenditures and improvements,
respectively. For the six months ended June 30, 1996, the Company paid $1.9
million in principal payments on long-term debt compared to $4.4 million for the
same period in 1995. In 1995, 1994 and 1993, the Company paid $7.7 million, $8.9
million and $0.4 million in principal payments on long-term debt, respectively.
The Company estimates capital expenditures of approximately $3.8 million in
the first year following the Acquisition to be used in part for the repair and
improvement of existing mausoleums and the purchase of additional computers to
support the Company's new centralized management information system. The Company
will have pre-funded all capital expenditures expected to be incurred in the
first year following the Acquisition with cash from the Acquisition.
After giving effect to the Acquisition and the offering of the Notes and
the application of net proceeds therefrom, the company had $190 million of
indebtedness outstanding and $25 million of borrowing availability under the
Revolving Credit Facility. The Company believes that, based upon current levels
of operations and anticipated growth and availability under the Revolving Credit
Facility, it can adequately service its indebtedness. If the Company cannot
generate sufficient cash flow from operations or borrow under the Revolving
Credit Facility to meet such obligations, then the Company may be required to
take certain actions, including reducing capital expenditures, restructuring its
debt, selling assets or seeking additional equity in order to avoid an Event of
Default. There can be no assurance that such actions could be effected or would
be effective in allowing the Company to meet such obligations.
36
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company is the fourth-largest operator of funeral homes and cemeteries,
on the basis of revenues, in the United States and is the largest privately-held
company in the funeral and cemetery industry. The Company owns 146 funeral homes
and 16 cemeteries in 20 states. Existing Prime was founded in 1991 and expanded
rapidly through the aggressive acquisition of funeral homes and cemeteries,
primarily in non-urban areas of the United States. The Company has focused on
non-urban areas in order to take advantage of the opportunities offered by such
areas, including (i) the opportunity to establish and maintain a higher market
share as a result of the smaller number of death care providers and (ii) the
stronger preference for traditional full-service funeral services and burials.
Historically, the Company's primary growth strategy has been to purchase
properties that can serve as anchor locations and subsequently to acquire
additional funeral homes and cemeteries located near those central assets.
Former and new management believe that historically, the Company had not
focused on maximizing profitability of the funeral homes and cemeteries which it
has acquired. Management intends to take advantage of (i) the quality and size
of the Company's portfolio of properties, (ii) the opportunity to operate more
efficiently those properties located in close proximity to one another, (iii)
the shift in focus from acquisitions to profit maximization at existing
locations and (iv) the cost reduction opportunities both at local sites and at
the corporate headquarters made possible by the Administrative Services
Agreement to improve the Company's present and long-term operating performance.
New Prime was incorporated in Delaware in May 1996. The Company's principal
executive offices are located at 691 Tekulve Road, Batesville, Indiana 47006 and
its telephone number is (812) 933-0222.
THE FUNERAL SERVICE INDUSTRY
The funeral service industry historically has been characterized by low
business risk compared with most other businesses. According to the Business
Failure Record published by The Dun & Bradstreet Corporation, the average
business failure rate in the United States in 1994 was 86 per 10,000. By
contrast, the 1994 failure rate of the funeral service and crematoria industry
was only 8 per 10,000, less than one-tenth the average rate and among the lowest
of all industries. This low failure rate can be attributed to a number of
factors, including the stable demand in the industry, positive demographic
trends and the low rate of new market entrants due to the length of time
required to establish the reputation necessary for community acceptance.
In the last fifteen years, demand has grown steadily at a 1% compound
annual growth rate while the aggregate number of funeral homes has remained
relatively constant. Future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The first members of the
'Baby Boom' generation will begin to turn 50 in 1996 and are advancing into the
prime savings and planning phases of their lives. The Census Bureau projects
that the segment of the United States population over 65 years old, which
presently totals 33 million, will double in size over the next 35 years. Over
the next fifteen years, this aging of the population is expected to outweigh the
effects of increased life expectancies. The Census Bureau projects that the
number of deaths in the United States is projected to grow at approximately 1.0%
annually through 2010.
A Wirthlin Group study conducted in 1995 concluded that the three most
important factors in selecting a funeral home are that it had previously served
the family, was close to the respondent's residence and had a strong reputation
in the community. Fewer than five percent of the respondents to the Wirthlin
study specified price as an important factor in selecting a funeral home. The
relationship between reputation and market share is an important competitive
advantage for existing funeral homes in that unless a new market entrant is able
to establish the community reputation necessary to gain market share, existing
homes will retain considerable pricing flexibility.
37
<PAGE>
BUSINESS OPERATIONS
Funeral Home Operations
The Company's funeral homes offer a full range of services to respond to
individuals' funeral needs, including the collection of remains, certification
of death, professional embalming, use of funeral home facilities, sale of
caskets and related merchandise, transportation to a place of worship or funeral
chapel for a religious service and transportation to a cemetery or crematorium.
To provide the public with the opportunity to choose the service that is most
appropriate from both an emotional and financial perspective, the Company offers
complete funeral services (including caskets and related merchandise) at prices
ranging from approximately $600 to $20,000 (and averaging approximately $3,364).
In addition, most of the Company's funeral homes are able to offer families the
opportunity to conduct both visitation and religious services at a
non-denominational chapel on the premises, thereby reducing transportation costs
to the Company and inconvenience to the families.
Although cremation, as a percentage of total funeral services, has been
increasing by approximately 1% annually over the past five years in the United
States, the number of caskets sold (typically associated with a traditional
funeral service) has remained relatively constant. Over the next 10 years the
cremation rate is expected to continue to increase at the same rate, while the
number of caskets sold is expected to remain constant. Cremation rates vary
dramatically across regions of the United States, at least in part because of
demographic differences in religious, ethnic and socioeconomic backgrounds.
While the Company views cremation as an alternative to earth burial and
encourages the provision of a traditional funeral or other appropriate
commemorative service, Management believes a substantial increase in the rate of
cremations performed by the Company could adversely affect the Company's
revenues and gross profits.
The services offered by both funeral homes and cemeteries can be purchased
at-need or pre-need. In general, payments made for pre-need funeral services are
not recorded as revenues until such services are provided. Payments made on
pre-need contracts, in accordance with applicable state law, typically are
either deposited in a trust fund by the Company and/or used by the purchasers of
the pre-need contracts to purchase life insurance policies under which the
Company is designated the beneficiary. On the date of performance of a
pre-arranged service, the Company records as funeral revenue the amount
originally trusted, together with all accumulated trust earnings, or the
payments under the insurance policy, as applicable.
The Company is a party to a casket supply agreement with Batesville Casket
Company, Inc. ('BCC'), pursuant to which the Company must purchase caskets
exclusively from BCC, subject to certain exceptions, through March 31, 2000.
Following such date, the agreement is terminable by either the Company or BCC
upon 30 days' written notice. Management believes that the terms of such supply
agreement are favorable to the Company.
Funeral home operations accounted for approximately 84% of the Company's
total revenues during the fiscal year ended December 31, 1995.
Cemetery Operations
The Company's cemetery division assists families in making at-need and
pre-need arrangements and offers a complete line of cemetery products (including
a selection of burial spaces, burial vaults, lawn crypts, memorials, niches and
mausoleum crypts), the opening and closing of graves and cremation services. The
sale of cemetery pre-need arrangements is a significant component of the
cemetery operations, having represented approximately 75% of the Company's
cemetery revenues during the fiscal year ended December 31, 1995. The pre-need
sale of interment rights and other related products generally is recorded as
revenue when customer contracts are signed and a down payment is received and,
concurrently, related costs are recorded and an allowance is established for
customer cancellations and refunds.
38
<PAGE>
PROPERTIES
Set forth in the table below is the number, by state, of the Company's
funeral homes and cemeteries:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
STATE FUNERAL HOMES CEMETERIES
- -------------------- ------------- ----------
<S> <C> <C>
Alabama............. 25 8
Arizona............. 2 0
Arkansas............ 3 0
California.......... 15 0
Florida............. 21 4
Georgia............. 6 0
Illinois............ 18 0
Indiana............. 7 0
Iowa................ 1 0
Kentucky............ 3 1
Michigan............ 8 0
Minnesota........... 10 0
Missouri............ 5 0
Nebraska............ 4 0
New York............ 3 0
Ohio................ 1 0
Tennessee........... 6 3
Texas............... 5 0
West Virginia....... 2 0
Wisconsin........... 1 0
--- --
Total.......... 146 16
--- --
--- --
</TABLE>
Of the 146 funeral homes listed above, 105 are owned by the Company or one
of its subsidiaries and 41 are leased. The leases have terms ranging from one
month to twenty years. Some of the funeral homes listed above are located at the
same site and are operated as combination operations. The Company's 16
cemeteries contain an aggregate of approximately 714 acres, of which
approximately 62% are developed. The Company also owns six crematories, two of
which are located in Illinois and the remaining four of which are located in
California, Florida, Indiana and Tennessee.
The Company's headquarters occupy approximately 8,000 square feet of office
space in a building in Batesville, Indiana under a lease agreement which expires
in August 1997.
HISTORICAL ACQUISITION STRATEGY
From the time that Existing Prime commenced operations in early 1992 until
the Acquisition Closing Date, its central focus had been rapid expansion through
the aggressive acquisition of leading funeral home and cemetery businesses,
primarily in non-urban areas of the United States.
The total consideration paid by Existing Prime in connection with these
acquisitions was approximately $50,900,000, $67,700,000, $23,400,000, $8,900,000
and $675,000 in 1992, 1993, 1994, 1995 and 1996, respectively, of which
approximately $43,200,000, $56,300,000, $20,600,000, $7,700,000 and $618,000,
respectively, was financed through borrowings. In 1992, 1993, 1994, 1995 and
1996, Existing Prime acquired assets, excluding goodwill, with fair market
values aggregating approximately $41,600,000, $35,600,000, $11,500,000,
$4,400,000 and $536,000, and assumed liabilities of approximately $4,300,000,
$14,300,000, $1,700,000, $200,000 and $0, in each case, respectively.
As described below under '--Business Strategy Following Acquisition,'
Existing Prime's history of acquisitions has resulted in geographic
concentrations of funeral homes and cemeteries that Management believes present
important opportunities for reducing costs and increasing revenues by
capitalizing on operational and marketing synergies.
39
<PAGE>
BUSINESS STRATEGY FOLLOWING ACQUISITION
Overview. Management believes that opportunities exist to enhance the
revenue and profitability of the Company's existing locations both in the
short-term and over time. The Company's new senior management team is headed by
two former executives of Loewen Group, North America's second-largest operator
of funeral homes and cemeteries, one of whom has 29 years of experience and the
other of whom has 12 years of experience in the funeral industry. Existing
Prime's operations underperformed significantly compared to its peer group
companies in the funeral service industry. As a result, Management has
identified, and the Company intends to undertake, a number of initiatives that
Management believes will result in an improvement in both revenues and operating
profit, including planned reductions in both operating and general and
administrative expenses. Over time, the Company will continue to endeavor to
increase revenues and profitability by capitalizing on the location and
concentration of its properties, improved merchandising, enhanced pre-need
marketing, and a management structure that encourages an entrepreneurial
business culture.
Revenue Enhancement. The two key drivers behind consistent revenue growth
in the funeral home industry are price per funeral and funeral services per
home. In 1995, the Company's properties averaged $3,364 per funeral and 144
services per home. Both of these figures measured significantly below the
estimated 1995 national average of $4,150 per funeral and 170 services per
funeral home. (Sources: Business Trend Analysts, US Funeral/Cremation
Services/Supplies Report, April 1, 1995 and National Funeral Directors
Association, respectively; the average revenue per funeral for both the Company
and the industry exclude trust earnings and insurance commission revenues).
Management believes that the quality and location of the Company's funeral homes
offer substantial opportunity for both near-term and long-term revenue
enhancement. The Company will seek to capitalize on this opportunity through the
introduction of more sophisticated merchandising and the pricing of its services
more closely to the industry average. Based on 1995 aggregate call volume, every
$100 increase in price per funeral could result in an approximate $2 millon
increase per year in the Company's revenues, although there can be no assurance
that such price increases can be effectively implemented or that such growth in
revenues will be realized. At the Company's cemetery operations, Management will
undertake to increase revenues through an enhanced marketing program to more
effectively serve the needs of the growing number of people who wish to plan
their burial needs in advance.
Clustered Operations. More than 80 percent of the Company's funeral homes
and cemeteries are located in clusters or in sufficient proximity to provide
significant opportunities for the sharing of resources. The Company's major
funeral home and cemetery clusters are in Alabama, Florida, Illinois, California
and Minnesota. Management believes that the Company has not fully capitalized on
the competitive advantages and scale economies available to its clustered
properties. Specifically, the Company expects to expand the sharing within
clusters of service personnel, vehicles, preparation services, clerical staff
and other key resources. Additionally, Management plans to implement revenue
enhancing cross-marketing programs that will benefit proximate locations without
increasing overhead expenses. The Company also now benefits from its
Administrative Services Agreement with Loewen, which will enable the Company to
reduce costs through the elimination of certain fixed expenses and the more
efficient use of facilities and personnel. See 'Certain Related
Transactions--Administrative Services Agreement.'
Reduced General & Administrative Expense. Management believes that
significant and immediate cost savings can be realized, at both the local site
and corporate levels, from the restructuring of the Company's general and
administrative staff to more appropriately reflect the Company's new focus on
existing operations. At the site level, Management intends to reduce excess
workforce and take advantage of the Company's funeral home and cemetery clusters
by pooling local resources to eliminate currently duplicative functions in the
areas of finance and administration. In addition, the Company has contracted
with Loewen to provide certain services pursuant to the Administrative Services
Agreement, thereby facilitating the reduction of excess resources. As the
Company's acquisition program will be substantially eliminated, the reduction of
acquisition-related functions at the corporate headquarters will offer further
opportunities for savings.
Pre-Need Marketing. Management realizes that individuals increasingly are
recognizing the benefits of purchasing funeral products and services in advance
and is committed to providing quality advanced funeral and cemetery planning to
the communities it serves. Management believes that such programs considerably
enhance long-term revenues for funeral homes by securing future market share. In
addition, the Company can realize
40
<PAGE>
significant current revenues from the sale, through a commissioned sales force,
of cemetery pre-need arrangements. To capitalize on these opportunities, the
Company intends to recruit experienced senior managers who will focus
exclusively on building a leading pre-need sales program based on the foundation
currently in place at the Company.
Management Structure. The Company's management structure and remuneration
practices will be designed to support and encourage entrepreneurial drive and
individual responsibility. Each funeral home and cemetery will be operated as a
distinct profit center, with monthly and annual financial performance monitored
by regional and corporate management in accordance with budgeted projections.
Local managers will be given a high degree of autonomy, as Management believes
that such managers, as members of the local community, are best able to judge
how to conduct day-to-day operations in a manner consistent with the established
character of the particular funeral home or cemetery and the needs of the
community. Additionally, senior management's compensation will be based in part
on the performance of the Company.
COMPETITION
In the funeral industry, local community competition is oriented towards
gaining market share. The market share of a single funeral home or cemetery in
any community is primarily a function of the name and reputation of that funeral
home or cemetery. Market share increases within a community are usually gained
over a long period of time because of the high importance of reputation and
superior service. Modest and tasteful promotional programs can help enhance
community profile but typically do not increase market share significantly.
The Company also faces competition from large 'consolidators' in the
industry which seek to reap profits from an acquisition and consolidation
strategy. Such competitors include several large, publicly-traded funeral
services companies, including Service Corporation International, Loewen, Stewart
Enterprises, Inc. and Equity Corporation International, as well as various
smaller companies which provide competition with the Company on a regional basis
and, on a local level, from operators who have focused on acquiring funeral home
groupings in concentrated geographic regions of the United States.
REGULATION
The Company's funeral home operations are regulated by the Federal Trade
Commission ('FTC'), which administers the Trade Regulation Rule on Funeral
Industry Practices (the 'Funeral Rule'), which became effective on April 30,
1984 and was revised as of July 19, 1994. The Funeral Rule defines certain acts
and practices in connection with the provision of funeral goods or services as
unfair or deceptive and sets forth various requirements intended to prevent such
unfair or deceptive acts and practices. The Company also must comply with other
federal legislation, including the Americans with Disabilities Act and
regulations administered by the Occupational Safety and Health Administration.
The Company's operations also are regulated at the state and local level,
with a vast majority of jurisdictions requiring licensing and supervision of
individuals who provide funeral-related services. A number of jurisdictions also
regulate the sale of pre-need services and the administration of any resulting
trust funds or insurance contracts. In addition, concerns regarding lack of
competition have led a few jurisdictions to enact legislation designed to
encourage competition by restricting the common ownership of funeral homes and
related operations within a specific geographic region. State legislatures and
regulatory agencies may propose new laws and regulations, some of which, if
enacted, could have a material effect on the death care industry in general and
on the Company's operations. The Company cannot predict the likelihood of
enactment of any such proposed laws or regulations or the effect that any such
enactment might have on the Company or its operations.
The Company believes that it is currently in substantial compliance with
the Funeral Rule and all other applicable federal, state and local laws and
regulations.
41
<PAGE>
ENVIRONMENTAL MATTERS
In connection with the Acquisition, New Prime conducted extensive
environmental reviews of all properties owned by Existing Prime prior to the
Acquisition Closing Date. Although Management is aware of some contamination
related to the use of underground storage tanks and embalming materials,
Management does not believe that any costs relating to these or other
environmental issues will have a material adverse effect on the Company's
financial results.
EMPLOYEES
As of June 30, 1996 the Company employed approximately 1,246 people. None
of the employees of the Company or its subsidiaries is covered by a collective
bargaining agreement. Management believes that its relationship with its
employees is good.
LITIGATION
Gamble Settlement. On February 26, 1996, a lawsuit was filed (the 'Alabama
Litigation') against the Company by World Service Life Insurance Company of
America ('World Service') and Jeffrey M. Gamble ('Gamble'), the former owner of
a business located in Alabama which was acquired by a subsidiary of the Company,
in connection with a pre-need funeral service funding agreement between the
Company and World Service (the 'Alabama Pre-need Agreement'). On February 29,
1996, a lawsuit (the 'Texas Litigation') was filed against the Company by South
Texas Bankers Life Insurance Company ('South Texas') and Gamble in connection
with a pre-need funeral service funding agreement between the Company and South
Texas (the 'Texas Pre-need Agreement;' together with the Alabama Pre-need
Agreement, the 'Pre-need Agreements').
On April 11, 1996, the Company settled the Alabama Litigation and the Texas
Litigation by entering into a Termination of Pre-need Funding Agreements and
Release with World Service, Gamble and South Texas (the 'Termination and
Release'). Pursuant to the Termination and Release, (a) the Pre-need Agreements
were immediately terminated, (b) each of the parties released the others from
all claims under or with respect to the Pre-need Agreements and (c) the Alabama
Litigation and the Texas Litigation were dismissed with prejudice. As
consideration for such termination, release and dismissal, the Company agreed to
pay to Gamble the following amounts, which will be recorded as a charge against
income in the Company's financial statements for the first quarter of 1996: (i)
$1,000,000 upon execution, (ii) $2,000,000 to be paid on the Acquisition Closing
Date, (iii) an aggregate of $6,000,000 payable over twenty years in the form of
monthly installments of $25,000 beginning on May 1, 1996 and (iv) the amount of
legal expenses incurred in connection with the Alabama Litigation, subject to a
maximum of $20,000.
On the Acquisition Closing Date, the Company used a portion of the net
proceeds from the offering of the Notes and the Bank Term Facility to purchase
an annuity to fund the remaining monthly payments provided for in the
Termination and Release. See 'Use of Proceeds.' Management believes that the
Company will recover a substantial portion of the cost of the settlement over
time through higher commission rates and increased policy benefits with the
purchase of pre-need insurance policies from an alternative insurance carrier.
Other. The Company is a party to other legal proceedings in the ordinary
course of its business but Management does not expect the outcome of any such
proceedings to have a material adverse effect on the Company's financial
condition.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of New Prime, and their ages
as of October 15, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ------------------------------------------------
<S> <C> <C>
Gary L. Wright........... 50 President and Chief Executive Officer, Director
Myles Cairns............. 41 Chief Financial Officer, Secretary and
Treasurer
Gregory M. Hilgendorf.... 47 North Central Regional Vice President
Robert G. Salerno........ 54 Western Regional Vice President
Bruce L. Woodard......... 36 Central Regional Vice President
Joseph E. Franckewitz.... 40 Vice President of Pre-Need Sales
Warren B. Rudman......... 66 Director
Howard A. Lipson......... 32 Director
John R. Woodard.......... 32 Director
Chinh E. Chu............. 29 Director
Peter K. Grunebaum....... 63 Director
Clifford R. Hinkle....... 47 Director
</TABLE>
Mr. Bruce Woodard and Mr. John Woodard are not related.
The business experience of each of such executive officers and directors is
set forth below.
Gary L. Wright has joined New Prime as President and Chief Executive
Officer. Mr. Wright served as Divisional Vice President for the Southeast United
States, overseeing operations in Alabama, Georgia, Florida and Puerto Rico and
managing the operations of over 100 funeral home locations for Loewen since June
1993. Prior thereto he served as Loewen's Regional Manager for the Pacific
Northwest, supervising operations in Washington, Oregon and Alaska, from 1989 to
1993. Prior to joining Loewen, Mr. Wright was a partner in the Price-Helton
Funeral Chapel which was acquired by Loewen in 1988. Mr. Wright is a past
President of the Washington State Funeral Directors Association and a past
member of the Board of Governors of the National Funeral Directors Association.
Myles S. Cairns has joined New Prime as Chief Financial Officer, Secretary
and Treasurer. Mr. Cairns served as Vice President, Operations Controller of
Loewen since October 1994. Prior thereto, Mr. Cairns held various positions at
Loewen, including Director of Risk Management from November 1993 to October
1994, Director of Operations Planning and Control from 1990 to November 1993 and
Corporate Controller from 1985 to 1989.
Gregory M. Hilgendorf has served as North Central Regional Vice President
of Existing Prime since 1992, overseeing operations in Illinois, Indiana,
Kentucky, Michigan, Minnesota and Wisconsin. He also has served as a member of
Existing Prime's Advisory Board and Senior Management Team. Prior to joining
Existing Prime, Mr. Hilgendorf served as President of Olson Funeral Homes from
1982 until its acquisition by Existing Prime in 1992 and was the owner of five
Olson funeral homes.
Robert G. Salerno has served as Western Regional Vice President of Existing
Prime since 1993, overseeing operations in Arizona, California and Texas. Prior
thereto, Mr. Salerno served in various capacities at Pierce Brothers, beginning
in 1960, including Manager, Area Vice President and Senior Vice President.
Bruce L. Woodard has served as Central Regional Vice President of Existing
Prime since 1992, overseeing operations in Arkansas, Iowa, Missouri and
Nebraska. Prior thereto, Mr. Woodard was an owner and General Manager of
Mason-Woodard Funeral Homes, which operates five funeral homes in southwest
Missouri.
Joseph E. Franckewitz has joined New Prime as Vice President of Pre-Need
Sales. Mr. Franckewitz has served in various capacities at Gibraltar Mausoleum
Corporation since 1989, including Regional Sales Manager in Brandon, Florida and
Regional Sales Manager in Baltimore, Maryland.
Warren B. Rudman became a partner of Paul, Weiss, Rifkind, Wharton and
Garrison in 1993 after serving two consecutive terms as a United States Senator
from New Hampshire, from 1980 through 1992. Senator Rudman was appointed
Attorney General of New Hampshire in 1970 and in 1975, he was elected president
of the
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<PAGE>
National Association of Attorneys General. Senator Rudman currently serves on
the Board of Directors of the Chubb Corporation, Collins & Aikman, the Raytheon
Company and the Concord Coalition.
Howard A. Lipson is Senior Managing Director of The Blackstone Group L.P.,
which he joined in 1988, and was a Vice President from January 1991 to March
1994. Prior to joining Blackstone, Mr. Lipson was a member of the Mergers and
Acquisitions Group of Salomon Brothers Inc. He currently serves on the Board of
Directors of UCAR International Inc., Volume Services, Inc., AMF Group Inc., and
Ritvik Holdings, Inc.
John R. Woodard joined The Blackstone Group L.P. as a Managing Director in
1996. Prior thereto, he was a Vice President at Vestar Capital Partners from
1990 to 1996.
Chinh E. Chu is a Vice President of The Blackstone Group L.P., which he
joined in 1990. Prior to joining Blackstone, Mr. Chu was a member of the Mergers
and Acquisitions Group of Salomon Brothers Inc from 1988 to 1990.
Peter K. Grunebaum has been a Director of Fortrend International LLC since
February 1996. Prior thereto, he had been a Director of ICA International since
April 1989. He currently serves on the Board of Directors of Pre-Paid Legal
Services, Inc.
Clifford R. Hinkle has served as President and a Director of Flagler
Capital Corporation since its founding in 1992, as Chief Executive Officer and
Chairman of the Board of Directors of Flagler Holdings, Inc. since its formation
in January 1996 and as Chairman, President and Chief Executive Officer of Hinkle
& Co. since 1992. Prior thereto, he was Executive Director of the State Board of
Administration of Florida from 1987 to 1991. Mr. Hinkle also was a Director and
President and Chief Executive Officer of MHI Group, Inc. from 1993 until its
merger with Loewen Group in 1995. He currently serves on the Board of Directors
of Commercial Net Lease Realty.
Pursuant to the Stockholders' Agreement described below (see 'Certain
Related Transactions--Stockholders' Agreement'), Blackstone and Loewen
designated five and two nominees, respectively, to the Board of Directors of
Existing Prime. Messrs. Wright, Rudman, Lipson, J. Woodard and Chu were the
nominees designated by Blackstone. Messrs. Grunebaum and Hinkle (neither of whom
is an officer or a director of Loewen Group) were the nominees designated by
Loewen. Pursuant to the Stockholders' Agreement, Loewen will designate one
additional nominee. Each of Blackstone's and Loewen's nominees to the Board of
Directors of Existing Prime also was nominated to the Board of Directors of New
Prime.
Directors of the Company (other than Directors who are employed by the
Company or Blackstone) will receive $25,000 annually for their service as
Directors plus the reimbursement of expenses. Such Directors will not receive a
separate fee for service on committees of the Board. Directors of the Company
who are employed by the Company or Blackstone will serve without compensation.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth for the fiscal year ended December 31, 1995
the compensation paid by Existing Prime to its Chief Executive Officer and each
of the other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS COMPENSATION(2)
- ------------------------------------------- -------- ------- ---------------
<S> <C> <C> <C>
Thomas H. Johnson
President and Chief Executive Officer.... $263,474 $15,000 $ 600
Bernhard L. Gaarsoe
Vice President, Chief Financial Officer,
Treasurer and Secretary................ $145,998 $ 6,000 $ 600
Robert G. Horn
Vice President and Chief Operating
Officer................................ $135,684 $ 5,625 $ 600
</TABLE>
(Footnotes on next page)
44
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Each of the executive officers listed above was an executive officer of
Existing Prime prior to the Acquisition, but is no longer an executive
officer of New Prime. For information concerning the compensation of the
executive officers of New Prime, see '--Employment Agreements' below.
(2) All Other Compensation includes amounts paid to the named executive officers
which may be applied to the payment of medical, dental and life insurance
benefits.
Employment Agreements
The Company has entered into letter agreements with Messrs. Wright and
Cairns regarding certain terms of their employment with the Company. The
agreements provide that Messrs. Wright and Cairns will be paid a base salary of
$225,000 per year, with annual increases at the discretion of the Board of
Directors of the Company plus an annual cash bonus. In 1996, such bonus will be
at the discretion of the Board, and thereafter such bonus will be equal to a
percentage of such executive's salary, which percentage will in turn be based on
the extent to which the Company achieves a target EBITDA. The agreements will
provide that the target EBITDA is $35.0 million and $37.7 million for 1997 and
1998, respectively. The target for the following years will be set by the Board.
The 1997 and 1998 targeted amounts were derived from the stockholders'
review of Management's estimates of projected cost savings and increase in
revenues following the Acquisition. The target EBITDA is a performance target
and is not a forecast of actual performance that will be realized by the
Company. Actual performance during the year may differ materially from the
targeted amount. See 'Risk Factors--Potential Adverse Consequences of Planned
Changes in Operating Strategy.'
The agreements further provide that Messrs. Wright and Cairns will be
entitled to a long-term incentive bonus at any time that Loewen purchases all of
the shares of common stock of Existing Prime owned by Blackstone, provided that
certain EBITDA targets are achieved. Such bonus will equal $500,000 if such
purchase occurs prior to 2002 and will be increased by $100,000 each year
thereafter up to a maximum of $900,000.
Other
The compensation of the executive officers other than Messrs. Wright and
Cairns will be determined by the Board of Directors of the Company.
PRINCIPAL STOCKHOLDERS
Upon consummation of the Acquisition, New Prime became a direct, wholly
owned subsidiary of Existing Prime. The following table sets forth certain
information regarding the beneficial ownership of the common stock of Existing
Prime:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES STOCK
- ------------------------------------ --------- ------------
<S> <C> <C>
Blackstone Management Associates II
L.L.C.(1)......................... 764.70589 76.5%
Loewen Group International,
Inc.(2)........................... 235.29411 23.5%
Gary L. Wright(7)................... -- --
Warren B. Rudman(3)................. -- --
Howard A. Lipson(4)................. -- --
John R. Woodard(4).................. -- --
Chinh E. Chu(4)..................... -- --
Peter K. Grunebaum(5)...............
Clifford R. Hinkle(6)...............
Directors and executive officers as
a group(7)(12 persons)........... -- --
</TABLE>
- ------------------
(1) 544.59536, 158.78262 and 54.71026 shares, respectively, are held by
Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P. Blackstone Management Associates II L.L.C., as the
general partner of each of Blackstone Capital Partners II Merchant Banking
Fund L.P., Blackstone Offshore Capital Partners II L.P. and
(Footnotes continued on next page)
45
<PAGE>
(Footnotes continued from previous page)
Blackstone Family Investment Partnership II L.P., exercises voting and
dispositive power with respect to such shares. Blackstone Management
Associates II L.L.C. is also the sole stockholder of PSI P&S Corp. ('PSI
P&S'), which is the general partner of PSIM, the holder of 6.61765 shares of
Existing Prime Common Stock. Blackstone Management Associates II L.L.C.
disclaims beneficial ownership of such shares of Existing Prime Common
Stock. See 'Certain Transactions--Formation of PSIM; Loans to Management.'
The address for the Blackstone entities is c/o Blackstone Group L.P., 345
Park Avenue, New York, N.Y. 10154.
(2) The address for Loewen is 50 River Center Boulevard, Covington, KY 41011.
(3) Mr. Rudman's business address is c/o Paul, Weiss, Rifkind, Wharton &
Garrison, 1615 L Street, N.W., Suite 1300, Washington, D.C. 20038.
(4) Messrs. Lipson, Woodard and Chu are affiliated with Blackstone in the
capacities described under 'Management--Executive Officers and Directors.'
Each such person's business address is c/o The Blackstone Group L.P., 345
Park Avenue, New York, NY 10154. Mr. Lipson disclaims beneficial ownership
of any such shares of Common Stock beneficially owned by Blackstone
Management Associates II L.L.C.
(5) Mr. Grunebaum's business address is c/o Fortrend International LLC, 805
Third Avenue, Suite 2300, New York, New York 10022.
(6) Mr. Hinkle's business address is c/o Flagler Capital Corporation, 215 South
Monroe Street, Suite 500, Tallahassee, Florida 32301.
(7) None of the named executive officers owns any shares of Existing Prime
Common Stock. Each of the executive officers of New Prime holds a limited
partnership interest in PSIM, the holder of 6.61765 shares (approximately
0.7%) of Existing Prime Common Stock; however, such executive officers do
not have voting or dispositive power with respect to such shares.
CERTAIN RELATED TRANSACTIONS
The summaries of the Stock Purchase Agreement, the Stockholders' Agreement,
the Put/Call Agreement and the Administrative Services Agreement set forth below
do not purport to be complete and are qualified in their entirety by reference
to all the provisions of the Stock Purchase Agreement, the Stockholders'
Agreement, the Put/Call Agreement and the Administrative Services Agreement,
respectively. Copies of the Stock Purchase Agreement, the Stockholders'
Agreement and the Administrative Services Agreement are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
STOCK PURCHASE AGREEMENT AND ACQUISITION
On June 14, 1996, as a precursor to the Acquisition, a company controlled
by Blackstone (the 'Purchaser') entered into a Stock Purchase Agreement with
Loewen Group and all of the holders of capital stock of Existing Prime (the
'Selling Stockholders'), pursuant to which the Selling Stockholders agreed to
sell to the Purchaser, and the Purchaser agreed to purchase from the Selling
Stockholders, all of the shares of Existing Prime held by the Selling
Stockholders. At the closing of the Acquisition, the Purchaser assigned back to
Existing Prime its rights and obligations as Purchaser under the Stock Purchase
Agreement, such that at the closing Existing Prime repurchased from the Selling
Stockholders all of their shares in Existing Prime.
In connection with the Acquisition, (i) Blackstone, Loewen and PSIM
contributed $130 million and all of the common stock of New Prime to Existing
Prime (the 'Blackstone/Loewen Contribution') in exchange for 100% of the capital
stock of Existing Prime, resulting in New Prime's becoming a wholly owned
subsidiary of Existing Prime; (ii) Existing Prime transferred the shares of all
of its directly held subsidiaries and all of its other assets and liabilities to
New Prime, (iii) the Bank Credit Agreement was entered into (see 'Description of
Bank Credit Facilities'), (iv) Existing Prime (a) repurchased the shares of its
common stock owned by the Selling Stockholders and (b) repaid or defeased
existing indebtedness and discharged certain other existing obligations in an
aggregate amount of approximately $126.4 million using the proceeds of the
Blackstone/Loewen Contribution and a portion of the proceeds of the offering of
the Notes and the Bank Term Facility.
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<PAGE>
STOCKHOLDERS' AGREEMENT
In connection with the Acquisition, Blackstone, Loewen and PSIM entered
into an agreement with Existing Prime (the 'Stockholders' Agreement') setting
forth certain of their rights and obligations as stockholders of Existing Prime.
The Stockholders' Agreement provides that, subject to the Put/Call
Agreement referred to below, (i) neither Blackstone nor Loewen is permitted to
transfer any of its respective shares of common stock of Existing Prime
('Existing Prime Common Stock') without the other's prior written consent,
subject to certain exceptions, and (ii) PSIM is not permitted to transfer any of
its shares of Existing Prime Common Stock without the consent of Blackstone and
Loewen.
Pursuant to the Stockholders' Agreement, Blackstone and Loewen designated
five and three nominees as directors, respectively, to the Board of Directors of
Existing Prime. The parties to the Stockholders' Agreement further agreed that
Existing Prime shall cause the Board of Directors of New Prime at all times to
consist of the same individuals who comprise the Board of Directors of Existing
Prime. In addition, the Certificate of Incorporation and the By-Laws of Existing
Prime provide that certain actions by or with respect to Existing Prime require
a supermajority vote of the Board of Directors and/or the stockholders of
Existing Prime. See '--Certain Matters Subject to Supermajority Vote.'
The Stockholders' Agreement will terminate following the exercise by either
Blackstone or Loewen of its option pursuant to the Put/Call Agreement or on such
other date as Blackstone and Loewen may agree.
PUT/CALL ARRANGEMENT
Pursuant to a separate agreement among Blackstone, PSIM, Loewen Group and
Loewen (the 'Put/Call Agreement'), (i) Loewen has a call option, exercisable
from and after the fourth anniversary of the Acquisition Closing Date until but
excluding the sixth anniversary of the Acquisition Closing Date, to purchase all
of Blackstone's or PSIM's shares of Existing Prime Common Stock (the 'Call
Option') and (ii) each of Blackstone and PSIM has a put option, exercisable from
and after the sixth anniversary of the Acquisition Closing Date until but
excluding the eighth anniversary of the Acquisition Closing Date, to require
Loewen to purchase Blackstone's or PSIM's, as the case may be, shares of
Existing Prime Common Stock (the 'Put Option'). The option price in each case is
derived from a formula based on EBITDA. The performance by Loewen of its
obligations under the Put/Call Agreement will be guaranteed by Loewen Group.
By virtue of the Put/Call Agreement, it is likely that the Company will
eventually become a wholly owned subsidiary of Loewen. See 'Risk Factors--
Control by Blackstone; Possible Future Control by Loewen.' There can be
no assurance, however, that either the Call Option or Put Option will be
exercised.
The exercise of either the Call Option or the Put Option will not give rise
to a Change of Control under the Indenture. See 'Description of Exchange Notes.'
CERTAIN MATTERS SUBJECT TO SUPERMAJORITY VOTE
The Certificate of Incorporation and/or the By-Laws of Existing Prime
provide that (1) amendments to the Certificate of Incorporation or By-Laws of
Existing Prime require the approval of holders of 90% of the issued and
outstanding Existing Prime Common Stock and (2) transactions involving the
merger, consolidation or sale of substantially all of the assets of Existing
Prime require the unanimous approval of both the Board of Directors and the
stockholders of Existing Prime.
ADMINISTRATIVE SERVICES AGREEMENT
In connection with the Acquisition, the Company has engaged Loewen to
provide certain administrative services and share certain resources (Loewen, in
such capacity, being the 'Administrative Services Provider') pursuant to the
Administrative Services Agreement. Such services will include the licensing of,
the maintenance of and the provision of training and other support services with
respect to, software, hardware and other information systems; the provision of
certain legal services, training and support services relating to certain types
of regulatory compliance, risk management services, travel arrangement services
and assistance and support with respect to environmental compliance and
remediation efforts, and the granting of access to certain telecommunications
equipment and services, as well as technical support therefor. In addition, the
Administrative Services Provider will provide the Company with the ability to
purchase supplies under certain of Loewen's supply agreements with third
parties. Also pursuant to the Administrative Services Agreement, Loewen and the
47
<PAGE>
Company will contract for, to the extent feasible and cost-effective in
particular markets, access to embalming facilities and automobile fleets.
As compensation for services provided under the Administrative Services
Agreement, the Administrative Services Provider receives from the Company, in
cash, a fee (the 'Administrative Services Fee') payable monthly in arrears and
in an aggregate annual amount equal to $250,000 for the first year following the
Acquisition Closing Date, to be increased by 2.5% for each year thereafter until
the termination of the Administration Services Agreement. The Company is also
required to reimburse the Administrative Services Provider for all out-of-pocket
costs and expenses incurred by it from third parties in connection with
performing the administrative services described in the Administrative Services
Agreement.
The Administrative Services Agreement is subject to termination (i)
automatically on the eighth anniversary of the Acquisition Closing Date, (ii)
automatically upon closing following the exercise of the Call Option or the Put
Option, (iii) if required pursuant to a legally binding order of a court or any
other governmental agency with appropriate jurisdiction, (iv) subject to
applicable grace periods and an arbitration requirement in the event of a
dispute, upon notice by either the Company or Loewen in the event of a material
breach by the other party of any provision of the Administrative Services
Agreement and (v) at the option of the Company.
PAYMENT OF CERTAIN FEES AND EXPENSES
In connection with the Acquisition, on the Acquisition Closing Date,
affiliates of Blackstone received fees of approximately $3.2 million and New
Prime reimbursed Blackstone for all out-of-pocket expenses incurred in
connection with the Acquisition and Loewen received a consulting fee of $1.5
million and was reimbursed for certain expenses incurred in connection with the
Acquisition equal to $1.0 million. In addition, from the Acquisition Closing
Date until the date on which Loewen or Blackstone exercises the Call Option or
the Put Option, respectively, pursuant to the Put/Call Agreement, an affiliate
of Blackstone will receive a monitoring fee equal to $250,000 per annum from New
Prime.
FORMATION OF PSIM; LOANS TO MANAGEMENT
In connection with the Acquisition, on the Acquisition Closing Date,
Messrs. Wright and Cairns and certain other officers of New Prime (the 'PSIM
Limited Partners') subscribed for limited partnership interests in PSIM and PSI
P&S subscribed for a general partnership interest in PSIM, the proceeds of which
subscriptions PSIM used to purchase approximately 0.7% of the Existing Prime
common stock (the 'PSIM-Owned Stock').
In order to effect such purchase, on the Acquisition Closing Date, New
Prime made a loan to PSIM which was evidenced by a note bearing interest at an
annual rate of 9% and secured by the PSIM-Owned Stock, the proceeds of which
loan PSIM used to make a loan to each of the PSIM Limited Partners. The loan to
each of Messrs. Wright and Cairns was in the principal amount of $97,750,
evidenced by a note bearing interest at an annual rate of 9% and secured by his
limited partnership interest in PSIM.
DESCRIPTION OF BANK CREDIT FACILITIES
The summary of the Bank Credit Facilities set forth below does not purport
to be complete and is qualified in its entirety by reference to all the
provisions of the credit agreement governing the Bank Credit Facilities, which
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part.
General. Contemporaneously with the consummation of the Acquisition, the
Company entered into a credit agreement (the 'Bank Credit Agreement') with the
Bank Lenders and The Bank of Nova Scotia, as administrative agent (in such
capacity, the 'Bank Agent'), in order to effect the Bank Credit Facilities,
under which GSCP acted as arranging agent and Goldman Sachs as syndication agent
and the Company is the sole borrower.
Commitments. The Bank Credit Facilities provided the Company with senior
secured amortization extended term loan facilities in an aggregate principal
amount of $90 million, the proceeds of which were used to finance the
Acquisition and related transaction costs, to pre-fund certain capital
expenditures and to refinance existing indebtedness of the Company, and a senior
secured revolving credit facility in an aggregate principal amount of up to $25
million, the proceeds of which will be used for general corporate purposes and a
portion of which may be extended (as agreed upon) in the form of swing line
loans or letters of credit for the account of the Company.
Maturities; Amortization. The Bank Term Facility will mature 7 years after
the Acquisition Closing Date, and the Bank Revolving Facility will mature 5
years after the Acquisition Closing Date. The Bank Term Facility
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is subject to amortization, subject to certain conditions, in semi-annual
installments in the amounts of $1 million in each of the first three years after
the anniversary of the closing date of the Bank Term Facility (the 'Bank
Closing'); $4 million in the fourth year after the Bank Closing; $9 million in
the fifth year after the Bank Closing; $12.5 million in the sixth year after the
Bank Closing and $61.5 million upon the maturity of the Bank Term Facility. The
Revolving Credit Facility will be payable in full at maturity, with no prior
amortization.
Interest. Borrowings (i) under the Bank Term Facility bear interest at a
rate per annum equal to, at the option of the Company (subject to certain
conditions), either (A) the Bank Agent's customary Base Rate (the 'Base Rate')
plus 2.00% or (B) the Bank Agent's reserve-adjusted Eurodollar Rate (the
'Adjusted Eurodollar Rate') plus 3.00% and (ii) under the Revolving Credit
Facility bear interest at a rate per annum equal to, at the option of the
Company (subject to certain conditions), either (A) the Base Rate plus 1.75% or
(B) the Adjusted Eurodollar Rate plus 2.75%; provided, in each case, that, at
the end of any quarter commencing with the quarter ending March 31, 1997, the
applicable margin over the Base Rate or Adjusted Eurodollar Rate, as the case
may be, is subject to an increase of .25%, in the event that the ratio of EBITDA
(as defined) to interest for the four quarters then ended is less than
1.50:1.00. Overdue principal and interest bear interest at the applicable rate
on loans bearing interest at the rate determined by reference to the Base Rate
plus 2.00% per annum.
Fees. The Bank Lenders under the Bank Revolving Facility are paid
commitment fees at a rate of 0.50% per annum on unused commitments. In addition,
the Bank Agent and the Bank Lenders received and/or will receive such other fees
as were separately agreed upon.
Mandatory Prepayments. The Company is required to prepay the loans made to
it under the Bank Credit Facilities, in the amounts and as otherwise set forth
in the Bank Credit Agreement, in the event of certain asset sales, certain
issuances of equity securities of (or capital contributions made to) New Prime
or Existing Prime or the generation of excess cash flow, proceeds from pension
plan revisions or certain proceeds of insurance or condemnation awards.
Call Premium. In the event that all or any portion of the Bank Term
Facility is repaid for any reason within two years following the Acquisition
Closing Date (other than pursuant to a scheduled amortization payment, certain
acceleration events or a mandatory prepayment), the Company will be required to
make any such repayment (i) on or before the first anniversary of the
Acquisition Closing Date, at 102% of the amount of loans so repaid and (ii)
after the first anniversary of the Acquisition Closing Date but on or before the
second anniversary of the Acquisition Closing Date, at 101% of the amount of
loans so repaid.
Guarantees. All obligations under the Bank Credit Facilities and any
interest rate hedging agreements entered into with the Bank Lenders or their
affiliates in connection therewith are unconditionally guaranteed, jointly and
severally, by Existing Prime and each of the Company's existing and future
domestic subsidiaries.
Security. All obligations of the Company and the Bank Guarantors under the
Bank Credit Facilities and the Bank Guarantees are secured by first priority
security interests in all existing and future assets (other than real property
and vehicles covered by certificates of title) of the Company and the Bank
Guarantors. In addition, the Bank Credit Facilities are secured by a first
priority security interest in 100% of the capital stock of the Company and each
subsidiary thereof and all intercompany receivables.
Covenants. The Bank Credit Agreement contains a number of affirmative
covenants, as well as negative covenants, that, among other things, restrict the
ability of Existing Prime, the Company and its subsidiaries to dispose of
assets, incur additional indebtedness, prepay other indebtedness (including the
Exchange Notes), pay dividends or make other payments on subordinated debt or on
equity, create liens on assets, make investments, capital expenditures or
guarantees, engage in mergers or acquisitions, enter into leases or transactions
with affiliates, and otherwise restrict corporate activities. In addition, the
Company is required to maintain a minimum fixed charge coverage ratio, a minimum
interest coverage ratio and a minimum net worth and to meet maximum senior and
total debt leverage tests.
Events of Default. Events of default under the Bank Credit Agreement
include, among other things: (i) failure to make payment when due; (ii) breaches
of representations and warranties; (iii) default in the performance of
covenants; (iv) default under certain other agreements governing indebtedness
(including the Indenture); (v) certain events of bankruptcy; (vi) failure to
satisfy certain material ERISA requirements; (vii) certain material impairment
of security interests in collateral; (viii) invalidity of the guarantees and
(ix) the occurrence of a Change of Control (as defined therein) of the Company.
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DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued under an indenture dated as of August 15,
1996 (the 'Indenture') between the Company and United States Trust Company of
New York, as trustee (the 'Trustee'). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Indenture
(a copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part and may be obtained upon request to the
Company), including the definitions of certain terms contained therein and those
terms made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended, as in effect on the date of the Indenture. The definitions of
certain capitalized terms used in the following summary are set forth below
under '--Certain Definitions.'
GENERAL
The Exchange Notes will be unsecured senior subordinated obligations of the
Company limited to $100,000,000 aggregate principal amount. Except for the
restrictions on registrations and transfers, all untendered Notes and the
Exchange Notes will be treated as one class of securities for purposes of the
covenants and the other terms contained in the Indenture.
Except as described under the heading 'Book Entry; Delivery and Form,' the
Exchange Notes initially will be represented by a single, permanent global
certificate in definitive, fully registered form (the 'Global Note'). The Global
Note will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York ('DTC') and registered in the name of a nominee of DTC or will
remain in the custody of the Trustee pursuant to the FAST Balance Certificate
Agreement between the Depository and the Trustee.
MATURITY, INTEREST AND PRINCIPAL
The Exchange Notes will mature on August 15, 2004. Interest on the Exchange
Notes will accrue at the rate of 10 3/4% per annum and will be payable
semiannually on each February 15 and August 15, commencing February 15, 1997, to
the holders of record of Exchange Notes at the close of business on the February
1 or August 1 immediately preceding such interest payment date. Interest on the
Exchange Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from August 20, 1996 (the 'Issue Date').
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
The Exchange Notes will not be entitled to the benefit of any mandatory
sinking fund.
REDEMPTION
Optional Redemption. The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after August 15, 2000, on
not less than 30 nor more than 60 days' prior notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, to the redemption date, if redeemed during the 12-month
period beginning on or after August 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---------------------- ----------
<S> <C>
2000.................. 105.375%
2001.................. 103.583%
2002.................. 101.792%
2003 and thereafter... 100.000%
</TABLE>
Purchase at Option of Holders. As described below, the Company is
obligated (a) upon the occurrence of a Change of Control, to make an offer to
purchase all outstanding Exchange Notes at a purchase price of 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase, and (b) upon the occurrence of certain sales or dispositions of
assets, to make an offer to purchase Exchange Notes with a portion of the net
cash proceeds thereof, at a purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. See
'--Certain Covenants--Change of Control' and '--Disposition of Proceeds of
Asset Sales.'
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SUBORDINATION
The indebtedness evidenced by the Exchange Notes will be subordinated in
right of payment to the prior payment in full in cash or Cash Equivalents of all
existing and future Senior Indebtedness of the Company.
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company or its assets, or any liquidation, dissolution or other winding-up of
the Company, whether voluntary or involuntary, or any assignment for the benefit
of creditors or other marshalling of assets or liabilities of the Company, all
Senior Indebtedness of the Company (including, in the case of Designated Senior
Indebtedness, any interest accruing subsequent to the filing of a petition for
bankruptcy whether or not such interest is an allowed claim) must be paid in
full in cash or Cash Equivalents before any payment or distribution (excluding
certain permitted equity or subordinated securities) is made on account of the
principal of, premium, if any, or interest on, or any other obligations to the
holders of the Exchange Notes in respect of, the Exchange Notes.
During the continuance of any default in the payment of principal, premium,
if any, or interest on any Senior Indebtedness, when the same becomes due, no
direct or indirect payment (other than payments previously made pursuant to the
provisions described under '--Defeasance or Covenant Defeasance of Indenture')
by or on behalf of the Company of any kind or character (excluding certain
permitted equity or subordinated securities) may be made on account of the
principal of, premium, if any, or interest on, or other obligations to the
holders of the Exchange Notes in respect of, or the purchase, redemption or
other acquisition of, the Exchange Notes unless and until such default has been
cured or waived or has ceased to exist or such Senior Indebtedness shall have
been discharged or paid in full in cash or Cash Equivalents.
In addition, during the continuance of any other default with respect to
any Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a 'Non-payment Default') and upon the earlier to occur of (a)
receipt by the Trustee from the representatives of holders of such Designated
Senior Indebtedness of a written notice of such Non-payment Default or (b) if
such Non-payment Default results from the acceleration of the Exchange Notes,
the date of such acceleration, no payment (other than payments previously made
pursuant to the provisions described under '--Defeasance or Covenant Defeasance
of Indenture') of any kind or character (excluding certain permitted equity or
subordinated securities) may be made by the Company on account of the principal
of, premium, if any, or interest on, or the purchase, redemption, or other
acquisition of, the Exchange Notes for the period specified below (the 'Payment
Blockage Period').
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default ('Payment Blockage Notice') by the Trustee from the
representatives of holders of Designated Senior Indebtedness or the date of the
acceleration referred to in clause (b) of the preceding paragraph, as the case
may be, and shall end on the earliest to occur of the following events: (i) 179
days has elapsed since the receipt of such notice or the date of such
acceleration (provided such Designated Senior Indebtedness shall not theretofore
have been accelerated), (ii) such default is cured or waived or ceases to exist
or such Designated Senior Indebtedness is discharged or paid in full in cash or
Cash Equivalents, or (iii) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the
representatives of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period, after which the Company shall promptly resume making
any and all required payments in respect of the Exchange Notes, including any
missed payments. Notwithstanding anything in the foregoing to the contrary, a
Payment Blockage Notice may only be given and therefore shall only be effective
in respect of the Company and the Trustee if given by, (i) the agent under the
Bank Credit Agreement as long as any Senior Indebtedness remains outstanding
under the Bank Credit Agreement and (ii) if no Senior Indebtedness remains
outstanding under the Bank Credit Agreement, any other representative of
outstanding Designated Senior Indebtedness. Only one Payment Blockage Period
with respect to the Exchange Notes may be commenced within any 365 consecutive
day period. No Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period will be, or can be, made the basis for
the commencement of a second Payment Blockage Period, whether or not within a
period of 365 consecutive days, unless such default has been cured or waived for
a period of not less than 180 consecutive days. In no event will a Payment
Blockage Period extend beyond 179 days from the receipt by the Trustee of the
notice or the date of the acceleration initiating such Payment Blockage Period
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and there must be a 186 consecutive day period in any 365 day period during
which no Payment Blockage Period is in effect.
If the Company fails to make any payment on the Exchange Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Exchange Notes
to accelerate the maturity thereof. See '--Events of Default.'
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Exchange Notes and funds which would be
otherwise payable to the holders of the Exchange Notes will be paid to the
holders of the Senior Indebtedness to the extent necessary to pay the Senior
Indebtedness in full, and the Company may be unable to meet its obligations
fully with respect to the Exchange Notes.
On a pro forma basis after giving effect to the Acquisition, the Company
would have had $90 million of Senior Indebtedness outstanding as of June 30,
1996 and would have had $25 million available to be borrowed under the Revolving
Credit Facility. The Indenture limits, but does not prohibit, the incurrence by
the Company of additional Indebtedness which is senior to the Exchange Notes,
and limits the incurrence by the Company of Indebtedness which is subordinated
in right of payment to any other Indebtedness of the Company.
HOLDING COMPANY STRUCTURE
The Company is a holding company for its Subsidiaries, with no material
operations of its own and only limited assets. Accordingly, the Company is
dependent upon the distribution of the earnings of its Subsidiaries, whether in
the form of dividends, advances or payments on account of intercompany
obligations, to service its debt obligations. In addition, the claims of the
holders of Exchange Notes are subject to the prior payment of all liabilities
(whether or not for borrowed money) and to any preferred stock interest of such
Subsidiaries. There can be no assurance that, after providing for all prior
claims, there would be sufficient assets available from the Company and its
Subsidiaries to satisfy the claims of the holders of Exchange Notes. See 'Risk
Factors--Holding Company Structure.'
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or in any manner become directly or indirectly liable, contingently or
otherwise, for the payment of (in each case, to 'incur') any Indebtedness
(including, without limitation, any Acquired Indebtedness); provided, however,
that the Company and any of its Subsidiaries will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) if at the
time of such incurrence, and after giving pro forma effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to
2.00:1.
Notwithstanding the foregoing, the Company and its Subsidiaries may, to the
extent specifically set forth below, incur each and all of the following:
(a) Indebtedness of the Company evidenced by the Notes and the
Exchange Notes;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date;
(c) Indebtedness of the Company represented by the notes issued under
the Bank Term Facility;
(d) Indebtedness of the Company under the Revolving Credit Facility
(including with respect to letters of credit issued thereunder) or any
other revolving credit facility in an aggregate principal amount at any one
time outstanding not to exceed $25,000,000;
(e) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Subsidiary of the Company and (ii)
Interest Rate Protection Obligations of any Subsidiary of the Company
covering Indebtedness of such Subsidiary; provided, however, that, in the
case of either clause (i) or (ii), (x) any Indebtedness to which any such
Interest Rate Protection Obligations relate bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under this
covenant and (y) the notional
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principal amount of any such Interest Rate Protection Obligations does not
exceed the principal amount of the Indebtedness to which such Interest Rate
Protection Obligations relate;
(f) Indebtedness of a Wholly-Owned Subsidiary owed to and held by the
Company or another Wholly-Owned Subsidiary, in each case which is not
subordinated in right of payment to any Indebtedness of such Subsidiary
(other than Indebtedness under its guaranty of the Bank Credit Facilities),
except that (i) any transfer of such Indebtedness by the Company or a
Wholly-Owned Subsidiary (other than to the Company or to a Wholly-Owned
Subsidiary) and (ii) the sale, transfer or other disposition by the Company
or any Subsidiary of the Company of Capital Stock of a Wholly-Owned
Subsidiary which is owed Indebtedness of another Wholly-Owned Subsidiary
such that it ceases to be a Wholly-Owned Subsidiary of the Company shall,
in each case, be an incurrence of Indebtedness by such Subsidiary subject
to the other provisions of this covenant;
(g) Indebtedness of the Company owed to and held by a Wholly-Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under
the Bank Credit Facilities and the Indenture, the Notes and the Exchange
Notes except that (i) any transfer of such Indebtedness by a Wholly-Owned
Subsidiary of the Company (other than to another Wholly-Owned Subsidiary of
the Company) and (ii) the sale, transfer or other disposition by the
Company or any Subsidiary of the Company of Capital Stock of a Wholly-Owned
Subsidiary which holds Indebtedness of the Company such that it ceases to
be a Wholly-Owned Subsidiary shall, in each case, be an incurrence of
Indebtedness by the Company, subject to the other provisions of this
covenant;
(h) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(j) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as
the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(k) purchase money Indebtedness incurred to finance the acquisition of
property or assets of the Company or any Subsidiary acquired in the
ordinary course of business within 90 days of such acquisition; provided
that the amount of such purchase money Indebtedness at any time outstanding
may not exceed $5,000,000 in the aggregate; provided, further, that any
Lien arising in connection with any such Indebtedness shall be limited to
the property or assets being financed;
(l) Indebtedness of the Company or any Subsidiary of the Company in
addition to that described in clauses (a) through (k) above, in an
aggregate principal amount outstanding at any time not exceeding
$5,000,000; provided, that if, at the time of incurrence of Indebtedness,
the ratio of the aggregate principal amount of Indebtedness on a pro forma
basis after giving effect to the Indebtedness then being incurred to
Consolidated Cash Flow for the four full fiscal quarters immediately
preceding the date of such incurrence is less than or equal to 6.00:1, then
such amount shall be an aggregate principal amount not exceeding
$10,000,000; and
(m) (i) Indebtedness of the Company (including any Indebtedness
incurred in connection with a Sale-Leaseback Transaction permitted pursuant
to the covenant described under '--Limitation on Sale-Leaseback
Transactions') the proceeds of which are used solely to refinance (whether
by amendment, renewal, extension or refunding) Indebtedness of the Company
or any of its Subsidiaries and (ii) Indebtedness of any Subsidiary of the
Company the proceeds of which are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of such
Subsidiary, in each case other than the Indebtedness refinanced, redeemed
or retired as described under 'Use of Proceeds' herein;
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provided, however, that (x) the principal amount of Indebtedness incurred
pursuant to this clause (m) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness) shall not exceed the sum of the principal
amount of Indebtedness so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably
determined by the Board of Directors of the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection therewith,
(y) in the case of Indebtedness incurred by the Company pursuant to this
clause (m) to refinance Subordinated Indebtedness, such Indebtedness (A)
does not have a Stated Maturity prior to the Maturity of the Subordinated
Indebtedness being refinanced, (B) has an Average Life to Stated Maturity
equal to or greater than the remaining Average Life to Stated Maturity of
the Subordinated Indebtedness being refinanced and (C) is subordinated to
the Exchange Notes in the same manner and to the same extent that the
Subordinated Indebtedness being refinanced is subordinated to the Exchange
Notes and (z) in the case of Indebtedness incurred by the Company pursuant
to this clause (m) to refinance Pari Passu Indebtedness, such Indebtedness
(A) does not have a Stated Maturity prior to the Stated Maturity of the
Pari Passu Indebtedness being refinanced, (B) has an Average Life to Stated
Maturity equal to or greater than the remaining Average Life to Stated
Maturity of the Pari Passu Indebtedness being refinanced and (C)
constitutes Pari Passu Indebtedness or Subordinated Indebtedness.
Limitation on Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Subsidiaries or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) the dividends-in-kind payable on the Company's
outstanding Preferred Stock in accordance with the terms thereof and any
other dividends or distributions payable solely in Capital Stock of the
Company (other than Redeemable Capital Stock) or in options, warrants or
other rights to purchase Capital Stock of the Company (other than
Redeemable Capital Stock), (y) the declaration or payment of dividends or
other distributions to the extent declared or paid to the Company or any
Subsidiary of the Company and (z) the declaration or payment of dividends
or other distributions by any Subsidiary of the Company to all holders of
Common Stock of such Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than any
such Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company (in each case other than in exchange for its Capital Stock (other
than Redeemable Stock)),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness or Pari Passu Indebtedness
other than (x) any such Indebtedness owned by the Company or a Wholly-Owned
Subsidiary of the Company and (y) the prepayment or defeasance on or before
January 31, 1997 of the notes to certain former owners of funeral homes
acquired by Existing Prime which are outstanding on the Issue Date, or
(d) make any Investment (other than any Permitted Investment) in any
Person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as 'Restricted Payments'), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
such Restricted Payment), (A) no Default or Event of Default shall have occurred
and be continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, the Company would be able to incur $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant described under '--
Limitation on Indebtedness' above (assuming a market rate of interest with
respect to such additional Indebtedness) and (C) the aggregate amount of all
Restricted Payments declared or made from and after the Issue Date would not
exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the first
day of the fiscal quarter of the Company following
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the fiscal quarter during which the Issue Date occurs and ending on the last day
of the fiscal quarter of the Company immediately preceding the date of such
proposed Restricted Payment, which period shall be treated as a single
accounting period (or, if such aggregate cumulative Consolidated Net Income of
the Company for such period shall be a deficit, minus 100% of such deficit) plus
(2) the aggregate net cash proceeds received by the Company either (x) as
capital contributions to the Company after the Issue Date from any Person (other
than a Subsidiary of the Company) or (y) from the issuance or sale of Capital
Stock (excluding Redeemable Capital Stock, but including Capital Stock issued
upon the conversion of convertible Indebtedness or from the exercise of options,
warrants or rights to purchase Capital Stock (other than Redeemable Capital
Stock)) of the Company to any Person (other than to a Subsidiary of the Company)
after the Issue Date plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date
(excluding any Investment described in clause (v) of the following paragraph),
an amount equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment, in either case, less the cost of the
disposition of such Investment. For purposes of the preceding clause (C)(2), the
value of the aggregate net proceeds received by the Company upon the issuance of
Capital Stock upon the conversion of convertible Indebtedness or upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such Indebtedness, options, warrants or rights plus the
incremental cash amount received by the Company upon the conversion or exercise
thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company or any Subsidiary of the Company in
exchange for, or out of the net cash proceeds of, a substantially concurrent (x)
capital contribution to the Company from any Person (other than a Subsidiary of
the Company) or (y) issue and sale of other shares of Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Subsidiary of the Company); provided, however, that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; (iii) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Subordinated Indebtedness by exchange for, or out of the net cash proceeds of
a substantially concurrent (x) capital contribution to the Company from any
Person (other than a Subsidiary of the Company) or (y) issue and sale of (1)
Capital Stock (other than Redeemable Capital Stock) of the Company to any Person
(other than to a Subsidiary of the Company); provided, however, that the amount
of any such net cash proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(C)(2) of the preceding paragraph; or (2) Indebtedness of the Company issued to
any Person (other than a Subsidiary of the Company), so long as such
Indebtedness is Subordinated Indebtedness which (x) has no Stated Maturity
earlier than the Stated Maturity of the Subordinated Indebtedness so purchased,
exchanged, redeemed, acquired or retired, (y) has an Average Life to Stated
Maturity equal to or greater than the remaining Average Life to Stated Maturity
of the Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or
retired, and (z) is subordinated to the Notes in the same manner and at least to
the same extent as the Subordinated Indebtedness so purchased, exchanged,
redeemed, acquired or retired; (iv) so long as no Default or Event of Default
shall have occurred and be continuing, any redemption, repurchase or other
acquisition or retirement of Pari Passu Indebtedness by exchange for, or out of
the net cash proceeds of, a substantially concurrent (x) capital contribution to
the Company from any Person (other than a Subsidiary of the Company) or (y)
issue and sale of (1) Capital Stock (other than Redeemable Capital Stock) of the
Company to any Person (other than to a Subsidiary of the Company); provided,
however, that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase or other acquisition or retirement is excluded from
clause (C)(2) of the preceding paragraph; or (2) Indebtedness of the Company
issued to any Person (other than a Subsidiary of the Company), so long as such
Indebtedness is Subordinated Indebtedness or Pari Passu Indebtedness which (x)
has no Stated Maturity earlier than the Stated Maturity of the Pari Passu
Indebtedness so purchased, exchanged, redeemed, acquired or retired and (y) has
an Average Life to Stated Maturity equal to or greater than the remaining
Average Life to Stated Maturity of the Pari Passu Indebtedness so purchased,
exchanged, redeemed, acquired or retired; (v) Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the covenant
described under '--Disposition of Proceeds of Asset Sales' below; (vi) so long
as no Default or Event
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of Default has occurred and is continuing, repurchases by the Company of Common
Stock of the Company or Existing Prime from employees of the Company or any of
its Subsidiaries or their authorized representatives upon the death, disability
or termination of employment of such employees, in an aggregate amount not
exceeding $500,000 in any calendar year; (vii) other Restricted Payments not to
exceed $2,500,000; provided that at the time such Restricted Payment is made,
the ratio of the aggregate principal amount of Indebtedness on a pro forma basis
after giving effect to any Indebtedness incurred in connection with such
Restricted Payment to Consolidated Cash Flow for the four full fiscal quarters
immediately preceding the date of such Restricted Payment shall be less than or
equal to 6.00:1; (viii) any payments permitted to be made pursuant to clauses
(ii) through (vi) of the proviso set forth in the covenant described under
'--Limitation on Transactions with Interested Persons' below; (ix) payments to
Existing Prime in an amount sufficient to pay (a) director's fees and the
reasonable expenses of directors, (b) accounting, legal or other administrative
expenses incurred by Existing Prime relating to the operations of the Company in
the ordinary course of business and (c) so long as Existing Prime files
consolidated income tax returns which include the Company, payments to Existing
Prime in an amount equal to the amount of income tax that the Company would have
paid if it had filed consolidated tax returns on a separate-company basis or (x)
payments to Existing Prime in an amount sufficient to consummate the
Acquisition. In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, Restricted Payments made
under the preceding clauses (v) and (vi) shall be included and clauses (i),
(ii), (iii), (iv), (vii), (viii), (ix) and (x) shall not be so included.
Limitation on Liens. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom, unless
(x) in the case of Liens securing Subordinated Indebtedness, the Exchange Notes
are secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (y) in all other cases, the Exchange Notes are
equally and ratably secured, except for (a) Liens existing as of the Issue Date;
(b) Liens securing the Exchange Notes; (c) Liens on assets of the Company and
its Subsidiaries securing Senior Indebtedness; (d) Liens in favor of the
Company; (e) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture;
provided, however, that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries not securing the Indebtedness
so refinanced; and (f) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase (a 'Change of Control Offer'),
and shall purchase all Exchange Notes properly tendered into the Change of
Control Offer and not withdrawn, on a business day (the 'Change of Control
Purchase Date') not more than 60 nor less than 30 days following the date the
notice described below is mailed to holders of the Exchange Notes, all of the
then outstanding Exchange Notes at a purchase price (the 'Change of Control
Purchase Price') equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Change of Control Purchase Date. The Company
shall be required to purchase all Exchange Notes properly tendered into the
Change of Control Offer and not withdrawn. The Change of Control Offer is
required to remain open for at least 20 business days and until the close of
business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the occurrence of the Change of Control, mail to
each holder of Exchange Notes notice of the Change of Control Offer, which
notice shall govern the terms of the Change of Control Offer and shall state,
among other things, the procedures that holders of Exchange Notes must follow to
accept the Change of Control Offer.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default under the Bank Credit Agreement
and, thereafter, the lenders will have the right to require repayment of the
borrowings thereunder in full. The Company's obligations under the Bank Credit
Facilities will constitute Designated Senior Indebtedness and will represent
obligations senior in right of payment to the Exchange Notes. Consequently, the
subordination provisions of the Indenture will have the effect of precluding the
purchase of the Exchange Notes by the Company in the event of a Change of
Control, absent consent of the lenders under the Bank Credit Facilities or
repayment of all amounts outstanding thereunder (although the failure by the
Company to comply with its obligations in the event of a Change of Control will
constitute a default under the Exchange Notes). There can be no assurance that
the Company will have adequate resources to repay or refinance all Indebtedness
owing under the Bank Credit Facilities or to fund the purchase of the Exchange
Notes upon a Change of Control.
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The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Exchange Notes validly tendered and not withdrawn under such Change of Control
Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Exchange Notes as described above. To the extent
that the provisions of any securities laws or regulations conflict with the
Change of Control provisions under the Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the Indenture by virtue thereof.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Subsidiaries to, make any Asset Sale unless (a) the Company or
such Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or assets sold
or otherwise disposed of and (b) at least 75% of such consideration consists of
cash or Cash Equivalents. To the extent the Net Cash Proceeds of any Asset Sale
are not applied to repay the Bank Term Facility or permanently reduce the
commitments under the Revolving Credit Facility, the Company or such Subsidiary,
as the case may be, may, within 365 days from the receipt of the Net Cash
Proceeds, apply such Net Cash Proceeds to an investment in properties and assets
that replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the business of the Company and
its Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto ('Replacement Assets'). Any Net Cash Proceeds from any Asset Sale that
are neither used to repay the Bank Term Facility, or permanently reduce the
commitments under the Revolving Credit Facility, nor invested in Replacement
Assets within the 365-day period described above constitute 'Excess Proceeds'
subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $5,000,000,
the Company shall make an offer to purchase (an 'Asset Sale Offer'), from all
holders of the Exchange Notes, not less than 20 Business Days nor more than 40
Business Days thereafter, an aggregate principal amount of Notes equal to such
Excess Proceeds, at a price in cash equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the purchase date.
To the extent that the aggregate principal amount of Exchange Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes. If the aggregate
principal amount of Exchange Notes validly tendered and not withdrawn by holders
thereof exceeds the Excess Proceeds, Exchange Notes to be purchased will be
selected on a pro rata basis. Upon completion of such Asset Sale Offer, the
amount of Excess Proceeds shall be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Issuances and Sale of Preferred Stock by Subsidiaries. The
Company (a) will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to the Company or a Wholly-Owned Subsidiary of the Company) and (b)
will not permit any Person (other than the Company or a Wholly-Owned Subsidiary
of the Company) to own any Preferred Stock of any Subsidiary of the Company;
provided, however, that this covenant shall not prohibit the issuance and sale
of (x) all, but not less than all, of the issued and outstanding Capital Stock
of any Subsidiary of the Company owned by the Company or any of its Subsidiaries
in compliance with the other provisions of the Indenture, (y) directors'
qualifying shares or investments by foreign nationals mandated by applicable law
or (z) issuances of Preferred Stock to former owners of funeral homes acquired
by the Company or any Subsidiary of the Company; provided that the sum of (i)
the aggregate Fair Market Value of such Preferred Stock and (ii) the aggregate
Fair Market Value of all Investments permitted under clause (ix) of the
definition of 'Permitted Investments' shall not exceed $5,000,000 at any time
outstanding.
Limitation on Transactions with Interested Persons. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, transfer, disposition, purchase,
exchange or lease of assets, property or services) with, or for the benefit of,
any Affiliate of the Company or any beneficial owner (determined in accordance
with the Indenture) of 5% or more of the Company's Common Stock at any time
outstanding ('Interested Persons'), unless (a) such transaction or series of
related transactions is on terms that are no less
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favorable to the Company or such Subsidiary, as the case may be, than those
which could have been obtained in a comparable transaction at such time from
Persons who are not Affiliates of the Company or Interested Persons, (b) with
respect to a transaction or series of transactions (other than commercial
arrangements with any limited partner of Blackstone Capital Partners II Merchant
Banking Fund L.P. or any Affiliate of such limited partners) involving aggregate
payments or value equal to or greater than $5,000,000, the Company has obtained
a written opinion from an Independent Financial Advisor stating that the terms
of such transaction or series of transactions are fair to the Company or its
Subsidiary, as the case may be, from a financial point of view and (c) with
respect to a transaction or series of transactions (other than commercial
arrangements with any limited partner of Blackstone Capital Partners II Merchant
Banking Fund L.P. or any Affiliate of such limited partners) involving aggregate
payments or value equal to or greater than $1,000,000, the Company shall have
delivered an officer's certificate to the Trustee certifying that such
transaction or series of transactions complies with the preceding clause (a)
and, if applicable, certifying that the opinion referred to in the preceding
clause (b) has been delivered and that such transaction or series of
transactions has been approved by a majority of the Board of Directors of the
Company; provided, however, that this covenant will not restrict the Company
from (i) paying dividends in respect of its Capital Stock permitted under the
covenant described under '--Limitation on Restricted Payments' above, (ii)
paying reasonable and customary fees and indemnities to directors of the Company
who are not employees of the Company, (iii) making loans or advances to, or
providing indemnities of, officers, employees or consultants of the Company and
its Subsidiaries (including travel and moving expenses) in the ordinary course
of business for bona fide business purposes of the Company or such Subsidiary
not in excess of $1,000,000 in the aggregate at any one time outstanding, (iv)
making loans to officers (or a partnership comprised of such officers) for the
purpose of purchasing common stock of Existing Prime and making any payment
required or specifically permitted by the terms of the Administrative Services
Agreement, (v) paying an annual monitoring fee of $250,000 (plus any increase
thereof which may be made to account for inflation) to Blackstone Management
Partners L.P. or any of its Affiliates designated by Blackstone Management
Partners L.P., (vi) making any payment to Existing Prime permitted by the
covenant described under '--Limitations on Restricted Payments' above or (vii)
entering into any transaction with any of its Wholly-Owned Subsidiaries or
restrict any Subsidiary from entering into any transaction with any other
Wholly-Owned Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed to
the Company or any other Subsidiary of the Company, (c) make loans or advances
to, or any investment in, the Company or any other Subsidiary of the Company,
(d) transfer any of its properties or assets to the Company or any other
Subsidiary of the Company or (e) guarantee any Indebtedness of the Company or
any other Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of the Company or any Subsidiary of the Company, (iii) customary
restrictions on transfers of property subject to a Lien permitted under the
Indenture, (iv) any agreement or other instrument of a Person acquired by the
Company or any Subsidiary of the Company (or a Subsidiary of such Person) in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the properties
or assets of the Person, so acquired, (v) provisions contained in agreements or
instruments relating to Indebtedness which prohibit the transfer of all or
substantially all of the assets of the obligor thereunder unless the transferee
shall assume the obligations of the obligor under such agreement or instrument,
(vi) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary pending the closing of such
sale or disposition, (vii) any encumbrance or restriction arising or agreed to
in the ordinary course of business and that does not, individually or in the
aggregate, detract from the value of the property or assets of the Company or
any Subsidiary in any manner material to the Company or such Subsidiary and
(viii) encumbrances and restrictions under agreements in effect on the Issue
Date, including the Bank Credit Agreement, and encumbrances and restrictions in
permitted refinancings or replacements of Indebtedness evidenced by the
agreements referred to in this clause (viii) which are no less favorable to the
holders of the Exchange Notes than those contained in the Indebtedness so
refinanced or replaced.
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Limitation on the Issuance of Other Senior Subordinated Indebtedness. The
Company will not, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of the Company, unless such Indebtedness (x) is pari passu with or
(y) is subordinate in right of payment to the Exchange Notes in the same manner
and at least to the same extent as the Exchange Notes are subordinated to Senior
Indebtedness.
Limitation on Sale-Leaseback Transactions. The Company will not, and will
not permit any of its Subsidiaries to, enter into any Sale-Leaseback Transaction
with respect to any property of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, the Company and its Subsidiaries may enter into
Sale-Leaseback Transactions; provided that (a) the Attributable Value of such
Sale-Leaseback Transaction shall be deemed to be Indebtedness of the Company or
such Subsidiary, as the case may be, and (b) either (i) after giving pro forma
effect to any such Sale-Leaseback Transaction and the foregoing clause (a), the
Company would be able to incur $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described under '--Limitation on Indebtedness'
above (assuming a market rate of interest with respect to such additional
Indebtedness) or (ii) the proceeds of such Sale-Leaseback Transaction are
applied to repay existing Indebtedness (other than Indebtedness outstanding
under any revolving credit facility).
Reporting Requirements. The Company will file with the Commission or, if
not permitted, deliver to the Trustee, the annual reports, quarterly reports and
other documents required to be filed with the Commission pursuant to Sections 13
and 15 of the Exchange Act, whether or not the Company has a class of securities
registered under the Exchange Act. In the event that The Loewen Group Inc. fully
and unconditionally guarantees the obligations of the Company under the Exchange
Notes, the reporting requirements may be satisfied through the filing and
provisions of the annual reports, quarterly reports and other documents in
respect of The Loewen Group Inc. Such requirements may also be satisfied prior
to November 15, 1996, with the filing with the Commission of the Exchange Offer
Registration Statement. The Company will be required to file with the Trustee
and provide to each Noteholder within 15 days after it files them with the
Commission (or if any such filing is not permitted under the Exchange Act, 15
days after the Company would have been required to make such filing) copies of
such reports and documents.
MERGER, SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any Person or Persons, and the Company will not permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Subsidiaries, taken as a whole, to any other Person or Persons, unless at
the time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company shall be the
surviving Person of such merger or consolidation, or (ii) the Person formed by
such consolidation or into which the Company or such Subsidiary is merged or to
which the properties and assets of the Company or such Subsidiary, as the case
may be, are transferred (any such surviving Person or transferee Person being
the 'Surviving Entity') shall be a corporation organized and existing under the
laws of the United States of America, any state thereof, the District of
Columbia, Canada or any province thereof and shall expressly assume by a
supplemental indenture executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all the obligations of the Company under the
Exchange Notes and the Indenture, and in each case, the Indenture shall remain
in full force and effect; (b) immediately before and immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (c) the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described under '--Certain Covenants--
Limitation on Indebtedness' above (assuming a market rate of interest with
respect to such additional Indebtedness); and (d) immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), the Consolidated Net Worth of the Company or the Surviving
Entity, as the case
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may be, is at least equal to the Consolidated Net Worth of the Company
immediately before such transaction or series of transactions.
Notwithstanding the foregoing clauses (b), (c) and (d), (i) any Subsidiary
may consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (ii) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
In connection with any consolidation, merger, transfer, lease, assignment
or other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officer's certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture; provided, however, that solely for purposes of
computing amounts described in subclause (C) of the covenant described under
'--Certain Covenants--Limitation on Restricted Payments' above, any such
successor Person shall only be deemed to have succeeded to and be substituted
for the Company with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, in which the
Company is not the continuing corporation, the successor corporation formed by
such a consolidation or into which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein.
EVENTS OF DEFAULT
The following will be 'Events of Default' under the Indenture:
(i) default in the payment of the principal of or premium, if any, on
any Exchange Note when the same becomes due and payable (upon Stated
Maturity, acceleration, optional redemption, required purchase, scheduled
principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of
the Exchange Notes, when the same becomes due and payable, which default
continues for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or
agreement contained in the Exchange Notes or the Indenture (other than a
default specified in clause (i) or (ii) above) and such default continues
for a period of 30 days after written notice of such default requiring the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by holders of at least 25% in
aggregate principal amount of the Exchange Notes then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Subsidiary of the Company then has outstanding
Indebtedness in excess of $5,000,000, individually or in the aggregate, and
either (a) such Indebtedness has not been paid at final maturity or (b)
such default or defaults have resulted in the acceleration of the maturity
of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5,000,000, either individually or in the
aggregate, shall be entered against the Company or any Subsidiary of the
Company or any of their respective properties and shall not be discharged
or fully bonded and there shall have been a period of 60 days after the
date on which any period for appeal has expired and during which a stay of
enforcement of such judgment, order or decree shall not be in effect; or
(vi) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Significant Subsidiary of the Company shall
have occurred.
If an Event of Default (other than as specified in clause (vi) above with
respect to the Company) shall occur and be continuing, the Trustee, by notice to
the Company, or the holders of at least 25% in aggregate principal amount of the
Exchange Notes then outstanding, by notice to the Trustee and the Company, may
declare the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes to be due and payable immediately,
upon which declaration, all amounts payable in respect of the Exchange Notes
shall be immediately due and payable; provided, however, that so long as the
Bank Credit Agreement shall be in force
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and effect, if an Event of Default shall have occurred and be continuing (other
than an Event of Default under clause (vi) with respect to the Company), any
such acceleration shall not be effective until the earlier to occur of (x) five
business days following delivery of a notice of such acceleration to the Bank
Agent under the Bank Credit Agreement and (y) the acceleration of any
Indebtedness under the Bank Credit Facilities. If an Event of Default specified
in clause (vi) above with respect to the Company occurs and is continuing, then
the principal of, premium, if any, and accrued and unpaid interest, if any, on
all of the outstanding Exchange Notes shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holder of Exchange Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Exchange Notes, by written notice to the Company and the Trustee,
may rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Exchange Notes, (iii) the principal of and premium, if any, on any Exchange
Notes which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Exchange Notes, and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Exchange Notes which has become
due otherwise than by such declaration of acceleration; (b) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction;
and (c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Exchange Notes that have become due solely
by such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Exchange Notes may on behalf of the holders of all the Exchange
Notes waive any past defaults under the Indenture, except a default in the
payment of the principal of, premium, if any, or interest on any Exchange Note,
or in respect of a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each Exchange Note
outstanding.
No holder of any of the Exchange Notes has any right to institute any
proceeding with respect to the Indenture or the Exchange Notes or any remedy
thereunder, unless the holders of at least 25% in aggregate principal amount of
the outstanding Exchange Notes have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee under the
Exchange Notes and the Indenture, the Trustee has failed to institute such
proceeding within 30 days after receipt of such notice and the Trustee, within
such 30-day period, has not received directions inconsistent with such written
request by holders of a majority in aggregate principal amount of the
outstanding Exchange Notes. Such limitations do not apply, however, to a suit
instituted by a holder of an Exchange Note for the enforcement of the payment of
the principal of, premium, if any, or interest on such Exchange Note on or after
the respective due dates expressed in such Exchange Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Exchange Notes have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee under the
Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Exchange Notes
notice of the Default or Event of Default within 30 days after obtaining
knowledge thereof. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on any Exchange Notes, the
Trustee may withhold the notice to the holders of such Exchange Notes if a
committee of its trust officers in good faith determines that withholding the
notice is in the interest of the holders of the Exchange Notes.
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The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company with respect to the outstanding Exchange Notes ('defeasance').
Such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Exchange
Notes, except for (i) the rights of holders of outstanding Exchange Notes to
receive payment in respect of the principal of, premium if any, and interest on
such Exchange Notes when such payments are due, (ii) the Company's obligations
to issue temporary Exchange Notes, register the transfer or exchange of any
Exchange Notes, replace mutilated, destroyed, lost or stolen Exchange Notes and
maintain an office or agency for payments in respect of the Exchange Notes,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company with
respect to certain covenants that are set forth in the Indenture, some of which
are described under '--Certain Covenants' above (including the covenant
described under '--Certain Covenants--Change of Control' above) and any
subsequent failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Exchange Notes ('covenant
defeasance').
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Exchange Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Exchange Notes to redemption or maturity
(except lost, stolen or destroyed Exchange Notes which have been replaced or
paid); (ii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the outstanding Exchange Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which the Company is a party or by which it is bound; (vi) the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that (A) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and (B) the trust funds
will not be subject to the rights of holders of Senior Indebtedness, including,
without limitation, those rights arising under the Indenture; and (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent under the
Indenture to either defeasance or covenant defeasance, as the case may be, have
been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when (i) either (a) all the Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed
Exchange Notes which have been replaced or repaid and Exchange Notes for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation or (b) all
Exchange Notes not theretofore delivered to the Trustee for cancellation (except
lost, stolen
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or destroyed Exchange Notes which have been replaced or paid) have been called
for redemption pursuant to the terms of the Exchange Notes or have otherwise
become due and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Exchange Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Exchange Notes to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has paid
all other sums payable under the Indenture by the Company; (iii) there exists no
Default or Event of Default under the Indenture; and (iv) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company, when authorized by a resolution of its
Board of Directors and the Trustee may, without the consent of the holders of
any outstanding Exchange Notes, amend, waive or supplement the Indenture or the
Exchange Notes for certain specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act of 1939,
evidencing the acceptance and appointment of a successor trustee, providing for
the guarantee of the Exchange Notes by the Loewen Group Inc. or making any other
change that does not adversely affect the rights of any holder of Exchange
Notes; provided, however, that the Company has delivered to the Trustee an
opinion of counsel stating that such change does not adversely affect the rights
of any holder of Exchange Notes. Other amendments and modifications of the
Indenture or the Exchange Notes may be made by the Company and the Trustee with
the consent of the holders of not less than a majority of the aggregate
principal amount of the outstanding Exchange Notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Exchange Note affected thereby, (i) reduce the principal amount of,
extend the fixed maturity of or alter the redemption provisions of, the Exchange
Notes, (ii) change the currency in which any Exchange Notes or any premium or
the interest thereon is payable or make the principal of, premium, if any, or
interest on any Exchange Note payable in money other than that stated in the
Exchange Note, (iii) reduce the percentage in principal amount of outstanding
Exchange Notes that must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture or the Exchange Notes, (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to the Exchange Notes, (v) waive a default in payment with respect to
the Exchange Notes, (vi) amend, change or modify the obligations of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate the offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto, (vii) reduce
or change the rate or time for payment of interest on the Exchange Notes or
(viii) modify or change any provision of the Indenture affecting the
subordination or ranking of the Exchange Notes in a manner adverse to the
holders of the Exchange Notes.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement entered into by the Company and
the Initial Purchaser concurrently with the issuance of the Notes, the Company
agreed to file with the Commission and use its best efforts to cause to become
effective a registration statement (the 'Exchange Offer Registration Statement')
with respect to the Exchange Notes and, upon its becoming effective, to offer
the holders of the Notes the opportunity to exchange their Notes for the
Exchange Notes of the corresponding series (the 'Exchange Offer'). Under
existing Commission interpretations contained in no-action letters to third
parties, the Exchange Notes in general would be freely transferable after the
Exchange Offer by the holders thereof, other than affiliates of the Company,
without further registration under the Securities Act (subject to certain
representations required to be made by each such holder); provided that in the
case of broker-dealers ('Participating Broker-Dealers'), a prospectus meeting
the requirements of the Securities Act is delivered as required. The Commission
has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement,
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the Company is required to allow Participating Broker-Dealers and any other
persons, if any, with similar prospectus delivery requirements, to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of the Exchange Notes. A Participating Broker-Dealer or any
other person that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations
thereunder).
The Registration Statement of which this Prospectus is a part constitutes
the Exchange Offer Registration Statement for the Exchange Offer.
In the event that (i) due to a change in current interpretations by the
Commission, the Company is not permitted to effect the Exchange Offer, (ii) the
Exchange Offer is not for any other reason consummated within 150 days after the
Acquisition Closing Date or (iii) under certain circumstances, if the Initial
Purchaser shall so request, it is contemplated that the Company will file a
registration statement (a 'Shelf Registration Statement') covering resales (a)
by the holders of the Notes in the event the Company is not permitted to effect
the Exchange Offer pursuant to the foregoing clause (i) or the Exchange Offer is
not consummated within 150 days after the Acquisition Closing Date pursuant to
the foregoing clause (ii) or (b) by the holders of Notes with respect to which
the Company receives notice pursuant to the foregoing clause (iii), and will use
its best efforts to cause any such Shelf Registration Statement to become
effective and to keep such Shelf Registration Statement effective for 180 days
from the effective date thereof. The Company shall, if it files a Shelf
Registration Statement, provide to each holder of the Notes copies of the
prospectus and notify each such holder when the Shelf Registration Statement has
become effective. A holder that sells Notes pursuant to a Shelf Registration
Statement generally will be required to be named as a selling security holder in
the related prospectus and to deliver a current prospectus to purchasers, and
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales.
Under the Registration Rights Agreement, the Company agreed to: (i) file
the Exchange Offer Registration Statement or a Shelf Registration Statement with
the Commission within 60 days after the Acquisition Closing Date, (ii) use its
best efforts to have such Exchange Offer Registration Statement or Shelf
Registration Statement declared effective by the Commission within 120 days
after the Acquisition Closing Date, and (iii) use its best efforts to consummate
the Exchange Offer within 150 days after the Acquisition Closing Date. Each
holder of Notes, by virtue of having become so, is bound by the provisions of
the Registration Rights Agreement that may require the holder to furnish notice
or other information to the Company as a condition to certain obligations of the
Company to file a Shelf Registration Statement by a particular date or to
maintain its effectiveness for the prescribed 180-day period.
If the Company fails to comply with the above provisions, additional
interest (the 'Additional Interest') shall be assessed on the Notes as follows:
(i) (A) if an Exchange Offer Registration Statement or, in the event
that due to a change in current interpretations by the Commission the
Company is not permitted to effect the Exchange Offer, a Shelf Registration
Statement is not filed within 60 days following the Acquisition Closing
Date or (B) in the event that within the prescribed time period, any holder
or holders of Notes shall notify the Company that such holder or holders
(x) have received an opinion of counsel to the effect that such holder or
holders are prohibited by applicable law or Commission policy from
participating in the Exchange Offer, (y) have received an opinion of
counsel to the effect that such holder or holders may not resell Exchange
Notes acquired by it in the Exchange Offer to the public without delivering
a prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such holder or (z) are broker-dealers and hold Notes acquired directly from
the Company or an 'affiliate' of the Company, if a Shelf Registration
Statement is not filed within 45 days after expiration of the prescribed
time period, then commencing on the 61st day after the Closing Date or the
46th day after expiration of the prescribed time period, as the case may
be, Additional Interest shall be accrued on the Notes over and above the
accrued interest at a rate of .50% per annum for the first 90 days
immediately following the 61st day after the Acquisition Closing Date or
the 46th day after expiration of the prescribed
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time period, as the case may be, such Additional Interest rate increasing
by an additional .25% per annum at the beginning of each subsequent 90-day
period;
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to clause (i) of the preceding
full paragraph and is not declared effective within 120 days following
either the Acquisition Closing Date or the expiration of the prescribed
time period, as the case may be, then commencing on the 121st day after
either the Acquisition Closing Date or the expiration of the prescribed
time period, as the case may be, Additional Interest shall be accrued on
the Notes over and above the accrued interest at a rate of .50% per annum
for the first 90 days immediately following the 121st day after either the
Acquisition Closing Date or the expiration of the prescribed time period,
as the case may be, such Additional Interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered and not withdrawn in accordance with the terms
of the Exchange Offer on or prior to 30 days after the date on which the
Exchange Offer Registration Statement was declared effective, or (B) if
applicable, a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective prior to 180 days
from its original effective date, then, subject to certain exceptions,
Additional Interest shall be accrued on the Notes over and above the
accrued interest at a rate of .50% per annum for the first 60 days
immediately following the (x) 31st day after such effective date, in the
case of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above, such Additional Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 60-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
1.5% per annum; and provided further that (1) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
(i) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of (ii) above), or (3)
upon the exchange of Exchange Notes for all Notes validly tendered in the
Exchange Offer or upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective prior to 180 days from its original
effective date (in the case of (iii) above), Additional Interest on the Notes as
a result of such clause (i), (ii) or (iii) shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the interest payment dates of the Notes.
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the Notes,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period, and the denominator
of which is 360.
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer provided that it has accepted all Notes theretofore
validly tendered in accordance with the terms of the Exchange Offer. Notes not
tendered in the Exchange Offer shall bear interest at the same rate as in effect
at the time of issuance of the Notes.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Notes pursuant to the terms of, the Exchange Offer, the Company
will have fulfilled certain of its obligations under the Registration Rights
Agreement and, accordingly, there will be no increase in the interest rate on
the Notes and the holders of the Notes will have no further registration or
other rights under such agreement.
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THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent Person would exercise under the circumstances in the conduct of such
Person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in such Act) it must eliminate
such conflict or resign.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
'Acquisition' means the acquisition of Existing Prime by Blackstone Capital
Partners II Merchant Banking Fund L.P. and its affiliates and Loewen Group
International, Inc.
'Acquired Indebtedness' means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Subsidiary of any other Person.
'Administrative Services Agreement' means the Administrative Services
Agreement, dated as of August 26, 1996, between the Company and Loewen Group
International, Inc., as the same may be amended, supplemented or otherwise
modified from time to time.
'Affiliate' means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person.
'Asset Acquisition' means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Subsidiary of the Company, (b)
the acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or (c) the acquisition by the
Company or any Subsidiary of the Company of any division or line of business of
any Person (other than a Subsidiary of the Company).
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any Person other than the Company or a
Subsidiary of the Company, in one or a series of related transactions, of (a)
any Capital Stock of any Subsidiary of the Company (other than in respect of
director's qualifying shares or investments by foreign nationals mandated by
applicable law); (b) all or substantially all of the properties and assets of
any division or line of business of the Company or any Subsidiary of the
Company; or (c) any other properties or assets of the Company or any Subsidiary
of the Company other than in the ordinary course of business. For the purposes
of this definition, the term 'Asset Sale' shall not include (i) any sale,
transfer or other disposition of equipment, tools or other assets (including
Capital Stock of any Subsidiary of the Company) by the Company or any of its
Subsidiaries in one or a series of related transactions in respect of which the
Company or such Subsidiary receives cash or property with an aggregate Fair
Market Value of $1,000,000 or less; (ii) a disposition by a Subsidiary to the
Company or a Wholly-Owned Subsidiary of the Company and (iii) any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions described under '--Merger, Sale of
Assets, Etc.' above.
'Attributable Value' means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as
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determined in accordance with GAAP, discounted from the last date of such
initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capitalized Lease Obligation with a
like term in accordance with GAAP. The net amount of rent required to be paid
under any such lease for any such period shall be the aggregate amount of rent
payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. 'Attributable Value' means, as to a Capitalized Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with GAAP.
'Average Life to Stated Maturity' means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
'Bank Agent' means The Bank of Nova Scotia, as administrative agent under
the Bank Credit Agreement.
'Bank Credit Agreement' means the Credit Agreement, dated as of August 26,
1996, among the Company, as borrower, Existing Prime, the Lenders referred to
therein, The Bank of Nova Scotia, as administrative agent, and Pearl Street
L.P., as arranging agent, and Goldman, Sachs & Co., as syndication agent, and
all promissory notes, guarantees, security agreements, pledge agreements, deeds
of trust, mortgages, letters of credit and other instruments, agreements and
documents executed pursuant thereto or in connection therewith, in each case as
the same may be amended, supplemented, restated, renewed, refinanced, replaced
or otherwise modified (in whole or in part and without limitation as to amount,
terms, conditions, covenants or other provisions) from time to time.
'Bank Credit Facilities' means collectively, the Bank Term Facility and the
Revolving Credit Facility under the Bank Credit Agreement.
'Bank Term Facility' means the $90 million senior secured term loan
facility under the Bank Credit Agreement.
'Capital Stock' means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
'Capitalized Lease Obligation' means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
'Cash Equivalents' means, at any time, (i) any evidence of Indebtedness
with a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 365 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) certificates of deposit with a
maturity of 365 days or less of any financial institution that is not organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-2 by S&P or at least P-2 by Moody's or at
least an equivalent rating category of another nationally recognized securities
rating agency; (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the government of the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within 365 days from the date of acquisition; provided
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985;
(v) notes held by the Company or any Subsidiary which were obtained by the
Company or such Subsidiary
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in connection with Asset Sales (x) in the ordinary course of its funeral home,
cemetery or cremation businesses or (y) which were required to be made pursuant
to applicable federal or state law; and (vi) with respect to moneys held in the
escrow account pursuant to the Escrow Agreement, Eligible Investments (as
defined in the Escrow Agreement).
'Change of Control' means the occurrence of any of the following events:
(a) any 'person' or 'group' (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), excluding Permitted Holders, is or becomes the 'beneficial
owner' (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have 'beneficial ownership' of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event or
otherwise), directly or indirectly, of more than 35% of the total Voting Stock
of Existing Prime, under circumstances where the Permitted Holders (i)
'beneficially own' (as so defined) in the aggregate a lower percentage of the
Voting Stock than such other Person or 'group' and (ii) do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of Existing Prime; (b) Existing
Prime consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another Person, or another Person
consolidates with, or merges with or into, Existing Prime, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Existing
Prime is converted into or exchanged for cash, securities or other such
transaction where (i) the outstanding Voting Stock of Existing Prime is
converted into or exchanged for (1) Voting Stock (other than Redeemable Capital
Stock) of the surviving or transferee corporation or (2) cash, securities and
other property in an amount which could then be paid by the Company as a
Restricted Payment under the Indenture, or a combination thereof, and (ii)
immediately after such transaction no 'person' or 'group' (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is the 'beneficial owner' (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have 'beneficial
ownership' of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
50% of the total Voting Stock of the surviving or transferee corporation; (c) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of Existing Prime
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Existing Prime was approved
by a vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Existing Prime then in office; or (d)
Existing Prime is liquidated or dissolved or adopts a plan of liquidation.
'Common Stock' means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
'Consolidated Cash Flow' means, with respect to any Person for any period,
the sum of, without duplication, the amounts for such period, taken as a single
accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash
Charges, (c) Consolidated Interest Expense and (d) Consolidated Income Tax
Expense.
'Consolidated Fixed Charge Coverage Ratio' means, with respect to any
Person, the ratio of the aggregate amount of Consolidated Cash Flow of such
Person for the four full fiscal quarters immediately preceding the date of the
transaction (the 'Transaction Date') giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter period
being referred to herein as the 'Four Quarter Period') to the aggregate amount
of Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, 'Consolidated Cash Flow' and 'Consolidated Fixed Charges' shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence of any Indebtedness of
such Person or any of its Subsidiaries (and the application of the net proceeds
thereof) during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the 'Reference Period'),
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation (and the
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application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Subsidiaries (including any Person who becomes a Subsidiary
as a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness) occurring during the Reference Period, as if
such Asset Sale or Asset Acquisition occurred on the first day of the Reference
Period. Furthermore, in calculating 'Consolidated Fixed Charges' for purposes of
determining the denominator (but not the numerator) of this 'Consolidated Fixed
Charge Coverage Ratio,' (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date (taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a remaining
term in excess of 12 months); and (ii) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Reference
Period. If such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
'Consolidated Fixed Charges' means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the product of (a) the aggregate amount
of dividends and other distributions paid or accrued during such period in
respect of Preferred Stock and Redeemable Capital Stock (other than dividends
and distributions on Preferred Stock and Redeemable Capital Stock that are
non-cash through the Final Maturity Date) of such Person and its Subsidiaries on
a consolidated basis times (b) a fraction, the numerator which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal; provided,
however, that the denominator in clause (b) shall be one if such dividend or
other distribution is fully tax deductible.
'Consolidated Income Tax Expense' means, with respect to any Person for any
period, the provision for federal, state, local and foreign income taxes of such
Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
'Consolidated Interest Expense' means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations, (c)
the interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (e) all accrued interest and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
'Consolidated Net Income' means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such Person and its Subsidiaries allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by such Person or one of its
Subsidiaries, (iii) net income (or loss) of any Person combined with such Person
or one of its Subsidiaries on a 'pooling of interests' basis attributable to any
period prior to the date of combination, (iv) any gain or loss realized upon the
termination of any employee pension benefit plan, on an after-tax basis, (v)
gains or losses in respect of any Asset Sales by such Person or one of its
Subsidiaries, (vi) the net income of any Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Subsidiary of
that income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Subsidiary or
its stockholders and (vii) any closing costs associated with the Acquisition and
the financing thereof, severance costs, restructuring costs and costs related to
the closing of facilities.
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'Consolidated Net Worth' means, with respect to any Person at any date, the
consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such Person and
its Subsidiaries, as determined in accordance with GAAP.
'Consolidated Non-cash Charges' means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Net Income of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
item or loss or any such charge which required an accrual of or a reserve for
cash charges for any future period).
'Currency Agreement' means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
'Default' means any event that is, or after notice or passage of time or
both would be, an Event of Default.
'Designated Senior Indebtedness' means (i) all Senior Indebtedness under
the Bank Credit Agreement and (ii) any other Senior Indebtedness which (a) at
the time of the determination exceeds $5,000,000 in aggregate principal amount
and (b) is specifically designated in the instrument evidencing such Senior
Indebtedness as 'Designated Senior Indebtedness' by the Company.
'Escrow Agreement' means the Escrow Agreement, dated as of August 15, 1996
between the Company and United States Trust Company of New York, as escrow
agent.
'Event of Default' has the meaning set forth under 'Events of Default'
herein.
'Existing Prime' means Prime Succession, Inc., a Delaware corporation and
the parent of the Company, which will be renamed Prime Succession Holdings, Inc.
upon consummation of the Acquisition.
'Fair Market Value' means, with respect to any assets, the price, as
determined by the Company, acting in good faith which could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller and a
willing buyer, neither of which is under pressure or compulsion to complete the
transaction; provided, however, that, with respect to any transaction which
involves an asset or assets in excess of $250,000, such determination shall be
evidenced by resolutions of the Board of Directors of the Company delivered to
the Trustee.
'Final Maturity Date' means August 15, 2004.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable on the date of
the Indenture and are consistently applied.
'guarantee' means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
'Indebtedness' means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, and excluding all obligations, contingent or
otherwise, of such Person in connection with any undrawn letters of credit,
banker's acceptance or other similar credit transaction, (b) all obligations of
such Person evidenced by bonds, notes, debentures or other similar instruments,
(c) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
if the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of
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business, (d) all Capitalized Lease Obligations of such Person, (e) all
Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the Fair Market Value of such
property or asset or the amount of the obligation so secured), (f) all
guarantees of Indebtedness referred to in this definition by such Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such Person, (i) any Preferred Stock of any Subsidiary
of such Person valued at the sum of (without duplication) (A) the liquidation
preference thereof, (B) any mandatory redemption payment obligations in respect
thereof and (C) accrued cash dividends thereon, and (j) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) through (i) above. For
purposes hereof, the 'maximum fixed repurchase price' of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such Redeemable
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
'Independent Financial Advisor' means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
'Interest Rate Protection Agreement' means, with respect to any Person, any
arrangement with any other Person whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
'Interest Rate Protection Obligations' means the obligations of any Person
pursuant to an Interest Rate Protection Agreement.
'Investment' means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the assets of any Subsidiary of the Company at the time that
such Subsidiary is designated as an Unrestricted Subsidiary shall be deemed to
be an Investment made by the Company in such Unrestricted Subsidiary at such
time. 'Investments' shall exclude extensions of trade credit by the Company and
its Subsidiaries in the ordinary course of business in accordance with normal
trade practices of the Company or such Subsidiary, as the case may be.
'Issue Date' means the date on which the Notes are originally issued.
'Lien' means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
'Maturity Date' means, with respect to any security, the date on which any
principal of such security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
'Moody's' means Moody's Investors Service, Inc. and its successors.
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'Net Cash Proceeds' means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed by or sold
with recourse to the Company or any Subsidiary of the Company) net of (i)
brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any Person (other than the
Company or any Subsidiary of the Company) owning a beneficial interest in the
assets subject to such Asset Sale, (iv) all payments made on any Indebtedness
which is secured by any assets subject to such Asset Sale, in accordance with
the terms of any Lien upon such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Sale, or by applicable law, be
repaid out of the proceeds from such Asset Sale and (v) appropriate amounts to
be provided by the Company or any Subsidiary of the Company, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Subsidiary of the
Company, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee.
'Pari Passu Indebtedness' means Indebtedness of the Company which ranks
pari passu in right of payment with the Exchange Notes.
'Permitted Holder' means Blackstone Capital Partners II Merchant Banking
Fund L.P. or Loewen Group International, Inc., or any Affiliate of either.
'Permitted Investments' means any of the following:
(i) Investments in any Wholly-Owned Subsidiary of the Company
(including any Person that pursuant to such Investment becomes a
Wholly-Owned Subsidiary of the Company) and any Person that is merged or
consolidated with or into, or transfers or conveys all or substantially all
of its assets to, the Company or any Wholly-Owned Subsidiary of the Company
at the time such Investment is made;
(ii) Investments in Cash Equivalents;
(iii) loans or advances to officers, employees or consultants of the
Company and its Subsidiaries in the ordinary course of business for bona
fide business purposes of the Company and its Subsidiaries (including
travel and moving expenses) not in excess of $1,000,000 in the aggregate at
any one time outstanding;
(iv) Investments in evidences of Indebtedness, securities or other
property received from another Person by the Company or any of its
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such Person or
as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Indebtedness, securities or other property of
such Person held by the Company or any of its Subsidiaries, or for other
liabilities or obligations of such other Person to the Company or any of
its Subsidiaries that were created, in accordance with the terms of the
Indenture;
(v) Investments of funds received by the Company or its Subsidiaries
in the ordinary course of business, which funds are required to be held in
trust for the benefit of others by the Company or such Subsidiary, as the
case may be, and which funds do not constitute assets or liabilities of the
Company or such Subsidiary;
(vi) Investments in acquired Subsidiaries; provided that the sum of
(i) the aggregate Fair Market Value of all such Investments and (ii) the
aggregate Fair Market Value of all Preferred Stock permitted to be issued
pursuant to clause (z) of the covenant described under '--Certain
Covenants--Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries' shall not exceed $5,000,000 at any time outstanding;
(vii) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Subsidiary or in satisfaction of judgments;
(viii) Investments in Persons to the extent such Investment represents
the non-cash consideration otherwise permitted to be received by the
Company or its Subsidiaries in connection with an Asset Sale; and
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(ix) Investments existing on the Issue Date.
'Permitted Liens' means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition of property or
assets of the Company or any Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or assets
of the Company or any Subsidiary of the Company other than the property and
assets so acquired and (ii) the Lien securing such Indebtedness either (x)
exists at the time of such acquisition or (y) shall be created within 90
days of such acquisition;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(i) Liens with respect to Acquired Indebtedness incurred in accordance
with the covenant described under '--Certain Covenants--Limitation on
Indebtedness.'
'Person' means any individual, corporation, limited liability company
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
'Preferred Stock' means, with respect to any Person, any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
'Redeemable Capital Stock' means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Exchange Note or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity.
'Revolving Credit Facility' means the $25 million senior secured revolving
credit facility under the Bank Credit Agreement.
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'Sale-Leaseback Transaction' of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
'S&P' means Standard & Poor's Ratings Group and its successors.
'Senior Indebtedness' means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Exchange Notes. Without limiting the
generality of the foregoing, 'Senior Indebtedness' shall include all obligations
of the Company now or hereafter existing under the Bank Credit Agreement,
including without limitation principal of, premium, and interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not such post-petition
interest is allowed as a claim in such proceeding) on Indebtedness outstanding
under the Bank Credit Agreement, reimbursement obligations of the Company with
respect to any letters of credit outstanding under the Bank Credit Agreement and
any obligation for fees, expenses and indemnities. Notwithstanding the
foregoing, 'Senior Indebtedness' shall not include (a) Indebtedness evidenced by
the Notes and the Exchange Notes, (b) Indebtedness that is expressly subordinate
or junior in right of payment to any Indebtedness of the Company, (c)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (d) Indebtedness which is represented by Redeemable Capital Stock, (e)
Indebtedness for goods, materials or services purchased in the ordinary course
of business or Indebtedness consisting of trade payables or other current
liabilities (other than any current liabilities owing under the Bank Credit
Facilities or the current portion of any long-term Indebtedness which would
constitute Senior Indebtedness but for the operation of this clause (e)), (f)
Indebtedness of or amounts owed by the Company for compensation to employees or
for services rendered to the Company, (g) any liability for federal, state,
local or other taxes owed or owing by the Company, (h) Indebtedness of the
Company to a Subsidiary of the Company or any other Affiliate of the Company or
any of such Affiliate's Subsidiaries, (i) that portion of any Indebtedness which
is incurred by the Company in violation of the Indenture and (j) amounts owing
under leases (other than Capitalized Lease Obligations).
'Significant Subsidiary' shall mean a Subsidiary which is a 'Significant
Subsidiary' as defined in Rule 1.02(v) of Regulation S-X under the Securities
Act.
'Stated Maturity' means, when used with respect to any Exchange Note or any
installment of interest thereon, the date specified in such Exchange Note as the
fixed date on which the principal of such Exchange Note or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
'Subordinated Indebtedness' means Indebtedness of the Company or a
Subsidiary which is expressly subordinated in right of payment to the Exchange
Notes.
'Subsidiary' means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof and (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company under the Indenture, other than for purposes of the definition of an
Unrestricted Subsidiary, unless the Company
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shall have designated an Unrestricted Subsidiary as a 'Subsidiary' by written
notice to the Trustee under the Indenture, accompanied by an Officers'
Certificate as to compliance with the Indenture; provided, however, that the
Company shall not be permitted to designate any Unrestricted Subsidiary as a
Subsidiary unless, after giving pro forma effect to such designation, (i) the
Company would be permitted to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the first paragraph of the covenant described
under '--Certain Covenants--Limitation on Indebtedness' above (assuming a market
rate of interest with respect to such Indebtedness) and (ii) all Indebtedness
and Liens of such Unrestricted Subsidiary would be permitted to be incurred by a
Subsidiary of the Company under the Indenture. A designation of an Unrestricted
Subsidiary as a Subsidiary may not thereafter be rescinded.
'Unrestricted Subsidiary' means a Subsidiary of the Company (i) none of
whose properties or assets were owned by the Company or any of its Subsidiaries
prior to the Issue Date, other than any such assets as are transferred to such
Unrestricted Subsidiary in accordance with the covenant described under
'--Certain Covenants--Limitation on Restricted Payments' above, (ii) whose
properties and assets, to the extent that they secure Indebtedness, secure only
Non-Recourse Indebtedness and (iii) which has no Indebtedness other than
Non-Recourse Indebtedness. As used above, 'Non-Recourse Indebtedness' means
Indebtedness as to which (i) neither the Company nor any of its Subsidiaries
(other than the relevant Unrestricted Subsidiary or another Unrestricted
Subsidiary) (1) provides credit support (including any undertaking, agreement or
instrument which would constitute Indebtedness), (2) guarantees or is otherwise
directly or indirectly liable or (3) constitutes the lender (in each case, other
than pursuant to and in compliance with the covenant described under '--Certain
Covenants--Limitation on Restricted Payments') and (ii) no default with respect
to such Indebtedness (including any rights which the holders thereof may have to
take enforcement action against the relevant Unrestricted Subsidiary or its
assets) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or its Subsidiaries (other than Unrestricted
Subsidiaries) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
'Voting Stock' means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
'Wholly-Owned Subsidiary' means any Subsidiary of the Company of which 100%
of the outstanding Capital Stock is owned by one or more Wholly-Owned
Subsidiaries of the Company or by the Company and one or more Wholly-Owned
Subsidiaries of the Company. For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.
75
<PAGE>
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Exchange Notes initially
will be represented by one or more permanent global certificates in definitive,
fully registered form (each a 'Global Exchange Note'). Each Global Exchange Note
will be deposited on the Exchange Date with, or on behalf of, The Depository
Trust Company, New York, New York ('DTC') and registered in the name of a
nominee of DTC.
Exchange Notes held by persons who elect to take physical delivery of their
certificates instead of holding their interest through the Global Exchange Note
(and which are thus ineligible to trade through DTC) (collectively referred to
herein as the 'Non-Global Purchasers') will be issued in registered certificated
form ('Certificated Exchange Notes'). Upon the transfer of any Certificated
Exchange Note initially issued to a Non-Global Purchaser, such Certificated
Exchange Note will, unless the transferee requests otherwise or the Global
Exchange Note has previously been exchanged in whole for Certificated Exchange
Notes, be exchanged for an interest in the Global Exchange Note.
The Exchange Notes issued to Non-Global Purchasers will be issued only in
registered form without coupons, in denominations of $1,000 and integral
multiples thereof. Principal of and premium, if any, and interest on such
Exchange Notes will be payable, and such Exchange Notes will be transferable, at
the office of the Company's agent in the City of New York located at the
corporate trust office of the Trustee. In addition, interest may be paid, at the
option of the Company, by check mailed to the person entitled thereto as shown
on the security register. No service charge will be made for any transfer or
exchange of such Exchange Notes, except in certain circumstances for any tax or
other governmental charge that may be imposed in connection therewith.
THE GLOBAL EXCHANGE NOTE
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Exchange Note, DTC or its custodian will credit, on
its internal system, the principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Exchange Note to the respective
accounts for persons who have accounts with DTC and (ii) ownership of beneficial
interest in the Global Exchange Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of persons who have accounts with DTC
('participants') and the records of participants (with respect to interests of
persons other than participants). Ownership of beneficial interests in the
Global Exchange Note will be limited to persons who have accounts with DTC
participants or persons who hold interests through participants.
So long as DTC or its nominee is the registered owner or holder of Exchange
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Exchange Notes represented by such Global Exchange Note
for all purposes under the Indenture. No beneficial owner of an interest in the
Global Exchange Note will be able to transfer that interest except in accordance
with DTC's procedures, in addition to those provided for under the Indenture
with respect to the Exchange Notes.
Payments of the principal of, premium, if any, and interest on, the Global
Exchange Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
of the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Exchange Note or for maintaining, supervising, or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Exchange Note,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Exchange Note as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Exchange Note held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Exchange Note
76
<PAGE>
for any reason, including to sell Exchange Notes to persons in states that
require physical delivery of the Certificated Exchange Notes, or to pledge such
securities, such holder must transfer its interest in the Global Exchange Note
in accordance with the normal procedures of DTC and with the procedures set
forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants, to whose account the DTC interests in the Global Exchange Note are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Indenture,
DTC will exchange the Global Exchange Note for Certificated Exchange Notes,
which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the
Uniform Commercial Code and a 'clearing agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ('indirect
participants'). QIBs may elect to hold Exchange Notes through DTC. QIBs who are
not participants may beneficially own securities held by or on behalf of DTC
only through participants or indirect participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interest in the Global Exchange Note among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED EXCHANGE NOTES
If (i) the Company notifies the Trustee in writing that DTC is at any time
unwilling or unable to continue as a depository for the Global Exchange Note and
a successor depository is not appointed by the Company within 90 days, or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Exchange Notes in definitive form under the Indenture,
then, upon surrender by DTC of the Global Exchange Note, Certificated Exchange
Notes will be issued to each person that DTC identifies as the beneficial owner
of the Exchange Notes represented by the Global Exchange Note.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The exchange of Exchange Notes for Notes in the Exchange Offer will not
constitute a taxable event to holders for United States federal income tax
purposes. Consequently, no gain or loss will be recognized by a holder upon
receipt of an Exchange Note, the holding period of the Exchange Note will
include the holding period of the Note and the basis of the Exchange Note will
be the same as the basis of the Note immediately before the exchange.
In any event, persons considering the Exchange of Notes for Exchange Notes
should consult their own tax advisors concerning the United States federal
income tax consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdictions.
77
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. New Prime has agreed that, for a period
of 180 days after the Expiration Date, it will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until , 1997, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
New Prime will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an 'underwriter' within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
For a period of 180 days after the Exchange Date New Prime will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. New Prime has agreed to pay all expenses incident to the
Exchange Offer other than commssions or concessions of any brokers or dealers
and will indemnify the holders of the Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
will be passed upon for the Company by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of December 31,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, included in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as stated in their report (which contains an explanatory
paragraph with respect to the Company's ability to continue as a going concern)
appearing herein.
CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Effective August 26, 1996 the Company appointed KPMG Peat Marwick LLP
('KPMG') as its auditor, replacing Ernst & Young LLP ('E&Y'), Existing Prime's
auditor prior to the Acquisition.
E&Y's opinion was qualified as of and for the year ended December 31, 1995,
in that the financial statements were prepared assuming the Company and its
subsidiaries would continue as a going concern. The Company had not complied
with certain of its covenants in loan agreements with two of its lenders. These
violations constituted events of default which provided the lenders with the
right to demand immediate repayment of the debt and related accrued interest.
The demand for repayment would raise substantial doubt
78
<PAGE>
about the Company's ability to continue as a going concern. The financial
statements did not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may have resulted from the outcome of this
uncertainty.
There were no disagreements between the Company and its auditors during
E&Y's appointment as auditor for the Company.
In planning and performing the audit of the consolidated financial
statements of the Company and its subsidiaries for the year ended December 31,
1995, and again during their review of the March 31, 1996 consolidated financial
statements, the auditors noted certain matters involving the internal control
structure and its operation at the Alabama subsidiary that they considered to be
reportable conditions under standards established by the American Institute of
Certified Public Accountants.
Specifically, the auditors found that a number of key reconciliations were
not performed during the year at the Alabama subsidiary. Differences between a
subsidiary system and the general ledger which affected accounts receivable,
deferred revenue, commission payable and accounts payable were not quantified
and corrected during the course of the year. In addition, bank reconciliations
were not prepared which enabled significant errors to remain undetected for the
entire year.
During the latter half of 1995 and in 1996, management of the Company took
steps designed to address the concerns raised by E&Y, including the dedication
of corporate personnel to work on site in Alabama to assist in the processing
and summarizing of financial data, the replacement of an outside service bureau
that had previously been responsible for funeral service accounting at most of
the Company's locations and the institution of new and automated accounting
systems and procedures overall. Management is undertaking an extensive review of
the Company's accounting controls and procedures and intends to implement any
additional steps necessary.
79
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................ F-2
Consolidated Balance Sheets........................................... F-3
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Shareholders' Equity....................... F-5
Consolidated Statements of Cash Flows................................. F-6
Notes to Consolidated Financial Statements............................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Prime Succession, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Prime
Succession, Inc. (Existing Prime) and subsidiaries as of December 31, 1994 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for the three years in the period ended December 31, 1995.
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 Prime
Succession, Inc. and subsidiaries at December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Prime Succession, Inc. and subsidiaries will continue as a going concern. As
discussed in Note 1, the Company has not complied with certain covenants of loan
agreements with two of its lenders. These violations constitute events of
default which provide the lenders with the right to demand immediate repayment
of the debt and related accrued interest. A significant portion of the Company's
assets is pledged as collateral for these notes and demand for repayment by the
lenders would raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
ERNST & YOUNG LLP
May 9, 1996, except for Note 15, as to
which the date is June 14, 1996
F-2
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
------------ ------------ JUNE 30,
------------
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 3,625,677 $ 766,349 $ 3,429,025
Receivables, less allowances of $1,929,748, $2,926,331 and $2,755,774...... 8,925,815 9,409,130 9,793,248
Accounts receivable from shareholder....................................... -- 3,000,000 --
Inventories:
Merchandise................................................................ 3,112,617 3,068,037 3,116,640
Cemetery lots and mausoleum spaces......................................... 474,510 496,389 592,260
------------ ------------ ------------
3,587,127 3,564,426 3,708,900
Prepaids and other currents assets........................................... 1,433,336 1,298,372 1,190,371
------------ ------------ ------------
Total current assets......................................................... 17,571,955 18,038,277 18,121,544
Property and equipment:
Land and land improvements................................................. 13,252,280 13,335,855 13,462,643
Buildings and improvements................................................. 36,542,309 39,988,607 40,888,921
Equipment, furniture and fixtures.......................................... 9,992,546 10,910,479 11,194,347
Accumulated depreciation................................................... (3,794,607) (6,160,304) (7,433,659)
------------ ------------ ------------
55,992,528 58,074,637 58,112,252
Developed cemetery properties, at cost....................................... 5,617,700 5,322,650 5,260,226
Undeveloped cemetery properties, at cost..................................... 7,765,746 7,634,747 7,634,747
Names and reputations, less accumulated amortization of $4,697,069,
$7,944,175 and $9,523,490.................................................. 24,380,341 22,591,211 21,323,911
Goodwill, less accumulated amortization of $2,557,698, $4,416,174 and
$5,413,805................................................................. 75,367,735 75,216,667 74,291,525
Other intangible assets, less accumulated amortization of $903,873,
$1,405,258 and $1,686,459.................................................. 2,895,123 2,407,425 2,126,560
Long-term receivables, less allowances of $213,575, $240,704 and $385,749.... 5,086,236 6,048,023 6,348,557
Other assets................................................................. 621,541 784,017 876,384
------------ ------------ ------------
$195,298,905 $196,117,654 $194,095,706
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................... $ 3,847,189 $ 2,230,200 $ 2,154,323
Accrued salaries, commissions and withholdings............................. 1,263,776 2,249,557 2,077,388
Other accrued expenses..................................................... 3,966,094 3,883,806 10,449,880
Current maturities of obligations under agreements with former owners...... 2,037,680 2,280,929 2,538,933
Current maturities of long-term debt and long-term debt in default......... 6,111,050 113,813,885 112,303,048
------------ ------------ ------------
Total current liabilities.................................................... 17,225,789 124,458,377 129,523,572
Deferred merchandise liabilities, less trust fund deposits................... 11,238,785 8,318,054 8,417,850
Deferred revenues, less trust fund deposits.................................. 7,464,107 6,480,194 8,105,333
Obligations under agreements with former owners, less current maturities..... 19,931,112 18,718,176 17,490,668
Long-term debt, less current maturities...................................... 115,366,996 8,449,738 8,700,399
Deferred income taxes........................................................ 502,655 866,146 911,042
Other long-term liabilities.................................................. 905,846 3,826,494 3,671,869
Contingencies (Notes 1 and 13)
Redeemable Preferred Stock, par value $1,000 per share, 18% cumulative, at
liquidation value; 1,957 shares authorized, issued and outstanding,
including accrued and unpaid dividends of $352,260 and $560,093 at
December 31, 1995 and June 30, 1996...................................... 1,957,000 2,309,260 2,517,093
Shareholders' equity:
Common Stock, Class A, par value $.01 per share authorized 142 shares;
129.04 issued and outstanding shares..................................... 1 1 1
Common Stock, Class B, par value $.01 per share; 900 shares authorized,
issued and outstanding................................................... 9 9 9
Additional paid-in capital................................................... 29,254,989 31,902,729 31,694,896
Retained earnings deficit.................................................... (8,548,384) (9,211,524) (16,937,026)
------------ ------------ ------------
20,706,615 22,691,215 14,757,880
------------ ------------ ------------
$195,298,905 $196,117,654 $194,095,706
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Funeral services................... $32,961,694 $60,857,509 $68,623,948 $34,058,590 $36,991,843
Cemetery sales..................... 8,914,185 11,317,321 12,890,745 6,251,217 6,795,355
----------- ----------- ----------- ----------- -----------
41,875,879 72,174,830 81,514,693 40,309,807 43,787,198
Cost of sales:
Funeral homes...................... 5,732,056 10,910,596 11,312,913 5,668,472 5,624,582
Cemetery........................... 1,335,859 2,678,796 2,479,450 1,082,905 1,341,438
Cumulative effect of change in
accounting estimate (Note 5).... -- -- (3,552,000) -- --
----------- ----------- ----------- ----------- -----------
7,067,915 13,589,392 10,240,363 6,751,377 6,966,020
Operating expenses:
Funeral homes...................... 21,115,777 35,230,611 38,119,312 18,630,801 20,465,341
Cemetery........................... 4,659,695 6,659,942 7,510,047 3,539,756 3,865,832
----------- ----------- ----------- ----------- -----------
25,775,472 41,890,553 45,629,359 22,170,557 24,331,173
Corporate and regional general and
administrative expenses............ 2,877,710 4,632,993 6,108,842 2,748,219 3,670,410
Amortization of goodwill............. 718,350 1,790,705 1,890,862 953,585 1,009,540
Covenants not to compete............. 1,248,982 2,578,342 2,770,817 1,377,813 1,426,326
----------- ----------- ----------- ----------- -----------
Operating income..................... 4,187,450 7,692,845 14,874,450 6,308,256 6,383,729
Other income and expense:
Interest expense................... 6,418,146 12,421,811 15,401,048 7,592,040 7,605,629
Legal settlement (Note 2).......... -- -- -- -- 6,344,313
Other (income) expense, net........ 274,525 (72,611) (172,082) (400,539) (94,170)
----------- ----------- ----------- ----------- -----------
6,692,671 12,349,200 15,228,966 7,191,501 13,855,772
----------- ----------- ----------- ----------- -----------
Loss before income taxes............. (2,505,221) (4,656,355) (354,516) (883,245) (7,472,043)
Income tax benefit (expense)......... 214,026 309,870 (308,624) (412,150) (253,459)
----------- ----------- ----------- ----------- -----------
Net loss............................. (2,291,195) (4,346,485) (663,140) (1,295,395) (7,725,502)
Redeemable Preferred Stock dividend
requirements....................... -- -- (352,260) (176,130) (207,833)
----------- ----------- ----------- ----------- -----------
Net loss attributable to common
shareholders....................... $(2,291,195) $(4,346,485) $(1,015,400) $(1,471,525) $(7,933,335)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
F-4
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------
CLASS A CLASS B ADDITIONAL RETAINED
---------------- ---------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
------ ------ ------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993.................. 54.63 $1 900 $9 $14,174,990 $ (1,910,704)
Common stock issued......................... 44.12 -- -- -- 10,725,000 --
Net loss.................................... -- -- -- -- -- (2,291,195)
------ -- ------ -- ----------- ------------
Balance at December 31, 1993................ 98.75 1 900 9 24,899,990 (4,201,899)
Common stock issued 17.94 -- -- -- 4,354,999 --
Net loss.................................... -- -- -- -- -- (4,346,485)
------ -- ------ -- ----------- ------------
Balance at December 31, 1994................ 116.69 1 900 9 29,254,989 (8,548,384)
Common stock issued......................... 12.35 -- -- -- 3,000,000 --
Net loss.................................... -- -- -- -- -- (663,140)
Accrued dividends on Redeemable Preferred
Stock..................................... -- -- -- -- (352,260) --
------ -- ------ -- ----------- ------------
Balance at December 31, 1995................ 129.04 1 900 9 31,902,729 (9,211,524)
Net loss (unaudited)........................ -- -- -- -- -- (7,725,502)
Accrued dividends on Redeemable Preferred
Stock (unaudited)......................... -- -- -- -- (207,833) --
------ -- ------ -- ----------- ------------
Balance at June 30, 1996 (unaudited)........ 129.04 $1 900 $9 $31,694,896 $(16,937,026)
------ -- ------ -- ----------- ------------
------ -- ------ -- ----------- ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- -------------------------
1993 1994 1995 1995 1996
------------ ------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................ $ (2,291,195) $ (4,346,485) $ (663,140) $(1,295,395) $(7,725,502)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation.......................... 1,435,035 2,180,318 2,549,399 1,219,812 1,396,899
Amortization.......................... 2,579,494 5,059,588 5,456,104 2,748,491 2,859,147
Provision for doubtful accounts....... 645,979 1,281,140 973,561 507,888 35,653
Provision for deferred income taxes... (569,163) (560,598) 81,578 440,949 44,896
Gain on disposition of business....... -- -- (207,092) (207,092) --
Cumulative effect of change in
estimate of deferred merchandise
liability.......................... -- -- (3,552,000) -- --
Legal settlement...................... -- -- -- -- 6,344,313
Payment on legal settlement........... -- -- -- -- (1,050,000)
Changes in operating assets and
liabilities net of effects of
acquisitions of subsidiaries:
Receivables........................ (2,256,409) (3,918,418) (2,103,297) (1,514,423) (635,953)
Inventories........................ (71,959) (63,160) 548,877 301,188 (67,508)
Accounts payable and accrued
expenses......................... 2,268,109 3,162,251 (1,052,504) (3,045,526) 1,023,715
Deferred merchandise and revenue
(net)............................ 440,274 1,002,110 2,518,817 1,932,537 1,724,935
Other.............................. (176,402) (1,085,545) 1,409,655 3,246,377 (481,529)
------------ ------------ ----------- ----------- -----------
Net cash provided by operating
activities............................ 2,003,763 2,711,201 5,959,958 4,334,806 3,469,066
INVESTING ACTIVITIES
Proceeds from the disposal of assets.... 67,282 304,034 1,436,849 734,393 148,210
Purchases of property and equipment..... (1,888,528) (2,578,259) (1,561,564) (955,642) (939,584)
Net cash paid for purchases of
businesses............................ (67,668,570) (23,399,311) (8,931,865) (1,747,628) (675,000)
------------ ------------ ----------- ----------- -----------
Net cash used in investing activities... (69,489,816) (25,673,536) (9,056,580) (1,968,877) (1,466,374)
FINANCING ACTIVITIES
Proceeds from long-term debt............ 59,312,247 27,238,525 9,994,034 1,500,000 618,000
Payments on long-term debt.............. (446,185) (8,936,642) (7,725,492) (4,448,042) (1,878,146)
Payments on obligations under agreements
with former owners.................... (972,215) (1,791,002) (2,031,248) (1,073,210) (1,079,870)
Capital contributions................... 10,725,000 4,355,000 -- -- 3,000,000
Issuance of preferred stock............. -- 1,957,000 -- -- --
------------ ------------ ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................ 68,618,847 22,822,881 237,294 (4,021,252) 659,984
------------ ------------ ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents........................... 1,132,794 (139,454) (2,859,328) (1,655,323) 2,662,676
Cash and cash equivalents at beginning
of period............................. 2,632,337 3,765,131 3,625,677 3,625,677 766,349
------------ ------------ ----------- ----------- -----------
Cash and cash equivalents at end of
period................................ $ 3,765,131 $ 3,625,677 $ 766,349 $ 1,970,354 $ 3,429,025
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
1. GOING CONCERN
The accompanying financial statements have been prepared assuming Prime
Succession, Inc. and subsidiaries (the Company) will continue as a going
concern. As discussed in Note 7, the Company must comply with certain
restrictive covenants in connection with its borrowings. At December 31, 1995,
the principal lender notified the Company that it is deemed to be in violation
of certain of these covenants. As a result, the debt with a second lender is
also in default. Under the agreements, the default situation results in the debt
being callable by the lenders, however, they have not indicated an intention to
do so. The debt from these lenders, amounting to $108,604,361 at December 31,
1995, has been classified as a current liability, resulting in the working
capital of the Company being in a substantial deficit position. The Company's
future existence is contingent upon its ability to cure the defaults or
otherwise refinance the debt. Management disagrees with the lender's
interpretation of certain events categorized as defaults and is confident the
defaults will be cured or they will be able to locate alternative financing.
Therefore, the financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
2. LITIGATION SETTLEMENT
On February 26, 1996, a lawsuit was filed against the Company and two of
its officers by World Service Life Insurance Company of America (World Service)
and Jeffrey M. Gamble, the former owner of an acquired subsidiary, alleging,
among other things, breach of a pre-need funeral service funding agreement
between the Company and World Service. Immediately preceding the filing of the
lawsuit, the Company notified World Service that it had breached the pre-need
funding agreement by charging premiums to the Company in excess of those charged
to other World Service customers.
On April 11, 1996, the parties settled the litigation with the execution of
a Termination of Pre-need Funding Agreements and Release. Under the terms of the
settlement, the Company agreed to pay a total of $9,000,000 over twenty years to
Mr. Gamble in consideration for the dismissal of the lawsuit and the termination
of the pre-need funding agreement. The present value of the future settlement
payments was recorded as a charge against income of $6,273,985 in the first
quarter of 1996. Payments under the agreement are as follows: $1,000,000 upon
execution, $2,000,000 to be paid on or before April 1997, and monthly payments
of $25,000 over twenty years beginning May, 1996. Upon the earlier date of the
sale of the Company or April 1998, the Company will purchase an annuity to fund
the remaining monthly payments. However, in lieu of the annuity, Mr. Gamble may
demand payment from the Company of an amount equal to the purchase price of the
annuity. As a result of the pending sale of the Company (see Note 15), the
settlement has been classified as current in the March 31, 1996 unaudited
balance sheet.
The Company believes that it will recover a substantial portion of the cost
of the settlement over time through higher commission rates and increased policy
benefits through the purchase of pre-need insurance policies from an alternative
insurance carrier.
3. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Company, which began operations in 1991, owns and operates funeral
homes and cemeteries throughout the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and subsidiaries after elimination of intercompany accounts and transactions.
F-7
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Unaudited Interim Financial Statements
The interim consolidated financial statements presented are unaudited.
Certain information and disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although the Company believes the disclosures
made are adequate to make the information presented not misleading. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of interim results of operations
have been made to the interim financial statements. Results of operations for
interim periods are not necessarily indicative of result of operations for the
full year.
Cash and Cash Equivalents
All highly liquid investments, generally with original maturities of three
months or less, are considered to be cash equivalents. These investments are
valued at cost, which approximates fair value.
Receivables
The Company's receivables represent a combination of amounts due on at-need
and pre-need (installment) contracts. The Company frequently extends credit to
its customers for the purchase of funeral services or cemetery space. The
customers' credit worthiness is evaluated on a case by case basis and collateral
is generally not required on credit sales. Installment contracts receivable,
arising primarily from the sales of cemetery property and merchandise, are
generally due in monthly installments over periods of one to six years. The
contracts require a cash down payment and generally include simple interest,
computed at rates ranging from 8.0% to 14.3% per annum, which is recognized on
the interest method over the contract life. Allowances include estimates for
contract cancellations and uncollectible accounts.
Inventories
Inventories of mausoleum spaces, cemetery lots and merchandise are recorded
principally at average cost which is not in excess of market.
Property and Equipment
Property and equipment is recorded at cost. Depreciation of buildings,
improvements and equipment is provided on a straight-line basis over the
expected useful lives of the respective assets ranging from 3 to 40 years.
Expenditures for maintenance and repairs are expensed when incurred.
Names and Reputations
Amounts on the consolidated balance sheet under the caption Names and
Reputations represent the present value of amounts due under consultative and
noncompetition agreements as well as prepaid amounts related to such contracts.
Amortization of these assets is provided on a straight-line basis over the terms
of the relevant agreements, typically ten years.
Goodwill
Goodwill, resulting from the cost of assets acquired exceeding the
underlying net asset value, is being amortized on a straight-line basis over a
forty-year period. The Company periodically evaluates the carrying value of
goodwill to assess its continued recoverability. The determination includes
evaluation of factors such as current market value, future asset utilization,
business climate, and future cash flows expected to result from the use of the
related assets. The Company's policy is to record an impairment loss in the
period when it is determined that the carrying amount of the asset may not be
recoverable. In March 1995, Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
F-8
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Assets to be Disposed Of was issued. SFAS No. 121 requires the recognition of
impairment losses on long-lived assets used in operations and intangible assets
whenever events or changes in circumstances indicate that the carrying amount of
these assets may not be recoverable. SFAS No. 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. As required, the
Company will adopt SFAS No. 121 in 1996. Based on current circumstances, SFAS
No. 121 would not have a material impact on the Company's consolidated results
of operations or financial position as of December 31, 1995.
Other Intangible Assets
Deferred organization and loan costs have arisen in connection with the
acquisition of various companies. These assets are being amortized using the
straight-line method over 5 to 7 years. See Note 7 for discussion of a potential
impairment of loan costs at December 31, 1995.
Funeral Services
The Company sells pre-arranged funeral services under contracts that
provide for delivery of funeral services at the time of death at a price
determined at the time the agreement is signed.
Revenues from the pre-need funeral services are not recognized in the
financial statements until services are provided. Payments are typically used to
purchase insurance contracts on the lives of the patrons or deposited into trust
funds as required by state law, and are not shown on the consolidated balance
sheet (see Note 10). The payment amounts trusted are available to the Company
only as funeral services are delivered or are refundable to the purchasers under
certain state laws that provide for return of such amounts to the purchasers
under their option to cancel the contract. Earnings on the trust funds are
recognized when withdrawn from trust, typically as the funeral services are
delivered.
Funeral services sold at the time of need are recognized as funeral revenue
when contracted.
Trust earnings able to be withdrawn prior to the delivery of funeral
services, as well as insurance commissions paid in connection with the insurance
contracts described above, are recognized currently as part of funeral service
revenues.
Cemetery Sales
The Company accounts for its cemetery sales in accordance with the full
accrual method. Pre-need sales of cemetery interment rights and other related
products and services are recorded as revenues when customer contracts are
signed and a down payment is received, with concurrent accrual of related costs.
Allowances for customer cancellation and refunds are provided at the date of
sale based on historical experience.
In compliance with local laws, a portion of the proceeds from the sale of
cemetery lots may be required to be paid into perpetual or endowment care trust
funds. A portion of the proceeds from the related pre-need sale of other
cemetery merchandise may also be required to be paid into merchandise trust
funds. The Company recognizes currently the earnings on amounts deposited in
these trusts. Earnings on the perpetual or endowment care trust funds are used
to defray cemetery maintenance costs. The principal amount of deposits placed in
the merchandise trusts is available to the Company when the merchandise is
delivered.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-9
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
4. ACQUISITIONS
During 1995, the Company purchased the following funeral homes:
<TABLE>
<CAPTION>
DATE NAME LOCATION ENTITY
- ------------------ ----------------------------------------- -------------- ------------
<S> <C> <C> <C>
April 17, 1995 Aaron Cremation and Burial California Funeral Home
April 28, 1995 Brewer-Korisko Mortuary, Inc. Nebraska Funeral Home
August 29, 1995 Grotewald Simi Valley Mortuary, Inc. California Funeral Home
October 26, 1995 Weigel Funeral Home, Inc. Indiana Funeral Home
October 27, 1995 Lambert Corporation, Inc. West Virginia Funeral Home
October 27, 1995 J&W, Inc. West Virginia Funeral Home
October 27, 1995 Spencer Funeral Home Ohio Funeral Home
November 15, 1995 Hertz-Thoma Chapel, Ltd. Illinois Funeral Home
November 27, 1995 Simpson-Meyer Corporation Indiana Funeral Home
November 27, 1995 Simpson Funeral Home, Inc. Indiana Funeral Home
November 27, 1995 Simpson-Volkman Corporation Indiana Funeral Home
</TABLE>
During 1994, the Company purchased the following funeral homes and cemetery
businesses:
<TABLE>
<CAPTION>
DATE NAME LOCATION ENTITY
- ------------------ --------------------------------------------- -------------- ------------
<S> <C> <C> <C>
January 20, 1994 Hot Springs Funeral Home Arkansas Funeral Home
February 15, 1994 Metcalf Funeral Home Nebraska Funeral Home
February 25, 1994 Vining Funeral Home Georgia Funeral Home
February 25, 1994 Lester B. Hayman Funeral Home Georgia Funeral Home
February 25, 1994 Copeland Funeral Home South Carolina Funeral Home
March 8, 1994 Craig Funeral Home Florida Funeral Home
March 8, 1994 Flagler Palms Memorial Gardens Florida Cemetery
March 17, 1994 Brown Funeral Home Florida Funeral Home
March 17, 1994 Wachob-Forest Lawn Florida Cemetery
April 27, 1994 Kurfiss Funeral Home Florida Funeral Home
May 20, 1994 Welsheimer Funeral Home Indiana Funeral Home
June 10, 1994 Norris Funeral Services, Inc. Alabama Funeral Home
June 20, 1994 Burns Funeral Home Arkansas Funeral Home
June 30, 1994 Beck Memorial Homes* Illinois Funeral Home
July 1, 1994 Kalis Funeral Home Florida Funeral Home
July 29, 1994 Hawthorn Funeral Home Texas Funeral Home
August 1, 1994 Clayton Frank & Sons Funeral Home Florida Funeral Home
August 31, 1994 Hughes Funeral Chapel California Funeral Home
September 2, 1994 Norwood Chapel, Inc. Alabama Funeral Home
September 15, 1994 Clary-Godwin Funeral Home Florida Funeral Home
September 15, 1994 Comander Funeral Home Florida Funeral Home
September 30, 1994 McWane Family Funeral Home Inc. California Funeral Home
</TABLE>
- ------------------
* On June 30, 1994, 83% ownership was obtained.
The total consideration paid was approximately $23,399,000 and $8,932,000
in 1994 and 1995, respectively, of which $20,603,000 and $7,692,000 was financed
through borrowings. In 1994 and 1995, the Company acquired assets, excluding
goodwill, with fair values aggregating approximately $11,465,000 and $4,413,000
and assumed liabilities of $1,722,000 and $194,000, respectively. All
acquisitions have been accounted for using the purchase method of accounting.
The excess of the purchase price over the fair value of net assets is
established as goodwill. The results of operations for all acquisitions since
the dates of acquisition have been included in the consolidated results of
operations.
F-10
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
4. ACQUISITIONS--(CONTINUED)
The operating results of each acquisition are included in the Company's
operations from the date of the acquisition. The following represents the
unaudited pro forma results of operations as if all of the above noted business
combinations had occurred at the beginning of 1994.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues.... $82,881,107 $85,386,185
----------- -----------
----------- -----------
Net loss.... $(4,016,210) $ (82,887)
----------- -----------
----------- -----------
</TABLE>
The pro forma information presented above does not purport to be indicative
of the results that actually would have been obtained if the acquisitions had
been consummated at the beginning of 1994 and is not intended to be a projection
of future results or trends.
In 1996, the Company acquired the assets of three funeral homes for a
purchase price of approximately $675,000 of which $618,000 was financed through
borrowings.
5. CHANGE IN ESTIMATE OF DEFERRED MERCHANDISE LIABILITY
Effective in the fourth quarter of 1995, the Company revised its estimates
of the obligation to provide vaults and to open and close gravesites on pre-need
sales of cemetery interment rights in the state of Alabama. The Company's 1995
construction of a vault manufacturing facility allows production of vaults at a
significantly lower cost than the purchase of vaults from independent
manufacturers. Preparation of the gravesite will be performed by employees,
thereby eliminating the use of higher cost outside contractors. These changes
resulted in a reduction of the estimated deferred merchandise liability and cost
of goods sold in 1995 by approximately $3,552,000.
6. INCOME TAXES
Deferred income taxes relate primarily to temporary differences between the
tax basis of assets and liabilities and their reported amounts in the financial
statements.
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
--------- --------- --------
<S> <C> <C> <C>
Federal:
Current....... $ -- $ -- $ --
Deferred...... (569,163) (560,598) 81,581
State:
Current....... 355,137 250,728 227,043
--------- --------- --------
$(214,026) $(309,870) $308,624
--------- --------- --------
--------- --------- --------
</TABLE>
F-11
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
6. INCOME TAXES--(CONTINUED)
The differences between the U.S. federal statutory tax rate and the
Company's effective rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
Computed income tax at the
applicable federal statutory
income tax rate................... $ (851,775) $(1,583,161) $ (120,535)
Goodwill amortization............... 129,906 179,585 242,755
Change in estimate of deferred
merchandise liability............. -- -- (1,207,680)
State taxes, net of federal
benefit........................... 234,390 165,480 149,848
Valuation allowance................. 193,303 1,011,607 1,198,463
Other............................... 80,150 (83,381) 45,773
---------- ----------- -----------
Income tax expense (benefit)........ $ (214,026) $ (309,870) $ 308,624
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Components of deferred tax assets and (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Excess of the book value over tax basis of fixed
assets acquired, net of depreciation............ $(4,045,990) $(4,397,043)
Goodwill.......................................... (935,049) (1,450,111)
----------- -----------
Deferred tax liabilities.......................... (4,981,039) (5,847,154)
Net operating loss carryforwards.................. 2,522,299 3,294,098
Allowance for doubtful accounts................... 930,440 1,203,474
Deferred marketing costs and trust fund income
related to pre-arranged funeral sales........... 2,300,077 2,458,843
Covenants and consulting agreements............... 485,478 872,103
Other............................................. -- 103,863
----------- -----------
Deferred tax assets............................... 6,238,294 7,932,381
Valuation allowance............................... (1,759,910) (2,951,373)
----------- -----------
Net deferred tax liability........................ $ (502,655) $ (866,146)
----------- -----------
----------- -----------
</TABLE>
The Company has net operating loss carryforwards for tax purposes of
approximately $7,311,000 at December 31, 1995 which expire in varying amounts
from 2006 through 2010.
F-12
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
7. LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Debt in default:
Acquisition term loans:
Interest and principal payable quarterly with
final installments in July 1998 through
October 2002. Interest at prime rate plus
1.5% (10% at December 31, 1995).............. $106,553,911 $100,355,242
Interest payable monthly with principal due at
maturity, May 1996 through October 2000.
Interest at prime plus 1.75% (10.25% at
December 31, 1995)........................... 5,884,119 8,249,119
Demand notes, interest at lender's prime rate
(8.5% at December 31, 1995).................. 1,500,000 4,550,000
Other, principally seller financing of acquired
operations........................................ 7,540,016 9,109,262
------------ ------------
121,478,046 122,263,623
Less current maturities........................... 6,111,050 113,813,885
------------ ------------
$115,366,996 $ 8,449,738
------------ ------------
------------ ------------
</TABLE>
The Company has a loan agreement with Provident Services, Inc. (Provident)
which provides for a revolving credit facility, acquisition term loans and
construction term loans. As of December 31, 1995, no additional borrowings are
permitted due to the defaults discussed below. Borrowings under the revolving
credit facility are for general working capital use and generally have a final
maturity date of two years after the borrowing date. The acquisition term loans
are used to fund acquisitions and require quarterly payments. Borrowings under
this portion of the agreement require the investment of additional capital from
the Class A shareholders of the Company if certain debt to equity ratios are
exceeded. The construction term loans enable the borrower to construct facility
improvements and require quarterly payments. All borrowings bear interest at
prime plus 1.5%. Borrowings under the Provident loan agreement are secured by
substantially all of the assets of the Company. The loan agreement contains
various restrictive covenants that limit additional borrowing, capital
expenditures, disposition of assets and payment of dividends. Additionally, the
Company is required to maintain specified financial ratios related to cash flow,
total liabilities and working capital. There were no borrowings outstanding
under the revolving credit facility at December 31, 1994 or 1995.
At December 31, 1995, Provident notified the Company that it deemed the
Company to be in violation of covenants pertaining to (1) the incurrence of
additional indebtedness, (2) notifications, approvals and furnishing of
information regarding acquisitions not financed by the principal lender and (3)
delivery of audited financial statements within the period specified in the
agreement. Asserted violations of the indebtedness covenants also include the
assumption of additional indebtedness related to the Company's litigation
settlement (See Note 2) and extended payment terms negotiated with one of the
Company's principal suppliers. Management disagrees with the lender's assertion
that the extension of payment terms by its vendor constitutes prohibited
indebtedness. Under the terms of the loan agreement, the lender may call the
loans if the Company is in violation of any restrictive covenants. The lender
has not waived any of the claimed violations, and accordingly the entire balance
of the loans at December 31, 1995 of $100,355,242 has been included in current
liabilities. This results in an additional violation of a covenant under the
loan agreement regarding the maintenance of working capital ratios. Included in
the consolidated balance sheet caption other intangibles at December 31, 1995 is
approximately $2.3 million of deferred loan costs related to the aforementioned
loans. In the event that the loans are refinanced, the costs will be charged
against income as other expense at the time of refinancing.
F-13
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
7. LONG-TERM DEBT--(CONTINUED)
The Company also has an agreement with Heller Financial, Inc. for a $35
million loan facility which provides for a revolving credit facility and an
acquisition loan facility as well as letter of credit financing to support
certain acquisition-related obligations. The facility carries a fee of one half
of one percent on the unused portion. The primary purpose of the facility is to
provide funds for future acquisitions. The loan agreement contains various
restrictive covenants that require the Company to maintain specified financial
ratios. Because the cited violations of the Provident loan agreement have not
been waived, cross default provisions in this loan agreement cause a default
under the Heller agreement. These defaults allow Heller to call its loans and
also preclude the Company from any additional borrowings. Therefore, the entire
balance of these loans at December 31, 1995 of $8,249,119 has also been included
in current liabilities.
A portion of the Company's other long-term debt is secured by letters of
credit in the amount of $829,000.
The carrying value of the debt approximates market as a result of its
variable interest rate.
Future maturities on long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996.......... $113,813,885
1997.......... 659,485
1998.......... 683,845
1999.......... 608,348
2000.......... 675,743
Thereafter.... 5,822,317
------------
$122,263,623
------------
------------
</TABLE>
Interest paid was approximately $3.6 million, $8.7 million and $14.9
million for the years ended 1993, 1994 and 1995, respectively, and $3.1 million
(unaudited) for the quarter ended March 31, 1996.
8. OBLIGATIONS UNDER AGREEMENTS WITH FORMER OWNERS
The Company has entered into consultative and noncompetition agreements
(generally for ten years) with certain officers of the Company and former owners
and key employees of businesses acquired. Obligations under these agreements are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Obligations under covenants not to compete,
amounts payable monthly with final installments
in May 1997 through April 2010. Obligations have
been discounted at 10%.......................... $18,833,760 $18,079,045
Obligations under consulting agreements, amounts
payable monthly with final installments in
January 1997 through November 2013. Obligations
have been discounted at 10%..................... 3,135,032 2,920,060
----------- -----------
21,968,792 20,999,105
----------- -----------
Less current maturities...................... 2,037,680 2,280,929
----------- -----------
$19,931,112 $18,718,176
----------- -----------
----------- -----------
</TABLE>
F-14
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
8. OBLIGATIONS UNDER AGREEMENTS WITH FORMER OWNERS--(CONTINUED)
Future maturities on these agreements at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996.......... $ 2,280,929
1997.......... 2,453,646
1998.......... 2,484,167
1999.......... 2,391,993
2000.......... 2,646,345
Thereafter.... 8,742,025
-------------
$ 20,999,105
-------------
-------------
</TABLE>
Certain of the covenants are collateralized by letters of credit of $5.3
million.
9. REDEEMABLE PREFERRED STOCK
On December 31, 1994 the Company issued 1,957 shares of Preferred Stock
with a liquidation value of $1,957,000. Dividends on each share of Preferred
Stock accrue on an annual basis at a rate of 18% based upon the sum of the
liquidation value plus all accumulated and unpaid dividends thereon.
The holders of a majority of the Preferred Stock may, at any time, request
redemption of all shares of the Preferred Stock. Upon such request, the Company
is required to redeem all shares at a price per share equal to the liquidation
value thereof plus all accrued and unpaid dividends thereon.
Upon liquidation or dissolution of the Company, each holder of Preferred
Stock will be entitled to be paid, before any distribution or payment is made on
any junior securities, an amount in cash equal to the aggregate liquidation
value, plus all accrued and unpaid dividends. The holders will not be entitled
to any further payment.
10. PRE-ARRANGED FUNERAL TRUSTS
The Company enters into contracts with customers to pre-arrange funeral
services at a fixed price. In certain arrangements, the Company receives payment
on the contract from the customer. In turn, the Company invests in a variety of
instruments to fund pre-arranged funeral and cremation services and the related
merchandise sold but not delivered. Amounts trusted are invested primarily in
life insurance contracts, investment grade equity and corporate debt securities,
and time deposits. Such investments are subject to the risk that the current
market value may fall below cost.
The Company has other arrangements under which the customer purchases an
insurance policy which is assigned to the Company. The Company does not have
control of these policies and is obligated to deliver the service at the fixed
price only if the customer delivers the policy proceeds. Both types of these
arrangements are reflected in the table below. At December 31, 1995
approximately 39% and 14% of the insurance contracts held to satisfy pre-need
contracts represent insurance policies written by two insurance companies.
<TABLE>
<S> <C>
Cumulative pre-funded funeral services sold....... $ 155,642,543
--------------
--------------
Assets held to fund pre-need services:
Investments in trusted assets, at market........ $ 42,959,613
Insurance, at face value of policy.............. 71,036,319
Accounts receivable............................. 28,586,306
Other............................................. 3,816,499
--------------
$ 146,398,737
--------------
--------------
</TABLE>
11. SHAREHOLDERS' EQUITY
The rights of the Class A and Class B Common Stock are identical except for
the payment of distributions on the Common Stock. In the event a distribution is
made by the Company, it will be made first to holders of
F-15
<PAGE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE UNAUDITED SIX MONTHS ENDED JUNE 30, 1995 AND 1996
11. SHAREHOLDERS' EQUITY--(CONTINUED)
Class A Common Stock in an amount equal to the sum of the shares' unreturned
original cost plus any unpaid yield (at a 5% rate of return). Any distribution
in excess of this amount will then be paid at a ratio of 9:1 to the holders of
Class B and Class A Common Stock, respectively.
12. LEASES
The annual payments for operating leases (which are primarily for funeral
home facilities and vehicles) at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996.......... $ 2,330,794
1997.......... 1,974,584
1998.......... 1,683,663
1999.......... 1,373,267
2000.......... 1,145,455
Thereafter.... 5,551,297
-------------
$ 14,059,060
-------------
-------------
</TABLE>
The majority of the operating leases for funeral home facilities contain
one of the following options: (a) purchase of the property at the fair value at
date of expiration; (b) purchase of the property for a value determined at the
inception of the lease or (c) renewal of the lease at the fair rental value at
the end of the primary term of the lease. In addition, four of the leases
contain contingent rentals based upon revenues associated with the location.
Rent expense paid under operating leases was approximately $697,000,
$2,119,000 and $2,469,000 in 1993, 1994 and 1995, respectively, of which
approximately 50%, 50% and 34%, respectively, was paid to former owners
currently employed by the Company.
13. CONTINGENCIES
The Company is a party to legal proceedings in the ordinary course of its
business but does not expect the outcome of any such proceedings to have a
material adverse effect on the Company's financial position.
14. EMPLOYEE BENEFITS
The Company has established a 401(k) plan for the benefit of its employees.
All full-time employees who have reached the age of 21 and have one year of
service with the Company are eligible. Employees may defer 0-20% of their
compensation. The Company will match 25% of the employee's contribution up to a
maximum of 1% of their salary. Total expense recognized by the Company during
1993, 1994 and 1995 was $23,000, $100,000 and $145,000, respectively.
15. SUBSEQUENT EVENT
On June 14, 1996 the Company entered into a purchase agreement whereby all
shares of the common stock of the Company will be sold to a new company formed
by Blackstone Capital Partners II Merchant Banking Fund L.P. and The Loewen
Group Inc. for approximately $295 million. The sale of the Company is expected
to be completed in mid-September, 1996 and is subject to a number of conditions,
including regulatory approvals and financing.
F-16
<PAGE>
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY NEW PRIME. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE EXCHANGE
NOTES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE EXCHANGE NOTES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT
LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information........................................... 2
Disclosure Regarding Forward-Looking Statements.................. 2
Summary.......................................................... 3
Risk Factors..................................................... 13
Use of Proceeds.................................................. 16
The Exchange Offer............................................... 17
Capitalization................................................... 24
Unaudited Pro Forma Consolidated Financial Information........... 25
Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 33
Business......................................................... 37
Management....................................................... 43
Principal Stockholders........................................... 45
Certain Related Transactions..................................... 46
Description of Bank Credit Facilities............................ 48
Description of Exchange Notes.................................... 50
Book Entry; Delivery and Form.................................... 76
Certain United States Federal Income Tax Consequences............ 77
Plan of Distribution............................................. 78
Legal Matters.................................................... 78
Independent Auditors............................................. 78
Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure............................................. 78
Index to Consolidated Financial
Statements..................................................... F-1
</TABLE>
------------------------
Until , 1997 (90 days after the date
of this Prospectus), all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as Underwriters and with respect to their
unsold allotments or subscriptions.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
PROSPECTUS
PRIME SUCCESSION, INC.
(FORMERLY KNOWN AS PRIME
SUCCESSION ACQUISITION CORP.)
OFFER TO EXCHANGE
$100,000,000 OF ITS 10 3/4%
SENIOR SUBORDINATED NOTES DUE
2004 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES
ACT FOR $100,000,000 OF ITS
OUTSTANDING 10 3/4% SENIOR
SUBORDINATED NOTES DUE 2004
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the 'DGCL') provides
for, among other things:
a. permissive indemnification for expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by designated
persons, including directors and officers of a corporation, in the event
such persons are parties to litigation other than stockholder derivative
actions if certain conditions are met;
b. permissive indemnification for expenses actually and reasonably
incurred by designated persons, including directors and officers of a
corporation, in the event such persons are parties to stockholder
derivative actions if certain conditions are met;
c. mandatory indemnification for expenses actually and reasonably
incurred by designated persons, including directors and officers of a
corporation, in the event such persons are successful on the merits or
otherwise in litigation covered by a. and b. above; and
d. that the indemnification provided for by Section 145 shall not be
deemed exclusive of any other rights which may be provided under any
by-law, agreement, stockholder or disinterested director vote, or
otherwise.
The Company's By-Laws provide that:
"Section 1. Indemnity Undertaking. To the fullest extent permitted by
law (including, without limitation, Section 145 of the General Corporation
Law of the State of Delaware (as amended from time to time, the 'General
Corporation Law')), the Corporation shall indemnify any person who is or
was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (a 'Proceeding'), whether civil,
criminal, administrative or investigative, including, without limitation,
an action by or in the right of the Corporation to procure a judgment in
its favor, by reason of the fact that such person, or a person of whom such
person is the legal representative, is or was a Director or officer of the
Corporation, or is or was serving in any capacity at the request of the
Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (an 'Other Entity'), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and
costs, charges and expenses (including attorneys' fees and disbursements).
Persons who are not Directors or officers of the Corporation may be
similarly indemnified in respect of service to the Corporation or to an
Other Entity at the request of the Corporation to the extent the Board of
Directors at any time specifies that such persons are entitled to the
benefits of this [Article].
Section 2. Advancement of Expenses. The Corporation shall, from time
to time, reimburse or advance to any Director or officer or other person
entitled to indemnification hereunder the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in
connection with any Proceeding, in advance of the final disposition of such
Proceeding; provided, however, that, if required by the General Corporation
Law, such expenses incurred by or on behalf of any such Director, officer
or other person may be paid in advance of the final disposition of a
Proceeding only upon receipt by the Corporation of an undertaking, by or on
behalf of such Director, officer or other person indemnified hereunder, to
repay any such amount so advanced if it shall ultimately be determined by
final judicial decision from which there is no further right of appeal that
such Director, officer or other person is not entitled to be indemnified
for such expenses.
Section 3. Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant
to, this [Article] shall not be deemed exclusive of any other rights which
a person seeking indemnification or reimbursement or advancement of
expenses may have or to which such person hereafter may be entitled under
any statute, the Restated Certificate of Incorporation, these By-Laws, any
agreement, any vote of stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office.
II-1
<PAGE>
Section 4. Continuation of Benefits. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted
pursuant to, this [Article] shall continue as to a person who has ceased to
be a Director or officer (or other person indemnified hereunder) and shall
inure to the benefit of the executors, administrators, legatees and
distributees of any such person.
Section 5. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee
or agent of an Other Entity, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under the provisions
of this [Article] or the Restated Certificate of Incorporation or under
Section 145 of the General Corporation Law or any other provision of law.
Section 6. Binding Effect. The provisions of this [Article] shall be
a contract between the Corporation, on the one hand, and each Director and
officer who serves in such capacity at any time while this [Article] is in
effect and/or any other person indemnified hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be legally bound. No repeal or modification of this
[Article] shall affect any rights or obligations with respect to any state
of facts then or theretofore existing or thereafter arising or any
proceeding theretofore or thereafter brought or threatened based in whole
or in part upon any such state of facts.
Section 7. Procedural Rights. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant
to, this [Article] shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of providing that such indemnification
or reimbursement or advancement of expenses is not appropriate shall be on
the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that
such indemnification or reimbursement or advancement of expenses is proper
in the circumstances nor an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel and its
stockholders) that such person is not entitled to such indemnification or
reimbursement or advancement of expenses shall constitute a defense to the
action or create a presumption that such person is not so entitled. Such a
person shall also be indemnified for any expenses incurred in connection
with successfully establishing his or her right to such indemnification or
reimbursement or advancement of expenses, in whole or in part, in any such
proceeding.
Section 8. Service Deemed at Corporation's Request. Any Director or
officer of the Corporation serving in any capacity (a) another corporation
of which a majority of the shares entitled to vote in the election of its
directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed, in each case, to be doing so at the request of
the Corporation.
Section 9. Election of Applicable Law. Any person entitled to be
indemnified or to receive reimbursement or advancement of expenses as a
matter of right pursuant to this [Article] may elect to have the right to
indemnification or reimbursement or advancement of expenses interpreted on
the basis of the applicable law in effect at the time of the occurrence of
the event or events giving rise to the applicable Proceeding, to the extent
permitted by law, or on the basis of the applicable law in effect at the
time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the
Corporation, at the time indemnification or reimbursement or advancement of
expenses is sought; provided, however, that if not such notice is given,
the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.'
The directors and officers of the Company are insured against certain civil
liabilities, including liabilities under federal securities laws, which might be
incurred by them in such capacity.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) See Index to Exhibits.
(b) All schedules are omitted as the required information is presented in
the registrants' consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the 'Securities Act');
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if total dollar
value of securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the 'Calculation of Registration
Fee' in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request; and
(5) To supply by means of a post-effective amendment all information
concerning the Exchange Offer that was not the subject of and included in
the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against the registrant by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Batesville, Indiana, on
October 22, 1996.
PRIME SUCCESSION, INC.
(formerly known as Prime Succession
Acquisition Corp.)
By: /s/ MYLES S. CAIRNS
-------------------------------------
Chief Financial Officer,
Secretary and Treasurer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes Gary
L. Wright and Myles S. Cairns, and each of them, with full power of substitution
and full power to act without the other, his or her true and lawful
attorney-in-fact and agent in his or her name, place and stead, to execute in
the name and on behalf of such person, individually and in each capacity stated
below, any and all amendments (including post-effective amendments) to this
Registration Statement and all documents relating thereto, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, and generally to do all such things in his
or her name and on his or her behalf in his or her respective capacities as
officers or directors of Prime Succession, Inc. to comply with the provisions of
the Securities Act of 1933, as amended, and all requirements of the Securities
and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------ ------------------------------------------ ------------------
<S> <C> <C>
/s/ GARY L. WRIGHT President, Chief Executive Officer October 22, 1996
- ------------------------ (principal executive officer) and Director
Gary L. Wright
/s/ MYLES S. CAIRNS Chief Financial Officer, Secretary and October 22, 1996
- ------------------------ Treasurer (principal financial officer;
Myles S. Cairns principal accounting officer)
/s/ WARREN B. RUDMAN Director October 22, 1996
- ------------------------
Warren B. Rudman
/s/ HOWARD A. LIPSON Director October 22, 1996
- ------------------------
Howard A. Lipson
/s/ JOHN R. WOODARD Director October 22, 1996
- ------------------------
John R. Woodard
/s/ CHINH E. CHU Director October 22, 1996
- ------------------------
Chinh E. Chu
/s/ PETER K. GRUNEBAUM Director October 22, 1996
- ------------------------
Peter K. Grunebaum
/s/ CLIFFORD R. HINKLE Director October 22, 1996
- ------------------------
Clifford R. Hinkle
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- -------- -----------------------------------------------------------------------
<S> <C>
2 -- Stock Purchase Agreement, dated as of June 14, 1996, by and among
Prime Succession, Inc., the individuals or entities listed on the
signature pages thereof, The Loewen Group Inc. and Blackhawk
Acquisition Corp.
3.1 -- Certificate of Incorporation of Blackhawk Acquisition Corp.
3.2 -- Certificate of Amendment of Certificate of Incorporation of
Blackhawk Acquisition Corp. changing its name to Prime Succession
Acquisition Corp.
3.3 -- Certificate of Amendment of Certificate of Incorporation of Prime
Succession Acquisition Corp. changing its name to Prime Succession,
Inc.
3.4 -- By-Laws of Prime Succession, Inc.
4.1 -- Indenture dated as of August 15, 1996 between Prime Succession
Acquisition Corp. and United States Trust Company of New York, as
Trustee
4.2 -- Form of 10 3/4% Senior Subordinated Note due 2004 (included in
Exhibit 4.1)
5 -- Opinion of Simpson Thacher & Bartlett
10.1(a)* -- Casket Supply Agreement, dated January 1, 1993, between Batesville
Casket Company, Inc. and Prime Succession, Inc.
10.1(b)* -- Amendment Agreement, dated August 1994, between Batesville Casket
Company, Inc. and Prime Succession, Inc. (with respect to Casket
Supply Agreement)
10.1(c)* -- Amendment 2, dated May 22, 1995, between Batesville Casket Company,
Inc. and Prime Succession, Inc. (with respect to Casket Supply
Agreement)
10.2 -- Stockholders' Agreement dated as of August 26, 1996 among Prime
Succession, Inc. (to be renamed Prime Succession Holdings, Inc.),
Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P., Blackstone Family
Investment Partnership II L.P., PSI Management Direct L.P. and
Loewen Group International, Inc.
10.3 -- Administrative Services Agreement dated as of August 26, 1996
between Prime Succession Acquisition Corp. (to be renamed Prime
Succession, Inc.) and Loewen Group International, Inc.
10.4 -- Credit Agreement dated as of August 26, 1996 among Prime Succession,
Inc. (to be renamed Prime Succession Holdings, Inc.), Prime
Succession Acquisition Corp. (to be renamed Prime Succession, Inc.),
Goldman, Sachs & Co., as syndication agent and arranging agent, the
financial institutions from time to time parties thereto as lenders
and The Bank of Nova Scotia, as administrative agent for such
lenders
10.5 -- Letter Agreement dated August 1, 1996 between Prime Succession
Acquisition Corp. (to be renamed Prime Succession, Inc.) and Gary
Wright
10.6 -- Letter Agreement dated August 1, 1996 between Prime Succession
Acquisition Corp. (to be renamed Prime Succession, Inc.) and Myles
Cairns
12 -- Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of Prime Succession, Inc. (formerly known as Prime
Succession Acquisition Corp.)
23.1 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5)
23.2 -- Consent of Ernst & Young LLP (independent auditors prior to the
Acquisition)
24 -- Power of Attorney (included on page II-4 of this Registration
Statement)
25 -- Statement of Eligibility on Form T-1 of United States Trust Company
of New York
27 -- Financial Data Schedule
99.1 -- Registration Rights Agreement dated as of August 15, 1996 between
Prime Succession Acquisition Corp. and Smith Barney Inc.
99.2 -- Form of Letter of Transmittal
99.3 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------
*To be filed by amendment.
<PAGE>
EXECUTION COPY
STOCK PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
Section Page
1. REPRESENTATIONS AND WARRANTIES OF BLACKHAWK.......................... 1
1.1 Organization, Standing and Power, Capitalization
and Ownership of Blackhawk...................................... 1
1.2 Subsidiaries of Blackhawk....................................... 2
1.3 Authority....................................................... 3
1.4 Effect of Transaction, Records, Etc............................. 3
1.5 Financial Statements............................................ 4
1.6 Liabilities..................................................... 5
1.7 Absence of Changes.............................................. 5
1.8 Tax Matters..................................................... 7
1.9 Title to Assets; Necessary Properties........................... 8
1.10 Real Property Owned or Leased................................... 9
1.11 Trademark and Trade Names.......................................10
1.12 Insurance.......................................................10
1.13 Agreements, Etc.................................................10
1.14 Litigation, Etc.................................................11
1.15 Compliance; Governmental Authorizations.........................11
1.16 Preneed Contracts and Funds.....................................12
1.17 Labor Relations; Employees......................................12
1.18 Compensation....................................................13
1.19 Employee Benefit Matters........................................13
1.20 Business Generally..............................................15
1.21 Bank Accounts; Officers.........................................15
1.22 Insolvency......................................................15
1.23 Environmental Matters...........................................16
1.24 Firle Funeral Home..............................................17
1.25 Disclosures.....................................................17
1.26 Brokers and Advisors............................................17
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................17
2.1 Ownership of Shares.............................................18
2.2 Title to Shares.................................................18
2.3 Authority.......................................................18
2.4 Effect of Transaction, Records, Etc.............................18
2.5 Brokers and Advisors............................................19
2.6 Claims on Blackhawk.............................................19
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
PURCHASER AND GRIZZLY................................................19
<PAGE>
ii
Section Page
3.1 Organization, Standing and Power................................19
3.2 Authority.......................................................19
3.3 Effect of Transaction, Records, Etc.............................19
3.4 Investment Representations......................................20
3.5 Brokers.........................................................20
3.6 No Knowledge of Misrepresentations or Omissions.................20
3.7 HSR Filing Matters..............................................20
3.8 Authorization; No Conflict..................................20
4. SALE OF SHARES; PRICE AND TERMS; ADJUSTMENTS.........................21
4.1 Closing Date....................................................21
4.2 Sale and Purchase...............................................21
4.3 Price...........................................................21
4.4 Terms of Payment................................................22
4.5 Method of Payment...............................................22
4.6 Post Closing Adjustment.........................................23
4.7 Payment of Post Closing Adjustment..............................23
5. CLOSING TRANSACTIONS.................................................24
5.1 Closing Obligations of the Sellers..............................24
5.2 Closing Obligations of the Purchaser............................25
6. OTHER AGREEMENTS AND COVENANTS OF THE PARTIES........................25
6.1 Operation of the Businesses of Blackhawk and the Blackhawk
Subsidiaries................................................... 25
6.2 Supplements.....................................................26
6.3 Regulatory Consents, Authorizations, Etc........................27
6.4 Negotiations with Others........................................27
6.5 Publicity.......................................................27
6.6 Confidentiality.................................................28
6.7 Restrictions on Transfer of Shares..............................29
6.8 Federal Trade Commission/Wages & Salaries.......................29
6.9 Application of Down Payment.....................................29
6.10 Deposit Trust Closing Expenses..................................31
6.11 Pre-Closing Cooperation.........................................31
6.12 Assistance in Financing.........................................32
6.13 No Liquidation..................................................32
6.14 Transactions with Affiliates....................................32
<PAGE>
iii
Section Page
7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER........................... 32
7.1 Representations and Warranties.................................. 33
7.2 Performance of Obligations of Blackhawk and the Sellers......... 34
7.3 No Litigation................................................... 34
7.4 Regulatory Consents, Authorizations, Etc........................ 35
7.5 Senior Indebtedness............................................. 35
7.6 Financing....................................................... 35
7.7 All Shares Sold................................................. 35
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS............................. 35
8.1 Representations and Warranties.................................. 36
8.2 Performance of Obligations of the Purchaser..................... 36
8.3 No Litigation................................................... 36
8.4 Regulatory Consents, Authorizations, Etc........................ 36
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 36
9.1 Representations and Warranties of Blackhawk..................... 36
9.2 Representations and Warranties of the Sellers................... 36
9.3 Representations and Warranties of the Purchaser................. 37
9.4 Limitation of Recourse.......................................... 37
9.5 Acknowledgement by the Purchaser................................ 37
10. DEFINITIONS.......................................................... 37
11. MISCELLANEOUS........................................................ 40
11.1 Parties in Interest............................................ 40
11.2 Arbitration.................................................... 40
11.3 Choice of Law.................................................. 41
11.4 Termination.................................................... 41
11.5 Entire Agreement; Amendments................................... 42
11.6 Headings....................................................... 43
11.7 Currency....................................................... 43
11.8 Notices........................................................ 43
11.9 Further Assurances............................................. 45
11.10 No Third-Party Beneficiaries................................... 45
11.11 Waivers........................................................ 45
11.12 Knowledge...................................................... 45
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of June 14,
1996, by and among PRIME SUCCESSION, INC. ("Blackhawk"), the other individuals
or entities listed on the signature pages hereof (collectively, the "Sellers"),
THE LOEWEN GROUP INC. ("Grizzly") and BLACKHAWK ACQUISITION CORP., a Delaware
corporation (the "Purchaser").
WITNESSETH:
WHEREAS, the Sellers own in the aggregate (i) 129.03285 shares of common
stock, Class A, $0.01 par value per share ("Class A Common Stock"), of
Blackhawk, representing collectively 100.0% of the issued and outstanding
shares of Class A Common Stock, (ii) 900 shares of common stock, Class B, $0.01
par value per share ("Class B Common Stock" and collectively with the Class A
Common Stock, the "Common Stock"), of Blackhawk, representing collectively
100.0% of the issued and outstanding shares of Class B Common Stock, and (iii)
1,957 shares of preferred stock, $1,000 par value per share ("Preferred
Stock"), of Blackhawk, representing collectively 100.0% of the issued and
outstanding Preferred Stock (all of the shares of Common Stock and of Preferred
Stock owned by the Sellers being hereinafter referred to as the "Shares");
WHEREAS, each of the Sellers respectively holds such number of Shares as
is set forth below such Seller's name on Schedule 1.1 hereto; and
WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser
wishes to purchase from the Sellers, the Shares, upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, Blackhawk, the Sellers, Grizzly and the
Purchaser hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF BLACKHAWK
Blackhawk represents and warrants to the Purchaser as follows:
1.1 Organization, Standing and Power, Capitalization and Ownership of
Blackhawk. Blackhawk is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Blackhawk has all
requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as it is now being conducted
<PAGE>
and to execute, deliver and perform this Agreement and all other agreements,
documents and instruments contemplated hereby. Blackhawk is duly qualified to
do business and is in good standing as a foreign corporation in all of the
states in which it is required so to qualify, except where the failure to so
qualify could not be reasonably expected to have a material adverse effect on
the business, operations or financial condition of Blackhawk. The authorized
capital stock of Blackhawk consists of (a) 142 shares of Class A Common Stock,
$0.01 par value per share, of which 129.03285 are issued and outstanding, (b)
900 shares of Class B Common Stock, $0.01 par value per share, of which 900 are
issued and outstanding and (c) 1,957 shares of Preferred Stock, $1,000 par
value per share, of which 1,957 shares are issued and outstanding. No shares of
Common Stock or Preferred Stock are held in the treasury of Blackhawk. Schedule
1.1 sets forth a complete and accurate list of the shareholders of record of
Blackhawk and the number of shares owned by each shareholder. Except as set
forth in Schedule 1.1, Blackhawk is not a party to or bound by any options,
calls, contracts or commitments of any character relating to any issued or
unissued stock or any other equity security issued or to be issued by it. None
of the Shares was issued in violation of any preemptive rights binding on
Blackhawk.
1.2 Subsidiaries of Blackhawk. Except as set forth in Schedule 1.2, as of
the Closing Date, Blackhawk will own, directly or through one or more
wholly-owned subsidiaries, all of the outstanding capital stock of each of the
corporations listed in Schedule 1.2 (hereinafter referred to collectively as
the "Blackhawk Subsidiaries"). Schedule 1.2 sets forth an organizational chart
for the Blackhawk Subsidiaries and the legal name, registered office and
registered agent and state of incorporation of each Blackhawk Subsidiary. Each
Blackhawk Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the incorporation state indicated for each
Blackhawk Subsidiary in Schedule 1.2. Each Blackhawk Subsidiary is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which it is required so to qualify, except where the failure so to qualify
could not be reasonably expected to have a material adverse effect on the
business, operations or financial condition of such Blackhawk Subsidiary, and
each has full corporate power and authority to carry on the business in which
it is now engaged. Schedule 1.2 also sets forth for each Blackhawk Subsidiary
the name and business address of each funeral home, cemetery and/or other
related businesses owned or operated by the particular Blackhawk Subsidiary.
The Articles of Incorporation or corporate charters of the Blackhawk
Subsidiaries and all amendments thereto, certified by the Secretary of State of
the state in which each is incorporated, a certificate of good standing, or
similar certificate, dated and certified within 30 days of the Closing Date by
the Secretary of State for each Blackhawk Subsidiary, and a copy of each
Blackhawk Subsidiary's Bylaws or Code of Regulations, as amended to date,
certified by the appropriate recording officers of each, will be delivered to
the Purchaser prior to or at the Closing. Except as set forth in Schedule 1.2,
Blackhawk and the Blackhawk Subsidiaries do not own, directly or indirectly,
any material interest in the capital stock of any other corporation,
association, trust or similar entity, any interest in the equity of any
partnership or similar entity, any share in any joint venture, or any other
equity
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or proprietary interest in any entity or enterprise, however organized and
however such interest may be denominated or evidenced. Schedule 1.2 accurately
sets forth the capitalization and ownership, and the issued and outstanding
capital stock, of each of the Blackhawk Subsidiaries. All of the outstanding
capital stock of the Blackhawk Subsidiaries is duly authorized and validly
issued, fully paid and nonassessable. None of the shares of capital stock of
the Blackhawk Subsidiaries were issued in violation of any preemptive rights
binding on the Blackhawk Subsidiaries. There are no issued or outstanding
shares of any class of capital stock of the Blackhawk Subsidiaries other than
those set forth in Schedule 1.2. Between the date hereof and the Closing,
Blackhawk will cause each of the Blackhawk Subsidiaries not to issue, sell or
purchase, or agree to issue, sell or purchase, any shares of common stock or
any other security of the Blackhawk Subsidiaries (including, without
limitation, any option, right or warrant to purchase any common stock or any
other security of such entity) to any person or entity other than Blackhawk or
a Blackhawk Subsidiary, without the prior written consent of the Purchaser.
Except as disclosed in Schedule 1.2, none of the Blackhawk Subsidiaries has
outstanding, or has agreed to issue or sell, any options, rights, warrants,
calls or other commitments (either in the form of convertible securities or
otherwise) pursuant to which the holder thereof has or will or may have the
right to purchase or otherwise acquire any shares of stock or any other
security of Blackhawk or any of the Blackhawk Subsidiaries. No person, firm,
corporation or other entity owns or controls capital stock of the Blackhawk
Subsidiaries, except as set forth in Schedule 1.2.
1.3 Authority. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by
Blackhawk have been duly and validly authorized by Blackhawk's Board of
Directors. This Agreement and all other agreements, documents and instruments
contemplated hereby to be signed by Blackhawk constitute, or upon execution and
delivery will constitute, legal, valid and binding obligations of Blackhawk
enforceable against Blackhawk in accordance with their respective terms,
subject to applicable laws of bankruptcy, insolvency and similar laws affecting
creditors' rights generally and the application of general rules of equity.
1.4 Effect of Transaction, Records, Etc. Except as set forth in Schedule
1.4, neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the consummation by
Blackhawk and the Sellers of the transactions contemplated hereby or thereby,
nor the compliance by Blackhawk and the Sellers with any of the provisions
hereof or thereof, do or will: (a) conflict with or result in a breach of the
Articles of Incorporation or charter papers or Bylaws or Code of Regulations or
other organizational documents of Blackhawk, any of the Blackhawk Subsidiaries
or, with respect to the Sellers that are corporations or other business
entities, of such Sellers; (b) violate in any material respect any statute,
law, rule or regulation or any order, writ, injunction or decree of any court
or governmental authority to which Blackhawk, any of the Blackhawk Subsidiaries
or any of the Sellers is subject; or (c) violate or conflict with in any
material respect or constitute a material default under (or give rise to any
right of termination,
3
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cancellation or acceleration under) any material agreement or any writing of
any nature to which Blackhawk, any of the Blackhawk Subsidiaries or any of the
Sellers is a party or by which any of their respective assets or properties may
be bound, which agreement or writing will not be terminated on or before the
Closing Date. Except as set forth on Schedule 1.4 hereto, no consent or
approval of or notification to any governmental authority by Blackhawk, any of
the Sellers or any of the Blackhawk Subsidiaries is required for the execution
and delivery by Blackhawk and the Sellers of this Agreement or any other
agreement, document or instrument relating hereto, or the consummation of the
transactions contemplated hereby or thereby. Neither Blackhawk nor any of the
Blackhawk Subsidiaries is in default in the performance, observance or
fulfillment of any of the terms or conditions of their respective Articles of
Incorporation or charter papers or Bylaws or Code of Regulations. The minute
and stock record books of Blackhawk and each of the Blackhawk Subsidiaries,
true and complete copies of which have been delivered to the Purchaser, contain
complete and accurate records of all meetings and other corporate actions of
the shareholders and Boards of Directors of Blackhawk and each of the Blackhawk
Subsidiaries and all transactions with respect to the capital stock of
Blackhawk and each of the Blackhawk Subsidiaries, as of the date hereof.
1.5 Financial Statements. Blackhawk has delivered to the Purchaser true
and complete copies of (i) the consolidated balance sheets of Blackhawk as at
the close of each of the fiscal years ended December 31, 1992, 1993 and 1994,
together with related consolidated statements of operations and retained
earnings, shareholders' equity and cash flows for the years then ended
(collectively, the "Prior Audited Financials"), in each case certified by Ernst
& Young LLP, independent certified public accountants, (ii) the consolidated
balance sheet of Blackhawk as at December 31, 1995, (the "December Audited
Balance Sheet"), together with related consolidated statements of operations
and retained earnings, shareholders' equity and cash flows for the year then
ended (the "December Audited Income Statement" and collectively with the
December Audited Balance Sheet, the "December Audited Financials"), in each
case certified by Ernst & Young LLP, independent certified public accountants,
and (iii) the unaudited consolidated balance sheet of Blackhawk as at March 31,
1996, together with related consolidated statements of operations and retained
earnings, shareholders' equity and cash flows for the quarter then ended (the
"March Unaudited Financials").
The Prior Audited Financials, the December Audited Financials and
the March Unaudited Financials are attached hereto as Schedule 1.5. The Prior
Audited Financials, the December Audited Financials and the March Unaudited
Financials (i) were prepared in accordance with the books of account and other
financial records of Blackhawk and the Blackhawk Subsidiaries and (ii) present
fairly in all material respects the consolidated financial position and results
of operation of Blackhawk and the Blackhawk Subsidiaries as at the dates
thereof or for the periods covered thereby in accordance with generally
accepted
4
<PAGE>
accounting principles, applied on a basis consistent with the past practices of
Blackhawk, subject, in the case of the March Unaudited Financials, to normal
year-end adjustments.
1.6 Liabilities. At the date of the December Audited Balance Sheet,
Blackhawk and the Blackhawk Subsidiaries did not have material liabilities,
taxes or obligations of any nature, fixed or contingent, matured or unmatured,
which were not recorded on the December Audited Balance Sheet and at the
Closing, Blackhawk and the Blackhawk Subsidiaries will not have material
liabilities, taxes or obligations of any nature, fixed or contingent, matured
or unmatured, which will not be recorded on the Closing Balance Sheet, or
disclosed in the Schedules to this Agreement. For purpose of this paragraph, a
liability shall be deemed material if it involves an obligation in excess of
$50,000.
1.7 Absence of Changes. Except as otherwise set forth in Schedule 1.7
hereto, since December 31, 1995, Blackhawk and each of the Blackhawk
Subsidiaries have been operated only in the ordinary course of business,
consistent with past practices (including the formation of new Blackhawk
Subsidiaries and the acquisition by Blackhawk or any of the Blackhawk
Subsidiaries of new funeral home, cemetery or other related businesses), and
there has not been:
(a) any materially adverse change in the condition,
financial or otherwise, of the assets, liabilities, earnings, book value,
businesses or prospects of Blackhawk or any of the Blackhawk Subsidiaries;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the businesses or assets of Blackhawk or
any of the Blackhawk Subsidiaries;
(c) the incurrence of any material obligation or liability
(whether absolute, accrued, contingent or otherwise and whether due or to
become due), affecting Blackhawk or any of the Blackhawk Subsidiaries
(including any new indebtedness for borrowed money), other than
obligations or liabilities incurred in the ordinary course of business and
consistent with past practices;
(d) any strike or work stoppage affecting Blackhawk or any of
the Blackhawk Subsidiaries;
(e) the adoption of any statute, rule, regulation or order which
materially and adversely affects the businesses or assets of Blackhawk or
any of the Blackhawk Subsidiaries;
(f) any sale, transfer or other disposition of any assets of
Blackhawk or any of the Blackhawk Subsidiaries having a value with respect
to any single asset in excess of
5
<PAGE>
$25,000 or an aggregate value as to all such assets in excess of
$1,000,000 to any party, except for payments of third party obligations
incurred in the ordinary course of business in accordance with the regular
payment practices of Blackhawk and the Blackhawk Subsidiaries,
dispositions of surplus or used equipment, or other dispositions in the
ordinary course of business, consistent with past practices;
(g) any termination or waiver of any material rights of value to
Blackhawk or any of the Blackhawk Subsidiaries;
(h) any increase in the aggregate compensation of the employees
of Blackhawk or any Blackhawk Subsidiary, including, without limitation,
any increase pursuant to any bonus, pension, profit sharing or other plan
or commitment other than those increases occurring pursuant to the terms
of the Plans;
(i) any expenditure or commitment in excess of $50,000 for
acquisitions, additions to or replacements of property, plant or equipment
of Blackhawk or any of the Blackhawk Subsidiaries;
(j) any forward purchase commitments by Blackhawk or any of the
Blackhawk Subsidiaries, or to which any of them may be obligated,
involving more than $50,000 from any one supplier, except as necessary to
fulfill the normal and ordinary inventory and operational requirements of
Blackhawk and each of the Blackhawk Subsidiaries, consistent with past
practices;
(k) any change in the accounting methods or practices followed by
Blackhawk;
(l) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of Blackhawk or any non
wholly-owned Blackhawk Subsidiary to any person or entity that is not
Blackhawk or a Blackhawk Subsidiary or the transfer of any shares of
capital stock of any Blackhawk Subsidiary (or any entity that was a
subsidiary of Blackhawk immediately prior to such transfer) held by
Blackhawk or any Blackhawk Subsidiary (other than to Blackhawk or another
Blackhawk Subsidiary);
(m) any amendment to the articles or certificate of
incorporation or by-laws or other charter or organizational documents of
Blackhawk or any of the Blackhawk Subsidiaries;
(n) any material change in the method of conducting the business
of Blackhawk or any of the Blackhawk Subsidiaries (for purposes of the
foregoing, any changes in preneed sales techniques or practices or funding
arrangements for preneed
6
<PAGE>
products or in investment strategies with respect to preneed trust funds
(other than such changes required by applicable law) will be deemed to be
material); and
(o) any event which would permit any third party to demand
repayment of any indebtedness of Blackhawk or any of the Blackhawk
Subsidiaries prior to its normal maturity date.
1.8 Tax Matters. Except as set forth in Schedule 1.8:
(a) To the best knowledge of Blackhawk, all federal, state, local
and foreign tax returns and tax reports required to be filed with respect to
the businesses and assets of Blackhawk and any of the Blackhawk Subsidiaries
have been filed with the appropriate governmental agencies in all jurisdictions
in which such returns and reports are required to be filed, or will be timely
filed by Blackhawk and the appropriate Blackhawk Subsidiary. To the best
knowledge of Blackhawk, all of the foregoing tax returns and reports were, or
will be, prepared in the manner required under applicable law and regulation
and are, or will be true, correct and complete in all respects, and all amounts
shown as owing thereon have been or will be paid with such returns or reports.
Blackhawk has made or prior to Closing will make available to the Purchaser
true and complete copies of all the respective federal, state, local and
foreign income, franchise, sales, employment and use, real estate and personal
property tax returns for Blackhawk and each of the Blackhawk Subsidiaries for
each of the four years ended December 31, 1992, December 31, 1993, December 31,
1994 and December 31, 1995, respectively, and all such federal, state, local
and foreign income, franchise, sales, employment and use, real estate and
personal property tax returns filed prior to Closing which include Blackhawk or
any of the Blackhawk Subsidiaries with respect to periods ending after December
31, 1995 and prior to Closing.
(b) To the best knowledge of Blackhawk, there is no actual or
threatened dispute or disagreement with any international, federal, state or
local revenue authority or agency regarding liability or potential liability
for any tax in which an adverse determination could be reasonably expected to
have a material adverse effect on the business, operations or financial
condition of Blackhawk or any of the Blackhawk Subsidiaries. Blackhawk will
have made available to the Purchaser true and complete copies of any and all
existing Internal Revenue Service (the "IRS") audit reports and revenue agent's
reports which have been delivered to Blackhawk or any of the Blackhawk
Subsidiaries and any and all existing determination letters, private letter
rulings, consents and closing agreements obtained from or filed with the IRS
for each of the four years ended December 31, 1992, December 31, 1993, December
31, 1994 and December 31, 1995, respectively, relating to Blackhawk or any of
the Blackhawk Subsidiaries and all related settlement documents and
correspondence. To the best knowledge of Blackhawk, no unsettled claim for tax,
assessment, fee, levy or other governmental charge of any nature for which
Blackhawk or any of the Blackhawk Subsidiaries is presently or may become
liable exists or has been threatened and there is no
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valid basis for any such claim. No agreement which is now in effect has been
made with respect to Blackhawk or any of the Blackhawk Subsidiaries for the
waiver of any statute of limitations or the extension of time for the
assessment of any tax, assessment, fee, levy or other governmental charge of
any nature. Neither Blackhawk nor any of the Blackhawk Subsidiaries has agreed
to, or is required to, make any adjustments under Section 481(a) of the
Internal Revenue Code of 1986, as amended, (the "Code") by reason of a change
in a method of accounting or otherwise.
(c) To the best knowledge of Blackhawk, all federal, state, local
and foreign income, profits, franchise, gross receipts, sales, use, occupation,
property, excise, payroll, withholding and other taxes, duties or imports,
including interest, penalties and additions thereto (collectively, "Taxes")
shown on the tax returns referred to in Section 1.8(a) above as being owed by
Blackhawk or a Blackhawk Subsidiary were fully and duly paid when due, and all
Taxes due prior to the Closing Date will have been fully and duly paid when
due, and there is no further material liability of Blackhawk or any of the
Blackhawk Subsidiaries for Taxes, except as shall be adequately reserved for in
the Closing Balance Sheet.
(d) Neither Blackhawk nor any of the Blackhawk Subsidiaries has
entered into or is bound by any Tax sharing or similar agreement. Blackhawk is
not and has never been a United States real property holding company for
purposes of Section 1445 of the Code.
(e) For purposes of this paragraph 1.8, "material" shall mean
only those matters in excess of $50,000.
1.9 Title to Assets; Necessary Properties. Except as set forth in Schedule
1.9, Blackhawk and each of the Blackhawk Subsidiaries have, and as of the
Closing Date will have, (a) good and marketable title to all the real property
indicated on the December Audited Balance Sheet and the Closing Balance Sheet,
respectively, as being owned by Blackhawk or a Blackhawk Subsidiary; and (b)
good and marketable title to the tangible personal property included or to be
included on the December Audited Balance Sheet and the Closing Balance Sheet,
respectively, free and clear of all property interests, liens, pledges, claims,
charges, escrows, encumbrances, options, rights of first refusal, mortgages,
indentures, easements, licenses, security agreements or other agreements,
arrangements, contracts, commitments or obligations (collectively, the
"Encumbrances"), except for (i) Encumbrances specifically described in Schedule
1.9 to this Agreement, (ii) statutory liens for taxes or other governmental
charges with respect to owned real property of Blackhawk and the Blackhawk
Subsidiaries not yet due and payable or the amount or validity of which is
being contested in good faith by appropriate proceedings by Blackhawk, and with
respect to which all reserves required by generally accepted accounting
principles have been established, (iii) mechanics, carriers, workers, repairers
and similar statutory liens arising or incurred in the ordinary course of
business for amounts which are not delinquent and are not in excess of $20,000
in the case of a single property and $75,000 in the aggregate and (iv)
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minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (x) were not incurred in connection
with any indebtedness, (y) do not render title to the property encumbered
thereby unmarketable and (z) do not, individually or in the aggregate,
materially impair the use, for its current and anticipated purposes, or value
of such owned real property. Blackhawk and each of the Blackhawk Subsidiaries
have all of the properties, assets and rights which are necessary to carry on
their respective businesses as presently conducted.
1.10 Real Property Owned or Leased.
(a) Schedule 1.10 contains a list and brief description of all
real estate used in the operation of Blackhawk and each of the Blackhawk
Subsidiaries. For each parcel of real estate listed, the Schedule indicates
whether the real estate is owned by Blackhawk or a Blackhawk Subsidiary or
leased by Blackhawk or a Blackhawk Subsidiary as tenant or landlord, the
purpose to which such property is being employed and, in the case of any such
property which is leased, the termination date or notice requirement with
respect to termination, annual rental and renewal or purchase options and any
provisions limiting the assignability thereof. All of such real estate and the
improvements thereon are, to the best knowledge of Blackhawk, in reasonably
good condition and working order.
(b) With respect to real estate owned, each of Blackhawk and the
Blackhawk Subsidiaries has good and marketable title in fee simple to, and owns
all improvements (including buildings and other structures) on, the real estate
owned by it, subject only to those Encumbrances, if any, listed in Schedule
1.9. To the best of Blackhawk's knowledge, there are no defaults or disputes
relating to said Encumbrances. As of the Closing Date, with respect to real
estate leased, and except as set forth in Schedule 1.10, (i) all such leases
are in full force and effect and constitute valid and binding obligations of
the respective parties thereto, (ii) there has not been and there currently is
not any default thereunder by any party, (iii) no event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute a default thereunder entitling the
landlord to terminate the lease and (iv) the continuation, validity and
effectiveness of all such leases under the current rentals and other current
material terms thereof will in no way be affected by the sale and transfer of
the Shares by the Sellers to the Purchaser under this Agreement. Blackhawk has
made available to the Purchaser true and complete copies of all leases referred
to in said Schedule 1.10. To the best knowledge of Blackhawk, the improvements
on such real estate conform with all applicable federal, state and local laws
and regulations and the properties are zoned for the various purposes for which
such real estate is currently being used (other than permissible prior
non-conforming uses), or variances from such zoning ordinances have been
granted.
(c) Blackhawk has, or prior to the Closing Date will have (i)
preliminary title reports for owner's polices of title insurance for all
parcels of real property specified in
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Schedule 1.10(c) (the "Properties"), from Chicago Title & Trust Co. (the "Title
Company"), along with copies of all documents and instruments reflecting items
noted as exceptions to title (collectively the "Preliminary Reports"), (ii)
ALTA Surveys of the Properties in form and substance acceptable to the
Purchaser and otherwise sufficient to enable the Title Company to delete from
the Policies the so-called standard exception for matters disclosed by an
accurate survey of the Properties (collectively, the "Surveys") and (iii), for
each of the Properties, an ALTA Extended Owner's Form B Policy of Title
Insurance or its equivalent from the Title Company (collectively, the
"Policies"), insuring that fee simple title to each of the Properties is vested
in Blackhawk or any of the Blackhawk Subsidiaries, as the case may be, such
insurance to be in an amount reasonably determined by the Purchaser.
1.11 Trademark and Trade Names. Blackhawk or one of the Blackhawk
Subsidiaries, as the case may be, owns or has the right to use all the
trademarks and trade names which are used in the operation of the business of
Blackhawk and the Blackhawk Subsidiaries in their respective trade areas (a
true and complete list of which is included in Schedule 1.11), and, with
respect to all trademarks and trade names owned by it and to its best
knowledge, has the right to bring actions for the infringement thereof.
1.12 Insurance. Except as set forth in Schedule 1.12, Blackhawk maintains
in effect insurance covering Blackhawk and each of the Blackhawk Subsidiaries
in an amount (a) believed by Blackhawk to be adequate and (b) customary for
businesses of the kind engaged in by Blackhawk and the Blackhawk Subsidiaries
in the same geographical areas where such businesses are located, and such
insurance coverage shall be maintained by Blackhawk through the Closing Date.
Schedule 1.12 includes a list of all policies of insurance maintained with
respect to Blackhawk and each of the Blackhawk Subsidiaries, true and complete
copies of which have been provided to the Purchaser. Between now and the
Closing Date, Blackhawk shall furnish to the Purchaser and its agents such
additional information as the Purchaser shall reasonably request regarding such
insurance.
1.13 Agreements, Etc. Schedule 1.13 contains a list and brief description
of the following written contracts, agreements and other instruments relating
to Blackhawk or any of the Blackhawk Subsidiaries: (a) contract with or
commitment to any labor union; (b) contract involving more than $50,000 in any
instance for the future purchase of materials, supplies, equipment or services;
(c) profit sharing, bonus, incentive, stock option, pension, retirement,
employee stock purchase, health, dental, hospitalization, insurance or similar
plan, agreement or policy, formal or informal, providing benefits to any
current or former director, officer, shareholder or employee of Blackhawk or
any of the Blackhawk Subsidiaries; (d) indenture, mortgage, promissory note,
loan agreement, guarantee or other agreement or commitment for the borrowing of
money, for a line of credit or for a leasing transaction required to be
capitalized in accordance with Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board; (e) contract or commitment for
expenditures, or letter of intent with respect thereto, involving more than
$50,000 in any
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instance; (f) guaranty of the obligations of a third party (other than
guaranties by Blackhawk of the obligations of a Blackhawk Subsidiary or vice
versa); (g) agreement which restricts or regulates Blackhawk or any of the
Blackhawk Subsidiaries with respect to its doing business anywhere in the
world; (h) agreement or arrangement for the sale of any of the assets, property
or rights of Blackhawk or any of the Blackhawk Subsidiaries outside the
ordinary course of business, consistent with past practice, or requiring the
consent of any party to the consummation of the transactions contemplated
hereby; (i) any acquisition or similar agreement pursuant to which Blackhawk
acquired or will acquire prior to the Closing any of the businesses of the
Blackhawk Subsidiaries; and (j) any noncompete or consulting agreement
benefitting Blackhawk or any of the Blackhawk Subsidiaries. Each of Blackhawk
and the Blackhawk Subsidiaries has performed all the obligations required to be
performed by it to date except for any non-performance that could not
reasonably be expected to have a material adverse effect on the business,
operations or financial condition of Blackhawk or any of the Blackhawk
Subsidiaries. Except as set forth on Schedule 1.13, each of Blackhawk and the
Blackhawk Subsidiaries is not in material default or alleged to be in default
in any respect under any agreement, lease, contract, commitment, instrument or
obligation required to be listed in Schedule 1.13 to this Agreement, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute such a material default by it of any of the
foregoing. Except as otherwise indicated in Schedule 1.13, the continuation,
validity and effectiveness of each item on such Schedule under the current
material terms thereof will in no way be adversely affected by the transfer of
the Shares to the Purchaser under this Agreement. True and complete copies of
all written agreements and written summaries of all oral agreements described
in Schedule 1.13 have been provided to the Purchaser by Blackhawk. Without
limiting the generality of the foregoing, except as set forth on Schedule 1.13,
the sale to the Purchaser of the Shares will not give rise to any right of any
third party to rescind, avoid or repudiate any agreement or arrangement (which
will not be terminated as of the Closing Date) listed in Schedule 1.13 to which
Blackhawk or any of the Blackhawk Subsidiaries is a party.
1.14 Litigation, Etc. Except as set forth in Schedule 1.14, 1.15 or 1.17,
there are no actions, suits, claims, investigations or legal or administrative
or arbitration proceedings, foreign or domestic, pending or, to the best of the
knowledge of Blackhawk, threatened against Blackhawk or any of the Blackhawk
Subsidiaries, whether at law or in equity, or before or by any international,
federal, state, municipal or other governmental instrumentality. To the best of
Blackhawk's knowledge, there exists no reasonable basis for litigation against
Blackhawk or any of the Blackhawk Subsidiaries that is not adequately insured,
or in which an adverse determination could be reasonably expected to have a
material adverse effect on the business, operations or financial condition of
Blackhawk or any of the Blackhawk Subsidiaries.
1.15 Compliance; Governmental Authorizations. Except as set forth in
Schedule 1.15, Blackhawk and each of the Blackhawk Subsidiaries are in
compliance with all applicable
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federal, state, local or foreign laws, ordinances, regulations, treaties and
orders including, for example, matters relating to the environment,
anticompetitive practices, discrimination, trusting of prepaid and preneed
funeral and burial contract funds, disclosure of funeral prices, employment,
health and safety, except when such non-compliance could not reasonably be
expected to have a material adverse effect on the business, operations or
financial condition of Blackhawk or any of the Blackhawk Subsidiaries.
Blackhawk and each of the Blackhawk Subsidiaries have all material federal,
state, local and foreign governmental operating licenses and permits necessary
to conduct their respective businesses in the manner presently conducted, and
such operating licenses and permits are in full force and effect, and no
violations are or have been recorded in respect of any thereof, and no
proceeding is pending or, to the best of Blackhawk's knowledge, threatened, to
revoke or limit any thereof.
1.16 Preneed Contracts and Funds. Except as set forth in Schedule 1.16,
(a) all monies ("Preneed Funds") paid to Blackhawk or any of the Blackhawk
Subsidiaries in respect of prearranged or prepaid funeral, burial, merchandise,
cremation or cemetery arrangements or contracts ("Preneed Contracts")
(including, but not limited to, amounts recorded for deferred merchandise and
service liabilities and revenues) have been properly accounted for and
administered as required by applicable state laws and regulations, and, in the
case of insurance-funded Preneed Contracts, been properly and duly paid over to
insurance carriers (less applicable insurance commissions); (b) all accounts,
deposits and trusts of Preneed Funds, and the amounts thereof, are presently
held and administered in compliance in all material respects with all
applicable state laws and regulations (and the corpus of each such trust,
except as so scheduled, will equal, as of the Closing Date (or, if the Closing
Date is not a date as of which the adequacy of such trust corpus is measured
for purposes of applicable law, treating the Closing Date as though it were the
next day as of which the adequacy of such trust corpus is so measured, provided
that such measurement date would not otherwise be later than the date of the
first anniversary of the date hereof), that required by the applicable state
laws); (c) all withdrawals from accounts, deposits and trusts of Preneed Funds
by Blackhawk and each of the Blackhawk Subsidiaries have been made in
compliance in all material respects with all applicable state laws and
regulations; (d) Blackhawk and each of the Blackhawk Subsidiaries have complied
in all material respects with all requirements of federal, state and local tax
laws and regulations with regard to the reporting of income and interest earned
by Preneed Funds and, if required, the payment of taxes thereon; (e) Blackhawk
and each of the Blackhawk Subsidiaries have complied in all material respects
with the terms and conditions of all Preneed Contracts to which they are
parties and are not aware, of any default or allegation of default against any
of them thereunder; and (f) all commissions collected on behalf of commissioned
salespeople in respect of the Preneed Contracts have been paid in the normal
course of business, consistent with past practices.
1.17 Labor Relations; Employees. Blackhawk and each of the Blackhawk
Subsidiaries have generally enjoyed a good employer-employee relationship with
their employees. To the
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best knowledge of Blackhawk, Blackhawk and each of the Blackhawk Subsidiaries
are in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, except for any non-compliance
that could not reasonably be expected to have a material adverse effect on the
business, operations or financial condition of Blackhawk or any of the
Blackhawk Subsidiaries. Except as listed in Schedule 1.17, no unfair labor
practice complaint against Blackhawk or any of the Blackhawk Subsidiaries has
come to the attention of Blackhawk and there is no claim pending against
Blackhawk or any of the Blackhawk Subsidiaries before the National Labor
Relations Board or any other governmental agency. There are no strikes,
disputes, slowdowns or stoppages pending or, to the best knowledge of
Blackhawk, threatened, against or involving Blackhawk or any of the Blackhawk
Subsidiaries, and none has occurred within the past three years. No
representation question exists with respect to the employees of Blackhawk or
any of the Blackhawk Subsidiaries. Neither Blackhawk nor any of the Blackhawk
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract, and no collective bargaining agreement or other labor union
contract is currently being negotiated by Blackhawk or any Blackhawk
Subsidiary. Except as listed in Schedule 1.17, no grievance or arbitration
proceeding is pending before any court or governmental agency relating to any
of the employees of Blackhawk or any of the Blackhawk Subsidiaries.
1.18 Compensation. Blackhawk has previously furnished to the Purchaser a
complete and accurate list of all current officers, employees and consultants
of Blackhawk or the Blackhawk Subsidiaries who, in the calendar years 1995 or
1996, have received or are expected to receive aggregate remuneration in excess
of $70,000 from Blackhawk or any Blackhawk Subsidiary, together with the
current job title and aggregate remuneration rate (bonus and salary) for each
such person, a copy of which is attached hereto as Schedule 1.18.
1.19 Employee Benefit Matters.
(a) Schedule 1.19 lists (i) all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other material benefit plans, or
programs, and all employment, termination, severance or other similar contracts
or agreements to which Blackhawk or any of the Blackhawk Subsidiaries is a
party, with respect to which Blackhawk or any of the Blackhawk Subsidiaries has
any obligation or which are maintained, contributed to or sponsored by
Blackhawk or any of the Blackhawk Subsidiaries for the benefit of any current
or former employee, officer, director or consultant of Blackhawk or any of the
Blackhawk Subsidiaries, (ii) any contracts or agreements between the Sellers or
any of their Affiliates and any employee of Blackhawk or any of the Blackhawk
Subsidiaries, including, without limitation, any contracts or agreements
relating to
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the sale of Blackhawk and (iii) any contract or agreement pursuant to which
labor services are provided to Blackhawk or any of the Blackhawk Subsidiaries
(collectively, the "Plans"). The Sellers have furnished or made available to
the Purchaser a complete and accurate copy of each Plan and (i) a copy of each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed IRS Form 5500,
(iv) the most recently received IRS determination letter for each such Plan,
and (v) the most recently prepared actuarial report and financial statement in
connection with each such Plan. Except as provided in the Plans, Blackhawk and
any of the Blackhawk Subsidiaries have no express or implied commitment (i) to
create or incur material liability with respect to or cause to exist any other
material employee benefit plan, program or agreement, (ii) to enter into any
contract or agreement to provide material compensation or benefits to any
individual other than in the ordinary course, consistent with its or their past
practice, or to make material changes in staffing levels, or (iii) to modify,
change or terminate any Plan, other than with respect to a modification, change
or termination required by ERISA or the Code or in the normal course.
(b) None of the Plans is a multiemployer plan (within the meaning
of Section 3(37) or 4001(a)(3) of ERISA or a single employer pension plan
(within the meaning of Section 4001(a)(15) of ERISA) for which Blackhawk or any
of the Blackhawk Subsidiaries could incur liability under Section 4063 or 4064
of ERISA. Except as set forth and described in all material respects in
Schedule 1.19, none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person or obligates
Blackhawk or any of the Blackhawk Subsidiaries to pay separation, severance,
termination or similar-type benefits solely as a result of any transaction
contemplated by this Agreement or as a result of a "change in control," within
the meaning of such term under Section 280G of the Code. Except as set forth in
Schedule 1.19, none of the Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee,
officer or director of Blackhawk or any of the Blackhawk Subsidiaries. To the
best knowledge of Blackhawk, each of the Plans is subject only to the laws of
the United States of America or a political subdivision thereof.
(c) Each Plan is now and always has been operated in all material
respects in accordance with the requirements of all applicable law, including,
without limitation, ERISA and the Code, and all persons who participate in the
operation of such Plans and all Plan "fiduciaries" (within the meaning of
Section 3(21) of ERISA) have always acted in all material respects in
accordance with the provisions of all applicable law, including, without
limitation, ERISA and the Code. Blackhawk and each of the Blackhawk
Subsidiaries have performed all material obligations required to be performed
by it under, is not in default under or in violation of, and Blackhawk has no
knowledge of any material default or violation by any party to, any Plan. No
legal action, suit or claim is pending or, to the knowledge of Blackhawk,
threatened with respect to any Plan (other than claims for benefits
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in the ordinary course) and no fact or event exists that could give rise to any
such action, suit or claim.
(d) Each Plan which is intended to be qualified under Section
401(a) of the Code has received or has timely requested a favorable
determination letter from the IRS covering the provisions of the Tax Reform Act
of 1986 that it is so qualified, and no fact or event has occurred since the
date of such determination letter from the IRS to adversely affect the
qualified status of any such Plan.
(e) Blackhawk and each of the Blackhawk Subsidiaries have not
incurred any material liability for any penalty or tax arising under Section
4971, 4972, 4975, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and Blackhawk has no knowledge of any fact or event which
could be reasonably expected to give rise to any such liability. Except as set
forth on Schedule 1.19, no complete or partial termination has occurred within
the five years preceding the date hereof with respect to any Plan. Blackhawk
and each of the Blackhawk Subsidiaries have not incurred nor are they
reasonably likely to incur any liability under Section 4069 or 4212(c) of Title
IV of ERISA.
(f) All contributions, premiums or payments required to be made
with respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity, and
Blackhawk has no knowledge of any fact or event which could give rise to any
such challenge or disallowance.
1.20 Business Generally. Except as disclosed in Schedule 1.20, since
December 31, 1995, there has been no event, transaction or information which
has had or could reasonably be expected to have a material adverse effect on
the business, operations or financial condition of Blackhawk and the Blackhawk
Subsidiaries, taken as a whole.
1.21 Bank Accounts; Officers. Schedule 1.21 is a list of all bank accounts
and safe deposit boxes in the name of or controlled by Blackhawk or a Blackhawk
Subsidiary, and details about the persons having access thereto. Schedule 1.21
also contains a list of all officers and directors of Blackhawk and all
officers and directors of any of the Blackhawk Subsidiaries.
1.22 Insolvency.
(a) No receiver has been appointed for the whole or any part of
the assets or business of Blackhawk or any of the Blackhawk Subsidiaries.
(b) No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of Blackhawk or any of the
Blackhawk Subsidiaries.
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(c) No unsatisfied judgment is outstanding against Blackhawk or
any of the Blackhawk Subsidiaries.
1.23 Environmental Matters.
(a) Except as set forth in Schedule 1.23, Blackhawk and each of
the Blackhawk Subsidiaries are in compliance in all material respects with all
federal, state and local environmental and occupational health and safety laws
and regulations that may pertain to their operations (collectively, the
"Environmental Laws"), including, but not limited to, the Resource Conservation
and Recovery Act ("RCRA"), as amended, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as amended, the
Occupational Health and Safety Act ("OSHA"), as amended, and the regulations
promulgated pursuant thereto.
(b) Without limiting the generality of the foregoing, except as
set forth in Schedule 1.23 and except as would not reasonably be expected to
give rise to a material adverse effect on the business, operations or financial
condition of Blackhawk and the Blackhawk Subsidiaries, taken as a whole;
(i) no hazardous waste or hazardous substance, as those terms are
defined by RCRA and CERCLA, respectively, have been disposed of by
Blackhawk, or, to the best knowledge of Blackhawk, by any other person or
entity, in violation of any Environmental Law on any real property owned,
leased or operated by Blackhawk or any of the Blackhawk Subsidiaries;
(ii) no polychlorinated biphenyls (PCBs) are or were located on
any real property owned, leased or operated by Blackhawk or any of the
Blackhawk Subsidiaries, whether in electrical transformers or elsewhere,
at any time;
(iii) no storage tanks, whether underground or otherwise,
containing petroleum, petroleum fractions, hazardous substances or
hazardous wastes, are or were located on any of the real property owned,
leased or operated by Blackhawk or any of the Blackhawk Subsidiaries at
any time; and
(iv) no asbestos is or was located in any building on any of the
real property owned, leased or operated by Blackhawk or any of the
Blackhawk Subsidiaries at any time.
(c) Blackhawk and each of the Blackhawk Subsidiaries have
obtained and maintained and are in compliance with all permits issued by
environmental or health administrative agencies that are required with respect
to their respective operations.
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(d) Blackhawk has made available to the Purchaser all reports of
any health or environmental studies or investigations in the possession or
under the control of Blackhawk, any of the Blackhawk Subsidiaries or any of the
Sellers that have been conducted in connection with the real property owned,
leased or operated by Blackhawk or any of the Blackhawk Subsidiaries.
(e) Blackhawk has heretofore obtained from Conestoga Rovers &
Associates, U.S. Environmental Group, Inc. or Midwest Environmental
Consultants, Inc. a Phase I environmental report with respect to each parcel of
real property owned or leased by Blackhawk and the Blackhawk Subsidiaries set
forth on Schedule 1.23(e) (the "Environmental Reports"). The cost of such
Environmental Reports, copies of which have been made available to the
Purchaser, shall be borne by the Purchaser.
1.24 Firle Funeral Home. The acquisition of the Firle Funeral Home was
completed by Blackhawk prior to April 30, 1996, and was fully reflected on the
April 30 trial balance sheet previously made available to the Purchaser, and,
as of April 30, 1996, there were no remaining purchase price payment
obligations to the seller thereof in connection with such acquisition (it being
understood that Blackhawk or a Blackhawk Subsidiary has ongoing payment
obligations with respect to noncompete agreements entered into in connection
therewith).
1.25 Disclosures. No representation or warranty by Blackhawk contained in
this Agreement, and no statement contained in any certificate, Schedule,
Exhibit, list or other writing furnished to the Purchaser in connection with
this transaction, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein or therein not misleading. All copies of all writings furnished to the
Purchaser hereunder or in connection with the transactions contemplated hereby
are true and complete in all material respects. All Schedules to this Agreement
prepared by or on behalf of Blackhawk or the Sellers are true and complete in
all material respects.
1.26 Brokers and Advisors. No action taken by Blackhawk or any Blackhawk
Subsidiary in connection with or in furtherance of the transactions
contemplated hereby has or shall cause any of Blackhawk, any of the Blackhawk
Subsidiaries, the Purchaser or such Seller to be subject to any claim against
it for a brokerage commission, finder's fee, consulting fee, advisory fee or
other like payment.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers hereby represents and warrants to the Purchaser
severally as to itself, herself or himself and not jointly as to Sections 2.2,
2.3, 2.4, 2.5 and 2.6 below, jointly and severally as to Section 2.1(a) below
and on a pro rata basis (based on the percentages set
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forth opposite each such Seller's name on Schedule 4.6(e) hereto) as to Section
2.1(b) below, as follows:
2.1 Ownership of Shares.
(a) The Shares constitute all the issued and outstanding shares
of capital stock of Blackhawk.
(b) Except as set forth in Schedule 1.2, as of the Closing Date
Blackhawk will own, directly or through one or more wholly-owned subsidiaries,
all of the outstanding capital stock of each of the Blackhawk Subsidiaries.
2.2 Title to Shares. As of the date hereof and as of the Closing Date,
each of the Sellers has and will have good and valid title to the Shares
indicated as being owned by him, her or it in Schedule 1.1, free and clear of
all liens, encumbrances, equities and claims whatsoever. Except as set forth in
Schedule 1.1, each Seller represents and warrants that, as of the date hereof
and as of the Closing Date, there are and there will be no restrictions
whatsoever against the transfer of his, hers or its Shares to the Purchaser.
2.3 Authority. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by each
of the Sellers have been duly and validly authorized by all requisite action on
the part of such Seller. This Agreement and all other agreements, documents and
instruments contemplated hereby to be signed by each of the Sellers constitute,
or upon execution and delivery thereof will constitute, legal, valid and
binding obligations of each Seller enforceable in accordance with their
respective terms, subject to applicable laws of bankruptcy, insolvency and
similar laws affecting creditors' rights generally and the application of
general rules of equity.
2.4 Effect of Transaction, Records, Etc. Except as set forth on Schedule
2.4, neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the consummation by
each Seller of the transactions contemplated hereby or thereby, nor the
compliance by such Seller with any of the provisions hereof or thereof, do or
will: (a) with respect to any Seller that is a corporation or other business
entity, conflict with or result in a breach of the Articles of Incorporation or
charter papers or Bylaws or Code of Regulations or other organizational
documents of such Seller; (b) violate any material statute, law, rule or
regulation or any order, writ, injunction or decree of any court or
governmental authority to which such Seller is subject; or (c) materially
violate or conflict with or constitute a material default under (or give rise
to any right of termination, cancellation or acceleration under) any material
agreement or any writing of any nature to which such Seller is a party or by
which any of the assets or properties of such Seller may be bound. Except as
set forth on Schedule 2.4, no consent or approval of or notification to any
governmental authority is required in connection with the
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execution and delivery by such Seller of this Agreement or any other agreement,
document or instrument relating hereto or the consummation of the transactions
contemplated hereby or thereby.
2.5 Brokers and Advisors. No action taken by any Seller in connection with
or in furtherance of the transactions contemplated hereby has or shall cause
any of Blackhawk, any of the Blackhawk Subsidiaries or the Purchaser to be
subject to any claim against it for a brokerage commission, finder's fee,
consulting fee, advisory fee or other like payment.
2.6 Claims on Blackhawk. No Seller or, to the actual knowledge of any
Seller, no affiliate of such Seller has any claim against Blackhawk or any
Blackhawk Subsidiary in respect of borrowed money or funded indebtedness or
obligations or liabilities for fees, expenses and advances (other than amounts
payable in the ordinary course of business as compensation to Sellers who are
employees), nor is any Seller or its affiliates party to any agreement with
Blackhawk or any Blackhawk Subsidiary, except as described in Schedule 2.6.
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
PURCHASER AND GRIZZLY
A. The Purchaser represents and warrants to and agrees with Blackhawk and the
Sellers as follows:
3.1 Organization, Standing and Power. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has all the power and authority of a corporation to own
and operate its properties, to carry on its businesses as now being conducted,
and to execute, deliver and perform this Agreement and all other agreements,
documents and instruments contemplated hereby.
3.2 Authority. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by the
Purchaser have been duly and validly authorized by all necessary corporate
action of the Purchaser. This Agreement and all other agreements, documents and
instruments contemplated hereby to be signed by the Purchaser constitute, or
upon execution and delivery will constitute, legal, valid and binding
obligations of the Purchaser enforceable in accordance with their respective
terms.
3.3 Effect of Transaction, Records, Etc. Neither the execution and
delivery of this Agreement or any other agreement, document or instrument
contemplated hereby, nor the consummation by the Purchaser of the transactions
contemplated hereby or thereby, nor the compliance by the Purchaser with any of
the provisions hereof or thereof, do or will: (a)
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conflict with or result in a breach of the Articles of Incorporation or charter
papers or Bylaws or Code of Regulations of the Purchaser; (b) violate any
statute, law, rule or regulation or any order, writ, injunction or decree of
any court or governmental authority to which the Purchaser is subject; or (c)
violate or conflict with or constitute a material default under (or give rise
to any right of termination, cancellation or acceleration under) any agreement
or any writing of any nature to which the Purchaser is a party or by which any
of the assets or properties of the Purchaser may be bound. Except as otherwise
described in this Agreement, no consent or approval of or notification to any
governmental authority is required in connection with the execution and
delivery by the Purchaser of this Agreement or any other agreement, document or
instrument relating hereto or the consummation of the transactions contemplated
hereby or thereby.
3.4 Investment Representations. The Purchaser is purchasing the Shares
for investment, for its own account and without a view to distribution or
resale thereof.
3.5 Brokers. No action taken by the Purchaser in connection with or in
furtherance of the transactions contemplated hereby has or shall cause any of
Blackhawk, any of the Blackhawk Subsidiaries or any Seller to be subject to any
claim against it for a brokerage commission, finder's fee, consulting fee,
advisory fee or other like payment.
3.6 No Knowledge of Misrepresentations or Omissions. To the best knowledge
of the Purchaser, as of the date hereof, there are no breaches of or
inaccuracies in any of the representations and warranties of the Sellers and
Blackhawk in this Agreement and the Schedules hereto, and, to the best
knowledge of the Purchaser, there are no errors in, or omissions from, any of
the Schedules to this Agreement.
B. Grizzly represents and warrants to and agrees as follows:
3.7 HSR Filing Matters. Neither Grizzly nor any of its affiliates will be
the acquiring person (as defined under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the rules and
regulations promulgated thereunder) in connection with the acquisition
contemplated hereby.
3.8 Authorization; No Conflict. (a) The execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated hereby by Grizzly and the payment by Grizzly of the
Down Payment as provided herein have been duly and validly authorized by all
necessary corporate and other action of Grizzly. This Agreement and all other
agreements, documents and instruments contemplated hereby to be signed by
Grizzly constitute, or upon execution and delivery will constitute, legal,
valid and binding obligations of Grizzly enforceable in accordance with their
respective terms.
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(b) Neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the carrying out by
Grizzly of its obligations hereunder and thereunder (including the payment by
Grizzly of the Down Payment as provided herein), nor the compliance by Grizzly
with any of the provisions hereof or thereof, do or will: (a) conflict with or
result in a breach of the organizational documents of Grizzly; (b) violate any
statute, law, rule or regulation or any order, writ, injunction or decree of
any court or governmental authority to which Grizzly is subject; or (c) violate
or conflict with or constitute a material default under (or give rise to any
right of termination, cancellation or acceleration under) any agreement or any
writing of any nature to which Grizzly is a party or by which any of the assets
or properties of Grizzly may be bound.
4. SALE OF SHARES; PRICE AND TERMS; ADJUSTMENTS
4.1 Closing Date. The consummation of the transactions contemplated by
this Agreement shall take place at a closing (the "Closing") at the offices of
Davis Polk & Wardwell, located at 450 Lexington Avenue, New York, NY 10017, or
at such other place as the Purchaser and Blackhawk may mutually agree upon in
writing, at 10:00 A.M. on or as soon as practicable after the date on which the
conditions to Closing specified in Articles 7 and 8 shall have occurred;
provided, however, that (subject to extension as provided in Section 11.4
below) the Closing shall occur on or before September 20, 1996 (the "Closing
Date").
4.2 Sale and Purchase. On the Closing Date, in reliance upon the
representations, warranties and agreements of the parties and subject to the
terms and conditions hereof, the Sellers shall, against payment of the Purchase
Price, sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser shall buy from the Sellers, free and clear of all encumbrances or
other liens, all of the Shares. At or prior to the Closing, the Sellers will
deliver to the Purchaser a schedule setting forth an allocation of the Purchase
Price among the Sellers, and, other than making any required payments in
accordance with Section 4.5, the Purchaser shall have no responsibility for the
allocation and distribution of such payments among the Sellers. The sale,
assignment, transfer, conveyance and delivery of the Shares shall be made by
the Sellers to the Purchaser at the Closing by delivery of the share
certificates evidencing all of the Shares, duly endorsed in blank or
accompanied by duly executed stock powers, in form satisfactory to the
Purchaser and with all required stock transfer tax stamps affixed. In addition,
at the Closing, the Sellers shall deliver to the Purchaser a receipt for the
Purchase Price and all opinions, certificates and other documents required to
be delivered pursuant to Article 7.
4.3 Price. The purchase price ("Purchase Price") for the Shares shall be
$171,789,632, less the Blackhawk liabilities as of the Closing with respect to
the following items
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(collectively, the "Adjustment Items"): (x) with respect to those certain
Employment Agreements, each dated December 22, 1992, by and among Blackhawk and
Fred Hunter Memorial Services, Inc. (as Employer) and Frederick B. Hunter,
Cheryl L. Ericson, Jessie Mae Hunter and Caryl Lyn Hunter, respectively, if, as
a result of the change in control of Blackhawk effected by the purchase of the
Shares, the parties to such contracts continue to have or have exercised any
rights thereunder to accelerate the payment obligations thereunder (and have
not waived such rights of acceleration), the net present value as of the
Closing Date, determined on a 12% discount rate, of the payments so
accelerated, based on an assumed inflation rate of 3% a year and (y)
Blackhawk's obligations to make any severance payments to any Seller, to senior
management as a result of a right arising from a change in control of Blackhawk
and to any employee as a result of a severance right created after the
execution of this Agreement requiring a payment by Blackhawk or a Blackhawk
Subsidiary (except for severance rights created in the ordinary course of
business and consistent with past practice). On the Closing Date, the Sellers
shall deliver to the Purchaser a certificate of the chief financial officer of
Blackhawk as to the Adjustment Items as of the Closing Date, which certificate
shall serve as the basis for payment at Closing.
4.4 Terms of Payment. The Purchase Price shall be paid as follows:
(a) $5,000,000 plus the amount of any interest thereon by
application of amounts heretofore delivered to Chicago, L.P., as agent for all
the Sellers, by Grizzly, in connection with prior negotiations relating to
Blackhawk;
(b) $500,000 (the "Deposit") has been deposited with Chicago
Title & Trust Company (the "Escrow Agent") and is being held in a trust by the
Escrow Agent; the Deposit, together with all interest earned thereon, will be
maintained in such trust ("Deposit Trust") until disbursed in accordance with
Section 4.7 or Section 6.10;
(c) $20,000,000 has been paid by Grizzly to Golder Thoma Cressey
Fund III, Limited Partnership (Chicago, L.P."), as agent for all the Sellers,
and, together with interest thereon, shall constitute the "Down Payment"; such
amount shall on the Closing Date be applied against the Purchase Price; and
(d) on the Closing Date, the Purchaser shall deliver to the
Sellers an amount in cash (the "Closing Date Cash") equal to the Purchase Price
less the sum of the amounts specified in paragraphs (a), (b) and (c).
4.5 Method of Payment. (a) On the Closing Date, the Purchaser shall wire
the Closing Date Cash into an account designated by Chicago, L.P., as agent for
all the Sellers, by notice to the Purchaser at least three days prior to the
Closing Date (the "Sellers' Account") for disbursement to the Sellers in
accordance with a written agreement among the Sellers. In
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the event any Seller has at the Closing any then outstanding monetary
obligation to Blackhawk or any Blackhawk Subsidiary, a corresponding portion of
the Closing Date Cash shall be offset against such obligation, and the
Purchaser shall pay the resulting net amount to the Sellers' Account.
(b) All payments made by the Purchaser pursuant to Section 4.4
shall be made by wire transfer of readily available funds to the Sellers'
Account or otherwise as designated in writing to the Purchaser by the Sellers.
4.6 Post Closing Adjustment. If, within 20 days after the Closing, the
Purchaser shall notify the Sellers in writing of its belief that the amount of
the Adjustment Items is greater than that certified as of the Closing Date,
specifying the amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, the Purchaser and the Sellers shall attempt
in good faith to resolve the matter or matters in dispute. If the Purchaser and
the Sellers, notwithstanding such good faith effort, shall have failed to
resolve the matter or matters in dispute, then any remaining matter or matters
in dispute shall be finally and conclusively determined by arbitration pursuant
to Section 11.12. Within five business days after the earliest of (i) the
resolution of all disagreements with respect to the Earnings Certificate
directly by the Purchaser and the Sellers and (ii) the issuance of the report
of the Arbiter (the "Final Resolution Date"), if there is a determination that
the amount of the Adjustment Items so determined is greater than the amount
certified as of the Closing Date, the Sellers shall pay to the Purchaser,
together with interest on such sum at the then applicable federal funds rate
for the period from the Closing to the date of payment, the amount of such
excess, such payment to be made by wire transfer in immediately available funds
to the account designated in writing by the Purchaser to Chicago, L.P., on
behalf of the Sellers. If the Purchaser does not provide the Sellers written
notice within 20 days after the Closing Date as provided above, the amount of
the Adjustment Items as certified by the chief financial officer of Blackhawk
(as provided in Section 4.3) shall be deemed to be conclusive and binding on
the parties hereto and not subject to further review or dispute.
4.7 Payment of Post Closing Adjustment. If the Sellers are required to pay
to the Purchaser a post closing payment pursuant to Section 4.6, such amount
shall be disbursed from the Deposit Trust, and, on the Final Resolution Date
(or, if no notice of dispute is given within 20 days after the Closing as
provided above, on the 21st day after the Closing), the remainder of the
Deposit Trust, if any, shall be disbursed to the Sellers in accordance with
Section 4.5(b). The Sellers shall be liable, jointly and severally, for any
payments due as determined pursuant to Section 4.6.
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5. CLOSING TRANSACTIONS
5.1 Closing Obligations of the Sellers. On the Closing Date, the
following shall be delivered to the Purchaser:
(a) stock certificates representing all of the Shares, duly
endorsed in blank or accompanied by duly executed stock powers, in form
satisfactory to the Purchaser and with all required stock transfer tax
stamps affixed;
(b) appropriate evidence of all necessary corporate action by
Blackhawk in connection with the transactions contemplated hereby,
including, without limitation, certified copies of resolutions duly
adopted by the Board of Directors of Blackhawk approving the transactions
contemplated hereby, and authorizing the execution, delivery and
performance by Blackhawk of this Agreement and the other agreements,
documents and instruments to which Blackhawk is a party contemplated
hereby, and a certificate as to the incumbency of officers of Blackhawk
executing any instrument or other document delivered in connection with
such transactions;
(c) the certificates required by Sections 4.3, 7.1, 7.2 and 7.3
of this Agreement;
(d) either (i) a certificate (prepared in accordance with Section
1445(b)(2) of the Code) from each Seller of non-foreign status or (ii) a
certificate from Blackhawk (prepared in accordance with Section 1445(b)(3)
of the Code) stating that Blackhawk is not and has never been a United
States real property holding company;
(e) tax lien waivers and tax good standing certificates
indicating the payment of franchise taxes from the jurisdictions where
Blackhawk and the Blackhawk Subsidiaries are located;
(f) an opinion, dated the Closing Date, of Kirkland & Ellis and
of Peter D. Cooper, counsel to Blackhawk and the Sellers, in form and
substance mutually acceptable to the parties hereto; and
(g) such duly signed resignations of the members of the Boards of
Directors and officers of Blackhawk and the Blackhawk Subsidiaries and
such changes relating to the accounts and safe deposit boxes of Blackhawk
and each of the Blackhawk Subsidiaries as the Purchaser shall have
requested by written notice to Blackhawk at least seven days prior to the
Closing Date.
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5.2 Closing Obligations of the Purchaser. On the Closing Date, the
Purchaser shall:
(a) pay the Purchase Price as specified in Section 4.4;
(b) deliver to Chicago, L.P., as representative of the Sellers,
appropriate evidence of all necessary corporate action by Grizzly in
connection with the transactions contemplated hereby, including, without
limitation, certified copies of resolutions duly adopted by the Board of
Directors of Grizzly approving the obligations of Grizzly under this
Agreement and the other agreements contemplated hereby and authorizing the
execution, delivery and performance by Grizzly of this Agreement and a
certificate as to the incumbency of officers of Grizzly executing any
instrument or other document delivered in connection with such
transactions; and
(c) deliver to Chicago, L.P., as representatives of the Sellers,
the certificates required by Sections 8.1, 8.2 and 8.3 of this Agreement.
6. OTHER AGREEMENTS AND COVENANTS OF THE PARTIES
6.1 Operation of the Businesses of Blackhawk and the Blackhawk
Subsidiaries. From the date hereof to the Closing Date, Blackhawk shall:
(a) consult with the Purchaser on a regular basis with respect to
all decisions which might materially affect the business or assets of
Blackhawk or any of the Blackhawk Subsidiaries; and
(b) except as the Purchaser may otherwise agree, operate the
businesses of Blackhawk and each of the Blackhawk Subsidiaries as
currently operated and only in the ordinary course and, consistent with
such operation, use its reasonable best efforts to preserve intact their
current respective business organizations and their relationships with
their employees and persons having dealings with them. Without limiting
the generality of the foregoing, Blackhawk shall not, and shall not permit
any Blackhawk Subsidiary to, without the prior consent of the Purchaser,
(i) take any action (over which Blackhawk can exercise control)
to cause any of the representations and warranties contained in
Article 1 of this Agreement to be intentionally breached in any
material adverse respect;
(ii) increase the rate of compensation of the management
employees of Blackhawk or any Blackhawk Subsidiary, or introduce
any additional bonus, severance, pension, profit sharing or
similar plan or agreement for the employees of Blackhawk or any
Blackhawk Subsidiary (other than pursuant to existing
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contracts or arrangements or in the ordinary course of business
consistent with past practices);
(iii) make any expenditure or commitment in excess of $50,000 for
acquisitions, additions to or replacements of property, plant or
equipment of Blackhawk or any of the Blackhawk Subsidiaries;
(iv) create, incur or assume any indebtedness for borrowed money
other than increases in indebtedness incurred under its existing
credit facilities as of the date hereof or agree to any increase
in the rates of interest or other fees (including, without
limitation, prepayment fees) or expenses payable thereunder,
except in accordance with existing contracts or arrangements;
(v) make any material changes in accounting practices or
procedures, incur any material non-recurring charges or make any
material reversal of accounting reserves, except as required by
changes in generally accepted accounting principles;
(vi) make any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of
Blackhawk or any non wholly-owned Blackhawk Subsidiary to a
person or entity that is not Blackhawk or a Blackhawk Subsidiary;
or
(vii) make any changes in preneed sales techniques or practices
or funding arrangements for preneed products or in investment
strategies with respect to preneed trust funds, except as
otherwise required by applicable law.
6.2 Supplements. From the date hereof until the Closing Date, upon
reasonable notice, Blackhawk will give to the Purchaser and its counsel,
accountants, employees and other authorized representatives reasonable access
during normal business hours to all of the offices, properties, books,
contracts, commitments, tax returns, records and affairs of Blackhawk and the
Blackhawk Subsidiaries. From time to time prior to the Closing Date, Blackhawk
shall furnish to the Purchaser supplemental information which Blackhawk has
with respect to any matters or events arising or discovered subsequent to the
date hereof which, if existing or known on the date hereof, would have rendered
any representation or warranty made by Blackhawk or the Sellers or any
information contained in any Schedule hereto inaccurate or incomplete. The
furnishing of such supplemental information shall not, however, affect or
otherwise diminish any of the representations and warranties of Blackhawk and
the Sellers hereunder and shall be disregarded in determining the effect of
such representations and warranties for the purposes of Article 7 hereof;
provided that, if the Closing occurs, such supplemental information shall be
considered incorporated in and supplemented to the representations and
warranties of Blackhawk and the Sellers, as
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applicable, and shall not serve as the basis for any claim of a breach of any
representation or warranty contained herein.
6.3 Regulatory Consents, Authorizations, Etc. Each party hereto will use
its reasonable best efforts to consummate the Closing, including obtaining all
consents, authorizations, orders and approvals of, and make all filings and
registrations with, any governmental commission, board or other regulatory body
or any other person required for or in connection with the consummation by it
of the transactions contemplated hereby and will cooperate fully with the other
parties in assisting them to obtain such consents, authorizations, orders and
approvals and to make such filings and registrations. No party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration. Specifically, the parties will
make all filings as expeditiously as is reasonably practicable. As of the date
hereof, the Purchaser has no reason to believe that it cannot complete its
financing and obtain the necessary consents, authorizations, orders and
approvals prior to the Closing Date, and agrees to notify the Sellers as soon
as practicable after the Purchaser reasonably determines that it will not be
able to complete its financing and obtain the necessary consents,
authorizations, orders and approvals prior to the Closing Date.
6.4 Negotiations with Others. During the period from the date hereof to
the Closing Date, or until this Agreement is terminated in accordance with
Section 11.4, the Sellers and Blackhawk shall not, and shall direct their
respective agents, employees, officers, directors, representatives and
affiliates not to, without the prior written consent of the Purchaser, initiate
any discussions or engage in negotiations with, or provide any information
other than publicly available information to, any person, firm or entity (other
than the Purchaser, any affiliate thereof or any person that has been approved
by the Purchaser) concerning any possible proposal regarding a sale or other
disposition of Blackhawk or any Blackhawk Subsidiary or any of their respective
assets, and Blackhawk will notify the Purchaser immediately by telephone, and
thereafter promptly confirm in writing, if any such discussions or negotiations
are sought to be initiated with, any such information is requested from, or any
such proposal or possible proposal is received by, Blackhawk.
6.5 Publicity. The parties hereto will not issue any press release or
otherwise make any public statement with respect to the transactions
contemplated hereby without the consent of the other party or parties (which
consent shall not be unreasonably withheld), except as may be required by law,
in which event such press release or public statements shall be made only after
consultation with the other party or parties.
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6.6 Confidentiality.
(a) In the event that this Agreement is terminated prior to the
Closing, unless Blackhawk shall otherwise consent in writing (i) the Purchaser
agrees (and shall cause each affiliate, agent, representative, employee,
officer and director of the Purchaser) not to use or to disclose to any third
party for any reason whatsoever, any information regarding the existence of or
details concerning the transactions contemplated by this Agreement, or
regarding Blackhawk or any of the Blackhawk Subsidiaries which is of a
proprietary or confidential nature, including, without limitation, any customer
lists, supplier information, resource information, financial information,
business or marketing information, product information, sales information, or
any other proprietary or confidential information of Blackhawk or any Blackhawk
Subsidiary (collectively, the "Blackhawk Proprietary Information") and (ii) the
Purchaser covenants to return all Blackhawk Proprietary Information and copies
and extracts thereof obtained from Blackhawk to Blackhawk within five days
after the date this Agreement is terminated, to immediately destroy all notes,
records or other documentation the Purchaser made with regard to the Blackhawk
Proprietary Information, and not to utilize, directly or indirectly, in any
manner, the Blackhawk Proprietary Information in the Purchaser's business or
the business of any of the Purchaser's affiliates.
(b) In the event this Agreement is terminated prior to the
Closing, unless Purchaser shall otherwise consent in writing (i) Blackhawk and
the Sellers severally, and not jointly, agree (and shall cause each affiliate,
agent, representative, employee, officer and director of Blackhawk, any of the
Blackhawk Subsidiaries and the Sellers) not to use or disclose to any third
party, for any reason whatsoever, any information, whether relating to the time
prior to the Closing Date or following such date, regarding the existence of or
details concerning the transactions contemplated by this Agreement, or
regarding the Purchaser or Grizzly which is of a proprietary or confidential
nature, including, without limitation, any customer lists, resource or supplier
lists, financial information and any other proprietary or confidential
information of the Purchaser or Grizzly (the "Purchaser Proprietary
Information"); and (ii) Blackhawk covenants to return all Purchaser Proprietary
Information and copies and extracts thereof obtained from the Purchaser to the
Purchaser within five days after the date this Agreement is terminated, to
immediately destroy all notes, records or other documentation Blackhawk made
with regard to the Purchaser Proprietary Information, and not to utilize,
directly or indirectly, in any manner, the Purchaser Proprietary Information in
Blackhawk's business or the business of any of Blackhawk's affiliates.
(c) From the date hereof until the Closing Date, neither Grizzly
nor any Subsidiary of Grizzly nor the Purchaser shall, without the prior
written consent of Blackhawk, which consent shall not be unreasonably withheld,
solicit or make an offer of employment to any employees of Blackhawk or any
Blackhawk Subsidiary (excluding
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employees earning less than $30,000 on an annual basis who are not location
managers) or hire any location managers or more senior officers of Blackhawk or
any Blackhawk Subsidiary.
6.7 Restrictions on Transfer of Shares. Blackhawk shall not transfer any
Shares on the stock transfer books of Blackhawk unless Blackhawk gives three
days' written notice thereof to the Purchaser and the transferee or payee by
written agreement with the Purchaser agrees to be liable (jointly and severally
with the transferring Seller, if Chicago, L.P., is the Seller) for such
Seller's obligations under the terms of this Agreement.
6.8 Federal Trade Commission/Wages & Salaries. Blackhawk will cooperate
with the Purchaser in developing systems designed to enable Blackhawk and each
of the Blackhawk Subsidiaries to be able to comply, as soon as practicable,
following the Closing, with the reasonable procedures established by the
Purchaser to assure compliance with the rules and regulations of the Federal
Trade Commission with respect to funeral practices and the rules and
regulations issued by governmental authority under the jurisdiction of the
Department of Labor with respect to wages and salaries, in each case reflecting
any information developed or to be developed in the audit conducted by the
Purchaser with the cooperation of Blackhawk and the Sellers of the practices
and procedures of Blackhawk and its Subsidiaries prior to the Closing Date. To
the extent any of the Sellers has any outstanding indebtedness to Blackhawk as
of the Closing Date, such indebtedness shall be repaid on the Closing Date.
6.9 Application of Down Payment. If a Closing occurs hereunder, the Down
Payment shall be applied as provided in Section 4.4(c). If the Purchaser shall
fail to complete the Closing for any reason whatsoever (including, without
limitation, the failure of the condition specified in Section 7.6 or the
termination by the Purchaser pursuant to Section 11.4(e)) other than (i) as a
result of the failure of the conditions specifically set forth in any of
Sections 7.1 through 7.5 (after giving effect to the options, provisos, and
requirements set forth therein) or 7.7, (ii) the termination of this Agreement
pursuant to Section 11.4 as a result of the failure of the conditions set forth
in any of Sections 7.1 through 7.5 (after giving effect to the options,
provisos, and requirements set forth therein) or 7.7, (iii) the determination
by the Sellers not to complete the Closing as a result of the failure of the
conditions set forth in Article 8, or (iv) the election by Grizzly to enter
into the Substitute Stock Purchase Agreement (as defined below) (in which event
the provisions of such Substitute Stock Purchase Agreement shall apply), the
Down Payment, together with the amounts previously paid to Chicago, L.P. as
described in Section 4.4(a), will be retained by Sellers as liquidated damages
in satisfaction of all obligations of the Purchaser hereunder (provided that
such amounts shall not operate to limit the Sellers from seeking damages in
excess of such amounts to the extent Blackhawk has incurred or sustained
losses, costs, expenses and other liabilities in excess of such amounts as a
result of a violation by the Purchaser or Grizzly of the covenants contained in
Section 6.6(a) or Section 6.6(c) or the commission by the Purchaser or Grizzly
of acts of fraud). If the Purchaser shall fail to
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complete the Closing (i) as a result of the failure of the conditions
specifically set forth in any of Sections 7.1) through 7.5 (after giving effect
to the options, provisos, and requirements set forth therein) or 7.7, (ii) the
termination of this Agreement pursuant to Section 11.4 as a result of the
failure of the conditions set forth in any of Sections 7.1 through 7.5 (after
giving effect to the options, provisos, and requirements set forth therein) or
7.7 or (iii) the determination by the Sellers not to complete the Closing as a
result of the failure of the conditions set forth in Article 8, the Down
Payment will be repaid to Grizzly. The Sellers shall be jointly and severally
liable to make any repayment of the Down Payment required by this Section.
Whether or not the Down Payment is to be retained by the Sellers or returned to
Grizzly pursuant to the foregoing provisions of this Section 6.9 (a "Final
Determination"), shall be determined pursuant to the following procedures:
(i) Within 30 days after written notice of termination of this
Agreement is delivered to any party pursuant to Section 11.4, Grizzly shall be
entitled to deliver to the Sellers a written notice specifying in reasonable
detail Grizzly's claim to return of the Down Payment pursuant to this Section
6.9 (the "Return Notice").
(ii) If such Return Notice is not delivered to the Sellers within
such 30-day period pursuant to clause (i) above, the Sellers shall be entitled
to retain the Down Payment with no further claims or assertions permitted to be
made with respect thereto by Grizzly or the Purchaser (or their permitted
assigns).
(iii) If within such 30-day period such Return Notice is
delivered to the Sellers pursuant to clause (i) above, the Down Payment shall
be retained by the Sellers or returned to Grizzly, as the case may be, upon the
earlier to occur, and pursuant to the terms, of (1) the written agreement of
Grizzly and the Sellers or (2) the final determination of the arbiters pursuant
to Section 11.2 below.
Notwithstanding the foregoing, if the Purchaser notifies the
Sellers in writing on or prior to August 31, 1996, that, despite its good faith
efforts, it will not be able to complete the Closing as a result of the failure
of the condition set forth in Section 7.6 (Financing), accompanied by a
certificate by Grizzly that it intends to enter into a substitute Stock
Purchase Agreement (the "Substitute Stock Purchase Agreement") (a "Substitution
Election"), the following provisions shall apply: within 10 days following the
receipt of the Substitution Election, the Sellers and Blackhawk may deliver
supplemental information pursuant to Section 6.2 which, notwithstanding the
other provisions of Section 6.2, shall serve to update the representations and
warranties of Blackhawk and the Sellers, and shall be deemed to be incorporated
into the representations and warranties of Blackhawk and the Sellers in the
Substitute Stock Purchase Agreement, as of the date of and upon the execution
and delivery of such Substitute Stock Purchase Agreement; within 10 days after
receipt of any such supplemental information (with any modifications thereto as
shall be agreed by Grizzly, Blackhawk and the Sellers), Grizzly shall elect
whether or not to proceed with the
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execution and delivery of the Substitute Stock Purchase Agreement; if it elects
to proceed, Grizzly, Loewen Group International, Inc. and the Sellers will
execute and deliver the Substitute Stock Purchase Agreement in the form
attached hereto as Exhibit A, the Down Payment hereunder will be retained by
the Sellers as, and shall constitute, $20,000,000 of the Down Payment under the
Substitute Stock Purchase Agreement. The Down Payment (for all purposes of the
Substitute Stock Purchase Agreement) shall be $30,000,000, the application of
which shall be governed by the provisions of the Substitute Stock Purchase
Agreement and, at the time of the execution of the Substitute Stock Purchase
Agreement, Grizzly shall pay the Sellers the additional $10,000,000 in
immediately available funds to an account designated by the Sellers. In the
event Grizzly elects to proceed with the execution and delivery of the
Substitute Stock Purchase Agreement as provided above and the Sellers do not
execute the Substitute Stock Purchase Agreement, Grizzly shall have the right
to compel by specific performance the Sellers to execute the Substitute Stock
Purchase Agreement.
The Purchaser and Grizzly hereby acknowledge and agree that the
$5 million payment (plus interest thereon) referred to in Section 4.4(a) shall
be retained by Sellers if for any reason whatsoever no Closing occurs either
under this Agreement or the Substitute Stock Purchase Agreement.
6.10 Deposit Trust Closing Expenses. To the extent that Blackhawk or the
Sellers incur costs and expenses in connection with the transactions
contemplated hereby of the type specified in Schedule 6.10 hereto ("Closing
Expenses"), Grizzly shall be liable for and shall promptly deposit into the
Deposit Trust from time to time the amount of any such Closing Expenses as and
when incurred. Grizzly will permit Blackhawk to deduct from the Deposit Trust
some or all of Blackhawk's Closing Expenses prior to the Closing (it being
understood that any such deduction will not affect Grizzly's obligation to fund
all Closing Expenses and to deposit the amount of such Closing Expenses in the
Deposit Trust as provided herein). In order to qualify as a Closing Expense,
each such expense must be reasonable, supported by invoice or similar
documentation, and directly related to Blackhawk's costs, fees and expenses
incurred in connection with the transactions contemplated hereby.
6.11 Pre-Closing Cooperation. The Sellers recognize that the Purchase
Price being paid by the Purchaser pursuant to this Agreement reflects the
anticipation by the parties of certain operational savings. These savings
include the effect of certain management changes and closing the present
corporate headquarters of Blackhawk, reducing the number of employees of
Blackhawk, including termination of the employment of certain officers of
Blackhawk, including Thomas H. Johnson, and other related savings. To this end,
the Sellers and Blackhawk will cooperate in developing plans and entering into
agreements prior to the Closing to implement these savings which will include
termination of employees at operating locations, closing of the corporate
headquarters and such other items as requested by Purchaser. Without limiting
the generality of the foregoing, the parties agree that the
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Blackhawk Succession, Inc. Shareholders Agreement, the proxies issued to Bruce
V. Rauner pursuant thereto and the agreements between Blackhawk Succession,
Inc. and various members of the senior management of Blackhawk will be
terminated on or prior to the Closing to the extent requested by Purchaser at
no cost to Blackhawk or the Purchaser.
6.12 Assistance in Financing. Blackhawk acknowledges that the Purchaser
currently intends that payment of the Purchase Price pursuant to Section 4.3
will be financed, in part, by an offering of High Yield Securities and the
arranging of funded senior bank debt financing. Blackhawk will provide
customary assistance in connection with the Purchaser's efforts to raise such
financing, including, without limitation, making senior management reasonably
available for meetings with prospective lenders and investors and cooperating
in the preparation of offering documents and necessary financial and business
information to enable documents, including the financial statements of
Blackhawk, to comply with the rules and regulations of the Securities and
Exchange Commission, it being recognized that the Sellers and Blackhawk (prior
to the Closing) will have no responsibility with respect to such compliance.
6.13 No Liquidation. No Seller (if other than a natural person) shall
liquidate or dissolve itself (i) if a Closing does not occur under this
Agreement, until there has been a Final Determination that the Sellers are not
required to return any portion of the Down Payment (as defined herein) under
Section 6.9 of this Agreement to the Purchaser hereunder or that the Sellers
are required to return all or a portion of the Down Payment and such return has
been completed; (ii) if the Closing under this Agreement or the Substitute
Stock Purchase Agreement has occurred (and there is no ongoing indemnification
obligation of the Sellers to the Purchaser under the final provisos to Section
7.1, Section 7.2 or Section 7.3), until such time as there is a final
determination that the Sellers are not required to make any payment pursuant to
Section 4.6 or the corresponding provision of the Substitute Stock Purchase
Agreement to the Purchaser hereunder or thereunder or that the Sellers are
required to make such a payment and such payment has been completed; and (iii)
if the Closing under this Agreement or the Substitute Stock Purchase Agreement
has occurred and there is an ongoing indemnification obligation of the Sellers
to the Purchaser under the final provisos to Section 7.1, Section 7.2 or
Section 7.3, until such time as such obligation has been discharged or fully
performed.
6.14 Transactions with Affiliates. Any agreement between any Seller or any
of its affiliates, on the one hand, and Blackhawk or any Blackhawk Subsidiary,
on the other hand, shall terminate on the Closing Date without any liability on
the part of Blackhawk or any Blackhawk Subsidiary.
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7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to perform this Agreement are subject
only to the satisfaction of the following conditions on or prior to the Closing
Date, unless waived by the Purchaser:
7.1 Representations and Warranties. The representations and warranties of
Blackhawk and the Sellers in this Agreement or in any Schedule, certificate or
document delivered in connection herewith shall have been true and correct in
all material respects when made and shall be true and correct on the Closing
Date in all material respects as though made on and as of the Closing Date, and
the Purchaser shall have received a certificate signed by an officer of
Blackhawk and by the Sellers to that effect; provided, however, that this
condition shall be deemed satisfied (except with respect to the representations
in Sections 2.1(a) and 2.2 (with respect to the existence of any liens,
encumbrances, equities or claims relating to the Shares only)) unless (i) the
Purchaser demonstrates that any such breaches (together with, but without
duplication, all amounts under Section 7.2) would reasonably be expected to
have, individually or in the aggregate, an adverse effect (determined, insofar
as any thereof are limited by reference to a material adverse effect on the
business, operations or financial condition of Blackhawk or its Subsidiaries,
without reference to such limitation) of more than $10,000,000 (the "Minimum
Damage Amount") on the business, properties, assets or liabilities of Blackhawk
or its Subsidiaries or the value thereof and (ii) neither the Purchaser nor
Grizzly had knowledge (within the meaning of Section 11.12) of any such
breaches prior to the date hereof; provided that, notwithstanding the foregoing
if the aggregate amount of such adverse effects is not more than $50,000,000,
the Sellers may, in their sole discretion, by delivery of written notice to the
Purchaser, elect to jointly and severally agree to indemnify, defend and hold
harmless the Purchaser against any and all losses, claims, costs, expenses,
liabilities and damages arising out of or relating to any failure of such
representations and warranties which are reasonably subject to quantification,
in which event such election shall be deemed to cause to be satisfied the
condition contained in this Section 7.1 with respect to such failure; and
provided further, that in the event of a breach of Section 2.2 relating to any
lien, encumbrance, equity or claim of not more than $5,000,000, individually or
in the aggregate, the Sellers may, in their sole discretion, elect to, jointly
and severally, agree to indemnify, defend and hold harmless the Purchaser
against any and all losses and damages arising out of or related to such
breach, in which event such election shall be deemed to cause to be satisfied
the condition contained in Section 7.1 with respect to such breach of Section
2.2; and provided further, that in the event of a breach of Section 2.2
relating to any lien, encumbrance, equity or claim (whether or not material or
in excess of $5,000,000), the Sellers may, in their sole discretion, elect to
cure such breach to the reasonable satisfaction of the Purchaser, in which
event such cure shall be deemed to cause to be satisfied the condition
contained in Section 7.1 with respect to such breach of Section 2.2. Any
disputes as to the fact or amount of quantification shall be subject to the
arbitration provisions of Section 11.2.
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<PAGE>
7.2 Performance of Obligations of Blackhawk and the Sellers. Blackhawk and
each of the Sellers in all material respects shall have performed all
obligations required to be performed by them under this Agreement and complied
with all covenants to be complied with by them under this Agreement at or prior
to the Closing Date, and the Purchaser shall have received a certificate signed
by an executive officer of Blackhawk and the Sellers to that effect; provided,
however, that this condition shall be deemed satisfied (except with respect to
the obligations of the Sellers pursuant to Section 5.1(a)) unless (i) the
Purchaser demonstrates that any such breaches (together with, but without
duplication, all amounts under Section 7.1) would reasonably be expected to
have, individually or in the aggregate, an adverse effect (determined, insofar
as any thereof are limited by reference to a material adverse effect on the
business, operations or financial condition of Blackhawk or its Subsidiaries,
without reference to such limitation) of more than the Minimum Damage Amount on
the business, properties, assets or liabilities of Blackhawk or its
Subsidiaries or the value thereof and (ii) neither the Purchaser nor Grizzly
had knowledge (within the meaning of Section 11.12) of any such breaches prior
to the date hereof; provided that, notwithstanding the foregoing, the Sellers
may, in their sole discretion, by delivery of written notice to the Purchaser,
if the aggregate of such adverse effects is not more than $50,000,000, elect to
jointly and severally indemnify, defend and hold harmless the Purchaser against
any and all losses, claims, costs, expenses, liabilities and damages arising
out of or relating to any failure of such covenants which are reasonably
subject to quantification, in which event such election shall be deemed to
cause to be satisfied the condition contained in this section 7.2 with respect
to such default. Any disputes as to the fact or amount of quantification shall
be subject to the arbitration provisions of Section 11.2.
7.3 No Litigation. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of
any law, decree or regulation of any governmental authority having appropriate
jurisdiction, or be one in which an adverse determination could be reasonably
expected to have a material adverse effect on the business, operations or
financial condition of Blackhawk or any of the Blackhawk Subsidiaries, and the
Purchaser shall have received a certificate signed by an executive officer of
Blackhawk and the Sellers that to Blackhawk's and the Sellers' best knowledge,
no such action, suit or other proceeding is pending; provided, however, that
this condition shall be deemed satisfied unless (i) the Purchaser demonstrates
that any such actions, suits or proceedings would reasonably be expected to
have, individually or in the aggregate, an adverse effect of more than
$10,000,000 on the business, properties, assets or liabilities of Blackhawk or
its Subsidiaries or the value thereof and (ii) neither the Purchaser nor
Grizzly had knowledge (within the meaning of Section 11.12) on the date hereof
that any such action, suit or other proceeding is pending; provided that,
notwithstanding the foregoing, if the aggregate of such adverse effects is not
more than $50,000,000, the Sellers may, in their sole discretion, by delivery
of written notice to the
34
<PAGE>
Purchaser, elect to jointly and severally agree to indemnify, defend and hold
harmless the Purchaser against any and all losses, claims, costs, expenses,
liabilities, damages, assessments, settlements or judgments arising out of or
relating to any such litigation, in which event (i) such election shall be
deemed to cause to be satisfied the condition contained in this section 7.3
with respect to such litigation and (ii) the Sellers shall have the sole right
to control and assume the defense of such matter or liability with counsel
selected by them in their sole discretion (it being understood that the
Purchaser shall have the right, at its own expense, to participate in, but not
to control, any such defense, except that no settlement of any litigation will
be entered into without the prior consent of the Purchaser, which consent shall
not be unreasonably withheld, if the effect of such settlement would require
Blackhawk to materially adversely change the manner in which Blackhawk
thereafter carries on its business or otherwise constitutes the admission of
wrongdoing by Blackhawk and which settlement would reasonably be expected to
have a material adverse effect on the business, properties or financial
condition of Blackhawk and the Blackhawk Subsidiaries, taken as a whole).
7.4 Regulatory Consents, Authorizations, Etc. All consents,
authorizations, orders, opinions and approvals of, and filings and
registrations with, any United States federal or state governmental commission,
board or other regulatory body which are listed on Schedule 7.4, in form
reasonably satisfactory to the Purchaser, shall have been obtained or made;
provided that the Purchaser shall, in accordance with Section 6.3, have used
its best efforts and taken all reasonable actions necessary to obtain such
consents, authorizations, orders, opinions, approvals, filings and
registrations.
7.5 Senior Indebtedness. No enforcement action shall have been taken under
any of the outstanding senior indebtedness instruments of Blackhawk prior to
Closing (including any action to accelerate the indebtedness or to foreclose on
any collateral) other than any action the effect of which shall have been
substantially eliminated by the payment and discharge of such indebtedness at
the Closing without a material adverse effect on Blackhawk and its
Subsidiaries, taken as a whole, or on the Purchaser.
7.6 Financing. The Purchaser shall have been able to complete the
financings necessary to enable it to pay the Purchase Price.
7.7 All Shares Sold. All of the Sellers shall have tendered their
respective Shares for delivery to the Purchaser.
35
<PAGE>
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to perform this Agreement are subject only
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by the Sellers:
8.1 Representations and Warranties. The representations and warranties of
the Purchaser and Grizzly in this Agreement or in any Schedule, certificate or
document delivered pursuant thereto shall have been true and correct when made
and be true and correct on the Closing Date as though made on and as of the
Closing Date, and the Sellers shall have received a certificate to that effect,
with respect to Grizzly, signed by an executive officer of Grizzly.
8.2 Performance of Obligations of the Purchaser. The Purchaser shall have
performed all obligations required to be performed by it under this Agreement
and complied with all covenants to be complied with by it under this Agreement
at or prior to the Closing Date and the Sellers shall have received a
certificate to that effect, with respect to Grizzly, signed by an executive
officer of Grizzly.
8.3 No Litigation. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated in this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of
any law, decree or regulation of any governmental authority having appropriate
jurisdiction, and the Sellers shall have received a certificate to that effect,
with respect to Grizzly, signed by an executive officer of Grizzly, that, to
Grizzly's best knowledge, no such action, suit or other proceeding is pending.
8.4 Regulatory Consents, Authorizations, Etc. All consents,
authorizations, orders, opinions and approvals of, and filings and
registrations with, any United States federal or state governmental commission,
board or other regulatory body which are listed on Schedule 7.4, in form
reasonably satisfactory to the Sellers, shall have been obtained or made;
provided that the Sellers and Blackhawk shall have used their respective best
efforts and taken all reasonable actions necessary to obtain such consents,
authorizations, orders, opinions, approvals, filings and registrations required
to be used and taken by each of them, respectively.
36
<PAGE>
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Blackhawk. The representations and
warranties of Blackhawk contained in Article 1 of this Agreement shall expire
as of the Closing Date and shall not survive the Closing.
9.2 Representations and Warranties of the Sellers. The representations and
warranties of the Sellers contained in Article 2 of this Agreement (other than
in Sections 2.1, 2.2 and 2.3) shall expire as of the Closing Date and shall not
survive the Closing. The provisions of Sections 2.1, 2.2 and 2.3 shall survive
the Closing until the expiration of the applicable statute of limitations,
except that the representation and warranties in Section 2.1(b) shall survive
only until the first anniversary of the Closing.
9.3 Representations and Warranties of the Purchaser. The representations
and warranties of the Purchaser contained in Article 3 of this Agreement (other
than in Section 3.2) shall expire as of the Closing Date and shall not survive
the Closing. The provisions of Section 3.2 shall survive the Closing until the
expiration of the applicable statute of limitations.
9.4 Limitation of Recourse. Following the Closing, in the absence of
fraud, neither Blackhawk nor any Seller shall have any liability or obligation
to indemnify or otherwise hold harmless the Purchaser or Blackhawk (or any of
their successors or permitted assigns) for any claim or any loss or liability
arising from or in any way relating to this Agreement or any of the
transactions contemplated hereby or any other transaction or event occurring on
or prior to the Closing (including, without limitation, any misrepresentation
or inaccuracy in, or breach of, any representations or warranties (other than
the representations and warranties contained in Sections 2.1, 2.2 and 2.3 and
other than their obligations under Sections 4.6, 4.7 and 6.13, and any
liability pursuant to the final provisos to Sections 7.1, 7.2 and 7.3) or any
breach or failure in performance prior to the Closing of any covenants or
agreements made by Blackhawk or the Sellers in this Agreement or in any Exhibit
or Schedule hereto or any certificate or instrument delivered hereunder), and
neither the Purchaser nor Blackhawk (or any of their successors or permitted
assigns) shall be entitled to bring any claim based on, relating to or arising
out of any of the foregoing against any Seller (or any Seller's employees,
directors, agents or representatives). Without limiting the generality of the
foregoing, in the absence of fraud, neither the Purchaser nor its respective
successors or permitted assigns shall be entitled to seek any rescission of the
transactions consummated under this Agreement or other remedy at law or in
equity.
9.5 Acknowledgement by the Purchaser. The Purchaser understands that the
representations and warranties of Blackhawk and the Sellers will not survive
the Closing (except as expressly set forth in Section 9.2) and constitute the
sole and exclusive representations and warranties of Blackhawk and the Sellers
to the Purchaser in connection
37
<PAGE>
with the transactions contemplated hereby, and the Purchaser understands,
acknowledges and agrees that all other representations and warranties of any
kind or nature expressed or implied (including, without limitation, any
relating to the future or historical financial condition, results of
operations, assets or liabilities of Blackhawk) are specifically disclaimed by
Blackhawk and the Sellers. The foregoing does not affect any indemnification
obligation of the Seller that may arise in accordance with the provisions
contained in Sections 7.1, 7.2 and 7.3.
10. DEFINITIONS
The terms set forth below are defined in the Sections of the Agreement
indicated:
- ---------------------------------------------------------------------------
Term Section
- ---------------------------------------------------------------------------
AAA 11.2(b)
- ---------------------------------------------------------------------------
Adjustment Items 4.3
- ---------------------------------------------------------------------------
Agreement Forepart
- ---------------------------------------------------------------------------
Blackhawk Forepart
- ---------------------------------------------------------------------------
Blackhawk Proprietary Information 6.6(a)
- ---------------------------------------------------------------------------
Blackhawk Subsidiaries 1.2
- ---------------------------------------------------------------------------
CERCLA 1.23(a)
- ---------------------------------------------------------------------------
Class A Common Stock Forepart
- ---------------------------------------------------------------------------
Class B Common Stock Forepart
- ---------------------------------------------------------------------------
Closing 4.1
- ---------------------------------------------------------------------------
Closing Date 4.1
- ---------------------------------------------------------------------------
Closing Date Cash 4.4(d)
- ---------------------------------------------------------------------------
Closing Expenses 6.10
- ---------------------------------------------------------------------------
Code 1.8(b)
- ---------------------------------------------------------------------------
Common Stock Forepart
- ---------------------------------------------------------------------------
Communications 11.8
- ---------------------------------------------------------------------------
December Audited Balance Sheet 1.5
- ---------------------------------------------------------------------------
December Audited Financials 1.5
- ---------------------------------------------------------------------------
38
<PAGE>
- ---------------------------------------------------------------------------
Term Section
- ---------------------------------------------------------------------------
December Audited Income Statement 1.5
- ---------------------------------------------------------------------------
Deposit 4.4(b)
- ---------------------------------------------------------------------------
Deposit Trust 4.4(b)
- ---------------------------------------------------------------------------
Down Payment 4.4(c)
- ---------------------------------------------------------------------------
Encumbrances 1.9
- ---------------------------------------------------------------------------
Environmental Laws 1.23(a)
- ---------------------------------------------------------------------------
Environmental Reports 1.23(e)
- ---------------------------------------------------------------------------
ERISA 1.19(a)
- ---------------------------------------------------------------------------
Final Determination 6.9
- ---------------------------------------------------------------------------
Final Resolution Date 4.6
- ---------------------------------------------------------------------------
Grizzly Forepart
- ---------------------------------------------------------------------------
HSR Act 3.8
- ---------------------------------------------------------------------------
IRS 1.8(b)
- ---------------------------------------------------------------------------
March Unaudited Financials 1.5
- ---------------------------------------------------------------------------
Minimum Damage Amount 7.1
- ---------------------------------------------------------------------------
OSHA 1.23(a)
- ---------------------------------------------------------------------------
Plans 1.19(a)
- ---------------------------------------------------------------------------
Policies 1.10(c)
- ---------------------------------------------------------------------------
Preferred Stock Forepart
- ---------------------------------------------------------------------------
Preliminary Reports 1.10(c)
- ---------------------------------------------------------------------------
Preneed Contracts 1.16
- ---------------------------------------------------------------------------
Preneed Funds 1.16
- ---------------------------------------------------------------------------
Prior Audited Financials 1.5
- ---------------------------------------------------------------------------
Properties 1.10(c)
- ---------------------------------------------------------------------------
Purchase Price 4.3
- ---------------------------------------------------------------------------
Purchaser Forepart
- ---------------------------------------------------------------------------
39
<PAGE>
- ---------------------------------------------------------------------------
Term Section
- ---------------------------------------------------------------------------
Purchaser Proprietary Information 6.6(b)
- ---------------------------------------------------------------------------
RCRA 1.23(a)
- ---------------------------------------------------------------------------
Sellers Forepart
- ---------------------------------------------------------------------------
Sellers' Trust 4.5
- ---------------------------------------------------------------------------
Shares Forepart
- ---------------------------------------------------------------------------
Substitute Stock Purchase Agreement 6.9
- ---------------------------------------------------------------------------
Substitution Election 6.9
- ---------------------------------------------------------------------------
Surveys 1.10(c)
- ---------------------------------------------------------------------------
Taxes 1.8(c)
- ---------------------------------------------------------------------------
Title Company 1.10(c)
===========================================================================
11. MISCELLANEOUS
11.1 Parties in Interest. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the Sellers and their respective
successors and permitted assigns, Blackhawk and its successors and permitted
assigns, and the Purchaser and its successors and permitted assigns; provided,
however, that (i) the Purchaser may assign its rights under this Agreement to
one or more third parties (and any such third party transferees may further so
assign) provided that any such assignee or reassignee is Blackstone Capital
Partners II Merchant Banking Fund L.P. ("Blackstone") or Grizzly or an
affiliate of Blackstone or Grizzly, provided that the assignee shall execute a
counterpart of this Agreement agreeing to be bound by the terms hereof as
"Purchaser" and shall agree to pay the portion of the Purchase Price
representing the portion of the Purchaser's rights and obligations assigned to
such third party in cash on the Closing Date and the Purchaser shall remain
obligated for all of its obligations hereunder which are not performed by such
assignee, (ii) except as provided in clause (i), this Agreement may not be
assigned by the Purchaser without the prior written consent of Blackhawk, and
(iii) any assignment by any Seller of its rights and obligations hereunder
shall be subject to Section 6.7. In the event of any such assignment, the
representations and warranties deemed made hereunder by the assignee shall be
appropriately modified to reflect the form and jurisdiction of organization of
such assignee.
11.2 Arbitration. (a) Subject to the limitations set forth in Article 9,
all disputes hereunder, including any relating to a breach or claimed breach of
any representation, warranty, covenant, undertaking, restriction or other
agreement contained herein, shall be determined by binding arbitration in
accordance with the provisions of this Section 11.2.
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<PAGE>
(b) If either party shall notify the other that, in the judgment of such
first party, an arbitrable dispute has arisen, the parties hereto shall attempt
in good faith to resolve such dispute by mutual agreement. If no satisfactory
resolution of such dispute has occurred within 30 days after such notice,
either party may submit such dispute to final and binding arbitration, by three
arbitrators, conducted pursuant to the rules of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except to the
extent such rules conflict with the provisions of this Agreement, in which case
the provisions of this Agreement shall control. The claimant shall nominate one
arbitrator in its request for arbitration. The respondent shall nominate one
arbitrator in its answer. The two partyappointed arbitrators shall name the
third arbitrator within 30 days after the second partyappointed arbitrator has
been named, failing which the AAA shall appoint the third arbitrator.
(c) The hearing shall be held by the arbitrators as soon as reasonably
practicable, consistent with the AAA arbitration rules and opportunity for
discovery. The parties specifically agree that, upon application by either
party, the arbitrators shall set a reasonable limitation on the period for
discovery related to the arbitration. No party may present a position or make
any argument at the hearing notice of which is not provided to the other party
in writing before the hearing.
(d) The decision of the arbitrators pursuant to this Section 11.2 shall be
in writing (setting forth in detail the basis for the decision) and shall be
final, binding and conclusive upon the parties and may be confirmed or embodied
in any order or judgment of any court having jurisdiction. The foregoing
agreement to arbitrate shall be specifically enforceable.
(e) The venue of any arbitration pursuant to this Section 11.2 shall be in
Manhattan or such other place as is mutually agreed upon by the parties. In any
arbitration pursuant to this Section 11.2, the arbitrators shall apply the
substantive law of the State of New York without reference to its conflict or
laws rules.
(f) Each party shall bear its respective costs incurred in connection with
any arbitration; provided, however, that in the event that the arbitrators
determine that there was no reasonable basis for the non-prevailing party in
the arbitration to have brought or defended the claim, the non-prevailing party
shall pay all reasonable costs, including, without limitation, reasonable
attorneys' fees and expenses, costs and expenses associated with the
arbitration incurred by the prevailing party in connection therewith.
(g) The pendency of these dispute resolution procedures shall not relieve
either party from its duty to perform under this Agreement or serve to delay or
suspend its performance of its obligations.
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<PAGE>
11.3 Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of New York.
11.4 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) By mutual agreement of the Purchaser and the Sellers;
(b) By the Purchaser, if the conditions set forth in Article 7
shall not have been complied with or performed in any material respect on
or before the Closing Date or if events shall have occurred which have
made it impossible for the conditions to Closing set forth in Article 7 to
be satisfied on or before the Closing Date; or
(c) By the Sellers, if the conditions set forth in Article 8
shall not have been complied with or performed in any material respect on
or before the Closing Date or if events shall have occurred which have
made it impossible for the conditions to Closing set forth in Article 8 to
be satisfied on or before the Closing Date; or
(d) By the Sellers, the Purchaser or Blackhawk, if the Closing
has not occurred by September 20, 1996; or
(e) By the Purchaser if at any time it shall have determined in
good faith that it will be unable to finance the payment of the Purchase
Price (in which event the provisions of Section 6.9 shall be applicable);
provided that no party hereto may terminate this Agreement pursuant to this
Section 11.4 if such party is in material and willful breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement or if it caused any of the conditions to closing not to be satisfied;
and provided further that (i) the Sellers may extend the date specified in
clause (d) above by an amount of time reasonably necessary to permit the
Closing to occur as soon as is practicable if there is a willful failure by the
Purchaser to satisfy one or more material closing conditions specified in
Article 8 above and (ii) the Purchaser may extend the date specified in clause
(d) above by an amount of time reasonably necessary to permit the Closing to
occur as soon as is practicable if there is a willful failure by the Sellers to
satisfy one or more of the closing conditions specified in Article 7 above.
In the event of the termination of this Agreement, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other parties hereto or their respective stockholders or
directors or officers in respect thereof, except for the obligations of the
parties hereto which by their express terms survive termination hereof and the
obligations of the parties hereto in Sections 6.5 and 6.6 and this Section 11.4
and
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<PAGE>
except that nothing herein shall relieve any party from liability for any
willful breach of any provision of this Agreement prior to such termination.
11.5 Entire Agreement; Amendments. This Agreement and the other writings
referred to herein or delivered in connection herewith contain the entire
understanding of the parties with respect to its subject matter and supersede
any prior understanding, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter hereof
in any way. This Agreement may be amended only by written instrument duly
executed by all of the parties hereto.
11.6 Headings. The section and subsection headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.7 Currency. All reference to dollar figures contained herein shall
refer to United States currency.
11.8 Notices. All notices, claims, certificates, requests, demands and
other communications ("Communications") hereunder shall be in writing and shall
be deemed to have been duly given five days after mailing when mailed (by
registered or certified mail, postage prepaid) or sent by facsimile
transmission with confirmation of receipt (with hard copy to follow by
registered or certified mail, postage prepaid) addressed as follows:
If to the Purchaser to:
Blackhawk Acquisition Corp.
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, N.Y. 10154
Attn: Howard A. Lipson
Fax: 212-754-8725
with a copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017-3954
Attn: Wilson S. Neely, Esq.
Fax: 212-455-2502
43
<PAGE>
Loewen Group International, Inc.
50 River Center Blvd.
Covington, KY 41011
Attn: Legal Department
Fax: 606-655-7154
If to Blackhawk, to:
Prime Succession, Inc.
691 Tekulve Avenue
Batesville, IN 47006
Attn: Thomas H. Johnson
Fax: 812-933-0226
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Kevin R. Evanich, Esq.
Fax: 312-861-2200
If to the Sellers, to:
Golder Thoma Cressey Fund III,
Limited Partnership
6100 Sears Tower
Chicago, IL 60606
Attn: Bruce V. Rauner
Fax: 312-382-2201
44
<PAGE>
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Kevin R. Evanich, Esq.
Fax: 312-861-2200
If to Grizzly:
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 358
Attn: Finance Department
Fax: 604-473-7305
with a copy to:
The Loewen Group Inc.
c/o Loewen Group International, Inc.
50 East River Center Blvd.
Covington, KY 41011
Attn: Legal Department
Fax: 606-655-7154
or to such other address or addresses as the persons to whom notice is to be
given may have furnished to the others in writing in accordance herewith. A
Communication given by any other means shall be deemed duly given when actually
received by the addresses.
11.9 Further Assurances. After the Closing Date, without further
consideration, the Sellers and Purchaser shall execute and deliver such further
instruments and documents as either party shall reasonably request to
consummate the transactions contemplated by this Agreement and to perfect
Purchaser's title to the Shares.
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11.10 No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein expressed
or implied shall give or be construed to give any person or entity, other than
the parties hereto and such permitted assigns, any legal or equitable rights
hereunder.
11.11 Waivers. No waiver of the terms, conditions or provisions of this
Agreement shall be valid unless in writing signed by the party granting said
waiver. Any such waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent,
same or different breach.
11.12 Knowledge. For purposes of this Agreement, (i) the phrase "to the
best knowledge of Blackhawk" shall mean the knowledge of Blackhawk after
reasonable inquiry of each Seller and of the President, each Vice President and
the General Counsel of Blackhawk; provided that Blackhawk shall have no
obligation or duty to inquire of any other person or entity and (ii) the phrase
"to the best knowledge of the Purchaser", and references to knowledge of
Purchaser or Grizzly, shall mean the knowledge of the Purchaser or Grizzly
after reasonable inquiry of the persons named in the most recent annual report
of Grizzly as executive officers of Grizzly and of J. C. Ojier Mathews, Ronald
Collins, Gary L. Wright and Charles Kizina; provided that the Purchaser shall
have no obligation or duty to inquire of any other person or entity.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PRIME SUCCESSION, INC.
By /s/ Thomas H. Johnson
-------------------------------
its President
-------------------------------
THE SELLERS:
/s/ William B. Cutter
----------------------------------
William B. Cutter
/s/ Bernhard L. Gaarsoe
----------------------------------
Bernhard L. Gaarsoe
/s/ Robert G. Horn
----------------------------------
Robert G. Horn
/s/ Thomas H. Johnson
----------------------------------
Thomas H. Johnson
/s/ Steven A. Tidwell
----------------------------------
Steven A. Tidwell
47
<PAGE>
GOLDER THOMA CRESSEY FUND III,
LIMITED PARTNERSHIP
By Golder, Thoma, Cressey & Rauner, L.P.,
its General Partner
By: /s/ B.V. Rauner
-------------------------------
its General Partner
-------------------------------
THE PURCHASER:
BLACKHAWK ACQUISITION
CORP.
By: /s/ Howard A. Lipson
-------------------------------
its President
-------------------------------
THE LOEWEN GROUP INC.
By: /s/ Raymond L. Loewen
-------------------------------
its Chairman and Chief
Executive Officer
----------------------------------
48
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CERTIFICATE OF INCORPORATION
OF
BLACKHAWK ACQUISITION CORP.
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the Corporation is Blackhawk Acquisition Corp.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is 1000 shares of Common Stock, par value $0.01 each.
FIFTH: The name of the sole incorporator is Derrick L. Horner, and
his address is 425 Lexington Avenue, New York City, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation, acting by majority
vote, may adopt, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation on May 30, 1996.
/s/ Derrick L. Horner
_______________________________
Derrick L. Horner
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BLACKHAWK ACQUISITION CORP.
BLACKHAWK ACQUISITION CORP., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
First: Article First of the Certificate of Incorporation be, and it
hereby is, amended to read as follows:
"FIRST: The name of the Corporation is Prime Succession Acquisition
Corp."
Second: The Corporation has not received any payment for any of its
stock and pursuant to Section 241 of the Delaware General Corporation Law, this
Certificate of Amendment of the Certificate of Incorporation was duly adopted by
the Board of Directors of the Corporation as of July 25, 1996.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed by Chinh Chu, its Secretary and Treasurer, on this 25th day of July,
1996.
BLACKHAWK ACQUISITION CORP.
By: /s/ Chinh Chu
--------------------------
Chinh Chu
Secretary and Treasurer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PRIME SUCCESSION ACQUISITION CORP.
_________________________________________
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
_________________________________________
PRIME SUCCESSION ACQUISITION CORP., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
FIRST. Article FIRST of the Certificate of Incorporation of the
Corporation shall be amended to read in its entirety as follows:
"FIRST: The name of the Corporation is Prime Succession, Inc."
SECOND. The Board of Directors of the Corporation, through an
unanimous written consent, adopted a resolution proposing and declaring
advisable the foregoing amendment, and said amendment has been adopted by the
sole stockholder of the Corporation in accordance with the provisions of
Sections 242 and 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Prime Succession Acquisition Corp. has caused
its corporate seal to be hereunto affixed and this Certificate to be signed by
its Chief Executive Officer, Gary L. Wright, and attested by its Secretary,
Myles S. Cairns, this 26th day of August, 1996.
PRIME SUCCESSION ACQUISITION CORP.
/s/ Gary L. Wright
__________________________________
Gary L. Wright
Chief Executive Officer
CORPORATE SEAL
Attest:
/s/ Myles S. Cairns
______________________________
Myles S. Cairns
Secretary
<PAGE>
PRIME SUCCESSION, INC.
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting and Notice. Meetings of the stockholders
of the Corporation shall be held at such place either within or without the
State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary if directed by the Board of
Directors or requested in writing by the holders of not less than 25% of the
capital stock of the Corporation. Each such stockholder request shall state the
purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at least 10
and not more than 60 days before each meeting of stockholders, written notice of
the time, date and place of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law, all matters
submitted to a meeting of stockholders shall be decided by vote of the holders
of record, present in person or by proxy, of a majority of the Corporation's
issued and outstanding capital stock.
ARTICLE II
DIRECTORS
Section 1. Number, Election and Removal of Directors. The number of
Directors that shall constitute the Board of Directors shall not be less than
one or more than fifteen. The first Board of Directors shall consist of two
Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors
<PAGE>
2
or the stockholders. The Directors shall be elected by stockholders at their
annual meeting. Vacancies and newly created directorships resulting from any
increase in the number of Directors may be filled by a majority of the Directors
then in office, although less than a quorum, or by the sole remaining Director
or by the stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as may from time to time be fixed by the
Board of Directors or as may be specified in a notice of meeting.
Section 3. Quorum. One-third of the total number of Directors shall
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation or these By-Laws, the act of
a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors.
Section 4. Committees. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate one or more committees,
including, without limitation, an Executive Committee, to have and exercise such
power and authority as the Board of Directors shall specify. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act as the
absent or disqualified member.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President, a Vice
President, a Secretary, a Treasurer, and such other additional officers with
such titles as the Board of Directors shall determine, all of which shall be
chosen by and shall serve at the pleasure of the Board of Directors. Such
officers shall have the usual powers and shall perform all the usual duties
incident to their respective offices. All officers shall be subject to the
supervision and direction of the Board of Directors. The authority, duties or
responsibilities of any officer of the Corporation may be suspended by the
President with or without cause. Any officer elected or appointed by the Board
of Directors may be removed by the Board of Directors with or without cause.
<PAGE>
3
ARTICLE IV
INDEMNIFICATION
Section 1. Indemnity Undertaking. To the fullest extent permitted by
law (including, without limitation, Section 145 of the General Corporation Law
of the State of Delaware (as amended from time to time, the "General Corporation
Law")), the Corporation shall indemnify any person who is or was made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding (a "Proceeding"), whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is or
was a Director or officer of the Corporation, or is or was serving in any
capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise (an
"Other Entity"), against judgments, fines, penalties, excise taxes, amounts paid
in settlement and costs, charges and expenses (including attorneys' fees and
disbursements). Persons who are not Directors or officers of the Corporation may
be similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board of Directors at
any time specifies that such persons are entitled to the benefits of this
Article IV.
Section 2. Advancement of Expenses. The Corporation shall, from time
to time, reimburse or advance to any Director or officer or other person
entitled to indemnification hereunder the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in connection
with any Proceeding, in advance of the final disposition of such Proceeding;
provided, however, that, if required by the General Corporation Law, such
expenses incurred by or on behalf of any such Director, officer or other person
may be paid in advance of the final disposition of a Proceeding only upon
receipt by the Corporation of an undertaking, by or on behalf of such Director,
officer or other person indemnified hereunder, to repay any such amount so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right of appeal that such Director, officer or other
person is not entitled to be indemnified for such expenses.
Section 3. Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article IV shall not be deemed exclusive of any other rights which a person
seeking indemnification or reimbursement or advancement of expenses may have or
to which such person hereafter may be entitled under any statute, the Restated
Certificate of Incorporation, these By-Laws, any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
Section 4. Continuation of Benefits. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Article IV shall continue as to a person who has ceased to be a
Director or officer (or other person
<PAGE>
4
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of any such person.
Section 5. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, employee or agent of an
Other Entity, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Article IV or the
Restated Certificate of Incorporation or under Section 145 of the General
Corporation Law or any other provision of law.
Section 6. Binding Effect. The provisions of this Article IV shall
be a contract between the Corporation, on the one hand, and each Director and
officer who serves in such capacity at any time while this Article IV is in
effect and/or any other person indemnified hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be legally bound. No repeal or modification of this Article IV
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
Section 7. Procedural Rights. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article IV shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
Section 8. Service Deemed at Corporation's Request. Any Director or
officer of the Corporation serving in any capacity (a) another corporation of
which a majority of the shares entitled to vote in the election of its directors
is held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed, in each case, to be doing so at the request of the Corporation.
<PAGE>
5
Section 9. Election of Applicable Law. Any person entitled to be
indemnified or to receive reimbursement or advancement of expenses as a matter
of right pursuant to this Article IV may elect to have the right to
indemnification or reimbursement or advancement of expenses interpreted on the
basis of the applicable law in effect at the time of the occurrence of the event
or events giving rise to the applicable Proceeding, to the extent permitted by
law, or on the basis of the applicable law in effect at the time such
indemnification or reimbursement or advancement of expenses is sought. Such
election shall be made, by a notice in writing to the Corporation, at the time
indemnification or reimbursement or advancement of expenses is sought; provided,
however, that if no such notice is given, the right to indemnification or
reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of expenses
is sought.
ARTICLE V
GENERAL PROVISIONS
Section 1. Notices. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears in the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail. Notice to Directors
may also be given by telegram.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
<PAGE>
[CONFORMED COPY]
Prime Succession Acquisition Corp., as Issuer
and
United States Trust Company of New York, as Trustee
INDENTURE
Dated as of August 15, 1996
$100,000,000
10 3/4% Senior Subordinated Notes due 2004
<PAGE>
TABLE OF CONTENTS
----------------------
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ARTICLE 1
Definitions and Other Provisions of General Application
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Section 1.01. Definitions................................................................... 1
Section 1.02. Incorporation by Reference of Trust Indenture Act............................. 22
Section 1.03. Rules of Construction......................................................... 23
ARTICLE 2
The Notes
Section 2.01. Forms and Dating.............................................................. 24
Section 2.02. Execution and Authentication.................................................. 25
Section 2.03. Registrar and Paying Agent.................................................... 26
Section 2.04. Paying Agent to Hold Money in Trust........................................... 26
Section 2.05. Noteholder Lists.............................................................. 27
Section 2.06. Transfer and Exchange......................................................... 27
Section 2.07. Replacement Notes............................................................. 28
Section 2.08. Outstanding Notes............................................................. 28
Section 2.09. Book-Entry Provisions for Global Note......................................... 28
Section 2.10. Restrictive Legends........................................................... 30
Section 2.11. Special Transfer Provisions................................................... 32
Section 2.12. Treasury Notes................................................................ 35
Section 2.13. Temporary Notes............................................................... 35
Section 2.14. Cancellation.................................................................. 35
Section 2.15. Defaulted Interest............................................................ 35
Section 2.16. Cusip Number.................................................................. 36
Section 2.17. Deposit of Moneys............................................................. 36
Section 2.18. Form of Certificate to Be Delivered........................................... 36
ARTICLE 3
Section 3.01. Notices to the Trustee........................................................ 39
Section 3.02. Selection of Notes to Be Redeemed............................................. 39
Section 3.03. Notice of Redemption.......................................................... 40
Section 3.04. Effect of Notice of Redemption................................................ 41
Section 3.05. Deposit of Redemption Price................................................... 41
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Section 3.06. Notes Redeemed or Purchased in Part........................................... 42
Section 3.07. Special Redemption............................................................ 42
ARTICLE 4
Covenants
Section 4.01. Payment of Notes.............................................................. 42
Section 4.02. Maintenance of Office or Agency............................................... 43
Section 4.03. Corporate Existence........................................................... 43
Section 4.04. Payment of Taxes and Other Claims............................................. 44
Section 4.05. Maintenance of Properties; Books and Records;
Compliance with Law....................................................... 44
Section 4.06. Compliance Certificate........................................................ 45
Section 4.07. SEC Reports................................................................... 45
Section 4.08. Limitation on Indebtedness.................................................... 46
Section 4.09. Limitation on Restricted Payments............................................. 49
Section 4.10. Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries.............................................................. 53
Section 4.11. Limitation on Liens........................................................... 53
Section 4.12. Change of Control............................................................. 53
Section 4.13. Disposition of Proceeds of Asset Sales........................................ 56
Section 4.14. Limitation on Transactions with Interested Persons............................ 58
Section 4.15. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.................................................... 60
Section 4.16. Limitation on the Issuance of Other Senior Subordinated
Indebtedness.............................................................. 61
Section 4.17. Limitations on Sale-Leaseback Transactions.................................... 61
Section 4.18. Waiver of Stay, Extension or Usury Laws....................................... 61
ARTICLE 5
Successor Corporation
Section 5.01. When Company May Merge, Etc................................................... 62
Section 5.02. Successor Substituted......................................................... 63
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ARTICLE 6
Remedies
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Section 6.01. Events of Default............................................................. 64
Section 6.02. Acceleration.................................................................. 65
Section 6.03. Other Remedies................................................................ 66
Section 6.04. Waiver of Past Defaults....................................................... 67
Section 6.05. Control by Majority........................................................... 67
Section 6.06. Limitation on Suits........................................................... 67
Section 6.07. Right of Holders to Receive Payment........................................... 68
Section 6.08. Collection Suit by Trustee.................................................... 68
Section 6.09. Trustee May File Proofs of Claims............................................. 68
Section 6.10. Priorities.................................................................... 69
Section 6.11. Undertaking for Costs......................................................... 69
Section 6.12. Restoration of Rights and Remedies............................................ 70
ARTICLE 7
Trustee
Section 7.01. Duties........................................................................ 70
Section 7.02. Rights of Trustee............................................................. 71
Section 7.03. Individual Rights of Trustee.................................................. 72
Section 7.04. Trustee's Disclaimer.......................................................... 72
Section 7.05. Notice of Default............................................................. 73
Section 7.06. Money Held in Trust........................................................... 73
Section 7.07. Reports by Trustee to Holders................................................. 73
Section 7.08. Compensation and Indemnity.................................................... 73
Section 7.09. Replacement of Trustee........................................................ 74
Section 7.10. Successor Trustee by Merger, Etc.............................................. 76
Section 7.11. Eligibility; Disqualification................................................. 76
Section 7.12. Preferential Collection of Claims Against Company............................. 76
ARTICLE 8
Satisfaction and Discharge of Indenture
Section 8.01. Termination of the Company's Obligations...................................... 76
Section 8.02. Legal Defeasance and Covenant Defeasance...................................... 78
Section 8.03. Application of Trust Money.................................................... 82
Section 8.04. Repayment to Company.......................................................... 82
Section 8.05. Reinstatement................................................................. 82
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ARTICLE 9
Amendments, Supplements and Waivers
Section 9.01. Without Consent of Holders.................................................... 83
Section 9.02. With Consent of Holders....................................................... 83
Section 9.03. Compliance with Trust Indenture Act........................................... 85
Section 9.04. Revocation and Effect of Consents............................................. 85
Section 9.05. Notation on or Exchange of Notes.............................................. 86
Section 9.06. Trustee May Sign Amendments, Etc.............................................. 86
ARTICLE 10
Subordination of Notes
Section 10.01. Notes Subordinate to Senior Indebtedness..................................... 86
Section 10.02. Payment over of Proceeds upon Dissolution.................................... 87
Section 10.03. Suspension of Payment When Senior Indebtedness
in Default.............................................................. 88
Section 10.04. Trustee's Relation to Senior Indebtedness.................................... 90
Section 10.05. Subrogation to Rights of Holders of Senior Indebtedness.................... 90
Section 10.06. Provisions Solely to Define Relative Rights.................................. 91
Section 10.07. Trustee to Effectuate Subordination.......................................... 91
Section 10.08. No Waiver of Subordination Provisions........................................ 92
Section 10.09. Notice to Trustee............................................................ 92
Section 10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent....................................................... 93
Section 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights........................................ 94
Section 10.12. Article Applicable to Paying Agents.......................................... 94
Section 10.13. No Suspension of Remedies.................................................... 94
ARTICLE 11
Miscellaneous
Section 11.01. Trust Indenture Act of 1939.................................................. 95
Section 11.02. Notices...................................................................... 95
Section 11.03. Communication by Holders with Other Holders.................................. 96
Section 11.04. Certificate and Opinion as to Conditions Precedent........................... 96
Section 11.05. Statements Required in Certificate or Opinion................................ 97
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Section 11.06. Rules by Trustee, Paying Agent, Registrar.................................... 97
Section 11.07. Governing Law................................................................ 97
Section 11.08. No Interpretation of Other Agreements........................................ 98
Section 11.09. No Recourse Against Others................................................... 98
Section 11.10. Successors................................................................... 98
Section 11.11. Duplicate Originals.......................................................... 98
Section 11.12. Separability................................................................. 98
Section 11.13. Table of Contents, Headings, Etc............................................. 98
Section 11.14. Benefits of Indenture........................................................ 99
EXHIBIT A Form of Global Note
EXHIBIT B Form of Physical Note
EXHIBIT C Option of Holder to Elect Purchase Form
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<PAGE>
INDENTURE, dated as of August 15, 1996, between Prime Succession
Acquisition Corp. (to be renamed Prime Succession, Inc.), a corporation
incorporated under the laws of the State of Delaware ("the Company"), and United
States Trust Company of New York, a New York corporation, as trustee (the
"Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 10 3/4%
Senior Subordinated Notes due 2004 (including the Initial Notes and the Exchange
Notes (as hereinafter defined), the "Notes").
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
"Accredited Investor" shall have the meaning set forth in Section 2.10.
"Acquisition" means the acquisition of Existing Prime by Blackstone
Capital Partners II Merchant Banking Fund L.P. and its affiliates and Loewen
Group International, Inc.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Subsidiary of any other Person.
"Acquisition Closing Date" means the closing date of the Acquisition.
"Administrative Services Agreement" means the Administrative Services
Agreement, to be dated on or about the Acquisition Closing Date, between the
Company and Loewen Group International, Inc., as the same may be amended,
supplemented or otherwise modified from time to time.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person.
"Agent" means any Registrar or Paying Agent of the Notes.
"Agent Members" has the meaning set forth in Section 2.09.
<PAGE>
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Subsidiary of the Company, (b)
the acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or (c) the acquisition by the
Company or any Subsidiary of the Company of any division or line of business of
any Person (other than a Subsidiary of the Company).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any Person other than the Company or a
Subsidiary of the Company, in one or a series of related transactions, of (a)
any Capital Stock of any Subsidiary of the Company (other than in respect of
director's qualifying shares or investments by foreign nationals mandated by
applicable law); (b) all or substantially all of the properties and assets of
any division or line of business of the Company or any Subsidiary of the
Company; or (c) any other properties or assets of the Company or any Subsidiary
of the Company other than in the ordinary course of business. For the purposes
of this definition, the term "Asset Sale" shall not include (i) any sale,
transfer or other disposition of equipment, tools or other assets (including
Capital Stock of any Subsidiary of the Company) by the Company or any of its
Subsidiaries in one or a series of related transactions in respect of which the
Company or such Subsidiary receives cash or property with an aggregate Fair
Market Value of $1,000,000 or less; (ii) a disposition by a Subsidiary to the
Company or a Wholly-Owned Subsidiary of the Company and (iii) any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions of Article 5 hereof.
"Asset Sale Offer" shall have the meaning set forth in Section 4.13.
"Asset Sale Offer Price" shall have the meaning set forth in Section
4.13.
"Asset Sale Purchase Date" shall have the meaning set forth in Section
4.13.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a
2
<PAGE>
like term in accordance with GAAP. The net amount of rent required to be paid
under any such lease for any such period shall be the aggregate amount of rent
payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. "Attributable Value" means, as to a Capitalized Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with GAAP.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years (or any fraction thereof)
from such date to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bank Agent" means The Bank of Nova Scotia, as administrative agent
under the Bank Credit Agreement and any successor agent.
"Bank Credit Agreement" means the Credit Agreement, to be dated on or
about the Acquisition Closing Date, among the Company, as borrower, Existing
Prime, the Lenders referred to therein, The Bank of Nova Scotia, as
administrative agent, and Goldman, Sachs & Co., as arranging agent and
syndication agent, and all promissory notes, guarantees, security agreements,
pledge agreements, deeds of trust, mortgages, letters of credit and other
instruments, agreements and documents executed pursuant thereto or in connection
therewith, in each case as the same may be amended, supplemented, restated,
renewed, refinanced, replaced or otherwise modified (in whole or in part and
without limitation as to amount, terms, conditions, covenants or other
provisions) from time to time.
"Bank Credit Facilities" means, collectively, the Bank Term Facility
and the Revolving Credit Facility under the Bank Credit Agreement..
"Bankruptcy Law" means Title 11, United States Code or any similar law
for the relief of debtors.
"Bank Term Facility" means the $90 million senior secured term loan
facility under the Bank Credit Agreement.
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"Board of Directors" means the board of directors of the Company or any
duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York, are authorized or obligated by law, regulation or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 365 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) certificates of deposit with a
maturity of 365 days or less of any financial institution that is not organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-2 by S&P or at least P-2 by Moody's or at
least an equivalent rating category of another nationally recognized securities
rating agency; (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the government of the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within 365 days from the date of acquisition; provided
that the terms of such agreements comply with the guidelines
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set forth in the Federal Financial Agreements of Depository Institutions With
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; (v) notes held by the Company or any Subsidiary which were
obtained by the Company or such Subsidiary in connection with Asset Sales (x) in
the ordinary course of its funeral home, cemetery or cremation businesses or (y)
which were required to be made pursuant to applicable federal or state law and
(vi) with respect to moneys held in the escrow account pursuant to the Escrow
Agreement, Eligible Investments (as defined in the Escrow Agreement).
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 35% of the total
Voting Stock of Existing Prime, under circumstances where the Permitted Holders
(i) "beneficially own" (as so defined) in the aggregate a lower percentage of
the Voting Stock than such other Person or "group" and (ii) do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors of Existing Prime; (b)
Existing Prime consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another Person, or another Person
consolidates with, or merges with or into, Existing Prime, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Existing
Prime is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of
Existing Prime is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could then be paid by the
Company as a Restricted Payment under the Indenture, or a combination thereof,
and (ii) immediately after such transaction no "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding
Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise), directly or indirectly,
of more than 50% of the total Voting Stock of the surviving or transferee
corporation; (c) at any time during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of
Existing Prime (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the stockholders of Existing
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Prime was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Existing Prime then in
office; or (d) Existing Prime is liquidated or dissolved or adopts a plan of
liquidation.
"Change of Control Date" shall have the meaning set forth in Section
4.12.
"Change of Control Offer" shall have the meaning set forth in Section
4.12.
"Change of Control Purchase Date" shall have the meaning set forth in
Section 4.12.
"Closing Date" means the later of the Issue Date and the Acquisition
Closing Date.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture, and thereafter means such
successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its President, an Executive Vice President or a Vice President,
and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense and (d) Consolidated Income
Tax Expense.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of the aggregate amount of Consolidated Cash Flow of such
Person for the four full fiscal quarters immediately preceding the date of
the transaction (the "Transaction Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter
period
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being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated Cash Flow" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence of any Indebtedness of
such Person or any of its Subsidiaries (and the application of the net proceeds
thereof) during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise
to the need to make such calculation (and the application of the net proceeds
thereof), as if such incurrence (and application) occurred on the first day of
the Reference Period, and (b) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including
any Person who becomes a Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness)
occurring during the Reference Period, as if such Asset Sale or Asset
Acquisition occurred on the first day of the Reference Period. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (i) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date
(taking into account any Interest Rate Protection Agreement applicable to such
Indebtedness if such Interest Rate Protection Agreement has a remaining term in
excess of 12 months); and (ii) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Reference
Period. If such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect
to the incurrence of such guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the product of (a) the aggregate amount
of dividends and other distributions paid or accrued during such period in
respect of Preferred Stock and Redeemable Capital Stock (other than dividends
and distributions on Preferred Stock and Redeemable Capital Stock that are
non-cash through the Final Maturity Date) of such Person and its Subsidiaries on
a
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consolidated basis times (b) a fraction, the numerator which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal; provided,
however, that the denominator in clause (b) shall be one if such dividend or
other distribution is fully tax deductible.
"Consolidated Income Tax Expense" means, with respect to any Person for
any period, the provision for federal, state, local and foreign income taxes of
such Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations, (c) the interest portion of any deferred payment obligation, (d)
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such Person and its Subsidiaries allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by such Person or one of its
Subsidiaries, (iii) net income (or loss) of any Person combined with such Person
or one of its Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss realized upon the
termination of any employee pension benefit plan, on an after-tax basis, (v)
gains or losses in respect of any Asset Sales by such Person or one of its
Subsidiaries, (vi) the net income of any Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Subsidiary of
that income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary or its stockholders and (vii) any closing costs associated with
the Acquisition and the financing thereof, severance costs, restructuring costs
and costs related to the closing of facilities.
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"Consolidated Net Worth" means, with respect to any Person at any date,
the consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such Person and
its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries reducing Consolidated Net Income of such
Person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which required an accrual of or a
reserve for cash charges for any future period).
"consolidation" means, with respect to any person, the consolidation of
the accounts of such person and each of its Subsidiaries if and to the extent
the accounts of such person and each of its Subsidiaries would normally be
consolidated with those of such person, all in accordance with GAAP. The term
"consolidated" shall have a meaning correlative to the foregoing.
"control" means, with respect to any specified person, the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is located in New York City.
"covenant defeasance" shall have the meaning set forth in Section 8.02.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
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"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Bank Credit Agreement and (ii) any other Senior Indebtedness which (a)
at the time of the determination exceeds $5,000,000 in aggregate principal
amount and (b) is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Escrow Agreement" means the Escrow Agreement, dated as of August 15,
1996, between the Company and United States Trust Company of New York, as escrow
agent.
"Event of Default" has the meaning set forth under Section 6.01.
"Excess Proceeds" shall have the meaning set forth in Section 4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that (i) such Exchange
Notes shall not contain terms or legends with respect to transfer restrictions
under the Securities Act and shall be registered under the Securities Act, and
(ii) certain provisions relating to an increase in the stated rate of interest
thereon shall be eliminated) that are issued and exchanged for the Initial Notes
in accordance with the Exchange Offer, as provided for in the Registration
Rights Agreement.
"Exchange Offer" means the offer by the Company to the Holders of the
Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Existing Prime" means Prime Succession, Inc., a Delaware corporation
and the parent of the Company, which will be renamed Prime Succession Holdings,
Inc. upon consummation of the Acquisition.
"Fair Market Value" means, with respect to any assets, the price, as
determined by the Company, acting in good faith which could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller and a
willing buyer, neither of which is under pressure or compulsion to complete
the transaction; provided, however, that, with respect to any transaction which
involves an asset or assets in excess of $250,000, such determination shall be
evidenced by Board Resolutions delivered to the Trustee.
"Final Maturity Date" means August 15, 2004.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable on the date of
the Indenture and are consistently applied.
"Global Note" has the meaning set forth in Section 2.01.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Holder" or "Noteholder" means the person in whose name a Note is
registered on the Registrar's books.
"incur" has the meaning set forth in Section 4.08.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business and
which are not overdue by more than 90 days, and excluding all obligations,
contingent or otherwise, of such Person in connection with any undrawn letters
of credit, banker's acceptance or other similar credit transaction, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such Person, (e)
all Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and
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contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the Fair Market Value of such
property or asset or the amount of the obligation so secured), (f) all
guarantees of Indebtedness referred to in this definition by such Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such Person, (i) any Preferred Stock of any Subsidiary
of such Person valued at the sum of (without duplication) (A) the liquidation
preference thereof, (B) any mandatory redemption payment obligations in respect
thereof and (C) accrued cash dividends thereon, and (j) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) through (i) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such Redeemable
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" refers to Notes initially issued under this Indenture
and distributed in transactions exempt from registration under the Securities
Act prior to the exchange of such Notes for Exchange Notes.
"interest" means, with respect to any Note, the amount of all interest
accruing on such Note, including all interest accruing subsequent to the
occurrence of any events specified in Section 6.01(f) or 6.01(g) or which would
have accrued but for any such event, whether or not such claims are allowable
under applicable law.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes, as set forth therein.
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"Interest Rate Protection Agreement" means, with respect to any Person,
any arrangement with any other Person whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the assets of any Subsidiary of the Company at the time that
such Subsidiary is designated as an Unrestricted Subsidiary shall be deemed to
be an Investment made by the Company in such Unrestricted Subsidiary at such
time. "Investments" shall exclude extensions of trade credit by the Company and
its Subsidiaries in the ordinary course of business in accordance with normal
trade practices of the Company or such Subsidiary, as the case may be.
"Issue Date" means the date on which the Notes are originally issued.
"legal defeasance" shall have the meaning set forth in Section 8.02.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity Date" means, with respect to any security, the date on which
any principal of such security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed by or sold
with recourse to the Company or any Subsidiary of the Company) net of (i)
brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any Person (other than the
Company or any Subsidiary of the Company) owning a beneficial interest in the
assets subject to such Asset Sale, (iv) all payments made on any Indebtedness
which is secured by any assets subject to such Asset Sale, in accordance with
the terms of any Lien upon such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Sale, or by applicable law, be
repaid out of the proceeds from such Asset Sale and (v) appropriate amounts to
be provided by the Company or any Subsidiary of the Company, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Subsidiary of the
Company, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers'
Certificate delivered to the Trustee.
"Non-payment Default" means any event (other than a Payment Default)
the occurrence of which entitles one or more persons to act to accelerate the
maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person other than a U.S. Person.
"Notes" has the meaning set forth in the preamble hereof.
"Officer" means the Chairman of the Board, the President, any Executive
Vice President, any Vice President, the Chief Financial Officer, the Treasurer,
the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers of
the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
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"Pari Passu Indebtedness" means Indebtedness of the Company which ranks
pari passu in right of payment with the Notes.
"Paying Agent" has the meaning set forth in Section 2.03, except that,
for the purposes of Section 4.12 and Section 4.13 and Articles Three and Eight,
the Paying Agent shall not be the Company or a Subsidiary of the Company or any
of their respective Affiliates.
"Payment Blockage Notice" has the meaning set forth in Section 10.03.
"Payment Blockage Period" has the meaning set forth in Section 10.03.
"Payment Default" means any default in the payment of principal,
premium, if any, or interest on any Senior Indebtedness beyond any applicable
grace period with respect thereto.
"Permitted Holder" means Blackstone Capital Partners II Merchant
Banking Fund L.P. or Loewen Group International, Inc., or any Affiliate of
either.
"Permitted Investments" means any of the following:
(i) Investments in any Wholly-Owned Subsidiary of the Company
(including any Person that pursuant to such Investment becomes a Wholly-Owned
Subsidiary of the Company) and any Person that is merged or consolidated with
or into, or transfers or conveys all or substantially all of its assets to, the
Company or any Wholly-Owned Subsidiary of the Company at the time such
Investment is made;
(ii) Investments in Cash Equivalents;
(iii) loans or advances to officers, employees or consultants of the
Company and its Subsidiaries in the ordinary course of business for bona fide
business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $1,000,000 in the aggregate at any one time
outstanding;
(iv) Investments in evidences of Indebtedness, securities or other
property received from another Person by the Company or any of its Subsidiaries
in connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such Person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such Person held by the Company
or any of its Subsidiaries, or for other liabilities or obligations of such
other Person to
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the Company or any of its Subsidiaries that were created, in accordance with
the terms of the Indenture;
(v) Investments of funds received by the Company or its Subsidiaries
in the ordinary course of business, which funds are required to be held in
trust for the benefit of others by the Company or such Subsidiary, as the case
may be, and which funds do not constitute assets or liabilities of the Company
or such Subsidiary;
(vi) Investments in acquired Subsidiaries; provided that the sum of
(i) the aggregate Fair Market Value of all such Investments and (ii) the
aggregate Fair Market Value of all Preferred Stock permitted to be issued
pursuant to clause (z) of Section 4.10 shall not exceed $5,000,000 at any time
outstanding;
(vii) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Subsidiary or in satisfaction of judgments;
(viii) Investments in Persons to the extent such Investment represents
the non-cash consideration otherwise permitted to be received by the Company or
its Subsidiaries in connection with an Asset Sale; and
(ix) Investments existing on the Issue Date.
"Permitted Junior Notes" shall have the meaning set forth in Section
10.02.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall have
set aside on its books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, governmental contracts,
performance
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and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be initiated
shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition of property or
assets of the Company or any Subsidiary of the Company acquired in the ordinary
course of business; provided, however, that (i) the related purchase money
Indebtedness shall not be secured by any property or assets of the Company or
any Subsidiary of the Company other than the property and assets so acquired
and (ii) the Lien securing such Indebtedness either (x) exists at the time of
such acquisition or (y) shall be created within 90 days of such acquisition;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(i) Liens with respect to Acquired Indebtedness incurred in accordance
with Section 4.08.
"Person" means any individual, corporation, limited liability company
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Physical Notes" has the meaning set forth in Section 2.01.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.06 hereof in exchange for a
mutilated
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Note or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence
the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any Capital Stock
of such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"principal" means, with respect to any debt security, the principal of
the security plus, when appropriate, the premium, if any, on the security and
any interest on overdue principal.
"Private Placement Legend" has the meaning set forth in Section 2.10.
"QIB" has the meaning set forth in Section 2.09.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any Note
or is redeemable at the option of the holder thereof at any time prior to any
such Stated Maturity, or is convertible into or exchangeable for debt securities
at any time prior to any such Stated Maturity.
"Redemption Date" means, with respect to any Note to be redeemed, each
such date fixed by the Company for redemption pursuant to this Indenture and the
Notes.
"Redemption Price" means, with respect to any Note to be redeemed, the
price fixed for such redemption pursuant to the terms of this Indenture and the
Notes.
"Regulation S" means Regulation S under the Securities Act or any
successor thereto.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of August 15, 1996, by and between the Company and Smith Barney Inc.
"Replacement Assets" has the meaning set forth in Section 4.13.
"Restricted Payment" has the meaning set forth in Section 4.09.
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"Revolving Credit Facility" means the $25 million senior secured
revolving credit facility under the Bank Credit Agreement.
"Rule 144A" means Rule 144A under the Securities Act or any successor
thereto.
"Sale-Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
"SEC" means the Securities and Exchange Commission, as from time
to time constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
all obligations of the Company now or hereafter existing under the Bank Credit
Agreement, including without limitation principal of, premium, and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
post-petition interest is allowed as a claim in such proceeding) on Indebtedness
outstanding under the Bank Credit Agreement, reimbursement obligations of the
Company with respect to any letters of credit outstanding under the Bank Credit
Agreement and any obligation for fees, expenses and indemnities. Notwithstanding
the foregoing, "Senior Indebtedness" shall not include (a) Indebtedness
evidenced by the Notes, (b) Indebtedness that is
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expressly subordinate or junior in right of payment to any Indebtedness of the
Company, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, (d) Indebtedness which is represented by Redeemable
Capital Stock, (e) Indebtedness for goods, materials or services purchased in
the ordinary course of business or Indebtedness consisting of trade payables or
other current liabilities (other than any current liabilities owing under the
Bank Credit Facilities or the current portion of any long-term Indebtedness
which would constitute Senior Indebtedness but for the operation of this clause
(e)), (f) Indebtedness of or amounts owed by the Company for compensation to
employees or for services rendered to the Company, (g) any liability for
federal, state, local or other taxes owed or owing by the Company, (h)
Indebtedness of the Company to a Subsidiary of the Company or any other
Affiliate of the Company or any of such Affiliate's Subsidiaries, (i) that
portion of any Indebtedness which is incurred by the Company in violation of
the Indenture and (j) amounts owing under leases (other than Capitalized Lease
Obligations).
"Senior Representative" means the Bank Agent or any other
representatives designated in writing to the Trustee of the holders of any class
or issue of Designated Senior Indebtedness.
"Significant Subsidiary" shall mean a Subsidiary which is a
"Significant Subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the
Securities Act.
"Special Redemption Date" means the date, if any, on which the Notes
are redeemed pursuant to Clause 3 (b) of the Notes.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary which is expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof and (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person,
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one or more Subsidiaries thereof or such Person and one or more Subsidiaries
thereof, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest entitled to vote in the election of
directors, managers or trustees thereof (or other Person performing similar
functions). For purposes of this definition, any directors' qualifying shares
or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company under the Indenture, other than for purposes of the definition of an
Unrestricted Subsidiary, unless the Company shall have designated an
Unrestricted Subsidiary as a "Subsidiary" by written notice to the Trustee
under the Indenture, accompanied by an Officers' Certificate as to compliance
with the Indenture; provided, however, that the Company shall not be permitted
to designate any Unrestricted Subsidiary as a Subsidiary unless, after giving
pro forma effect to such designation, (i) the Company would be permitted to
incur $1.00 of additional Indebtedness (other than Indebtedness permitted under
Clauses (a)-(m) of the second paragraph of Section 4.08) under the first
paragraph of Section 4.08 hereof (assuming a market rate of interest with
respect to such Indebtedness) and (ii) all Indebtedness and Liens of such
Unrestricted Subsidiary would be permitted to be incurred by a Subsidiary of
the Company under the Indenture. A designation of an Unrestricted Subsidiary as
a Subsidiary may not thereafter be rescinded.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the Issue Date.
"Trust Officer" means any officer or assistant officer in the Corporate
Trust Administration department or similar department performing corporate trust
work of the Trustee or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party in accordance with the provisions of this
Indenture, and thereafter means such successor.
"United States" has the meaning given to it in Regulation S.
"Unrestricted Subsidiary" means a Subsidiary of the Company (i) none of
whose properties or assets were owned by the Company or any of its Subsidiaries
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prior to the Issue Date, other than any such assets as are transferred to such
Unrestricted Subsidiary in accordance with Section 4.09 hereof, (ii) whose
properties and assets, to the extent that they secure Indebtedness, secure only
Non-Recourse Indebtedness and (iii) which has no Indebtedness other than
Non-Recourse Indebtedness. As used above, "Non- Recourse Indebtedness" means
Indebtedness as to which (i) neither the Company nor any of its Subsidiaries
(other than the relevant Unrestricted Subsidiary or another Unrestricted
Subsidiary) (1) provides credit support (including any undertaking, agreement
or instrument which would constitute Indebtedness), (2) guarantees or is
otherwise directly or indirectly liable or (3) constitutes the lender (in each
case, other than pursuant to and in compliance with Section 4.09 hereof) and
(ii) no default with respect to such Indebtedness (including any rights which
the holders thereof may have to take enforcement action against the relevant
Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or its
Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.02.
"U.S. Person" has the meaning given to it in Regulation S.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly-Owned Subsidiary" means any Subsidiary of the Company of which
100% of the outstanding Capital Stock is owned by one or more Wholly-Owned
Subsidiaries of the Company or by the Company and one or more Wholly-Owned
Subsidiaries of the Company. For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
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"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
1. a term has the meaning assigned to it;
2. words in the singular include the plural, and words in the
plural include the singular;
3. "or" is not exclusive;
4. provisions apply to successive events and transactions;
5. all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
6. the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
7. all references to $ or dollars shall refer to the lawful
currency of the United States of America.
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ARTICLE 2
THE NOTES
SECTION 2.01. Forms and Dating.
The Notes and the Trustee's certificate of authentication thereon shall
be in substantially the form of Exhibit A and Exhibit B hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with any applicable law or with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Officers executing such Notes, as evidenced by their execution thereof. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The definitive Notes shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes. Each Note shall be dated the date
of its authentication.
Initial Notes offered and sold in reliance on Rule 144A shall, except
as described in the following paragraph, and, unless the Global Note
representing the Initial Notes has theretofore been exchanged for Physical Notes
and except as described in the following paragraph, the Exchange Notes shall, be
issued initially in the form of one or more permanent global Notes substantially
in the form set forth in Exhibit A hereto, each such Note containing the legend
relating to global securities set forth in Section 2.09 and, in the case of the
Initial Notes, the Private Placement Legend set forth in Section 2.09 (each a
"Global Note") deposited with, or on behalf of, the Depositary or with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records, in the form of Schedule A to the Global Note,
of the Depositary or its nominee, or of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold other than as described in the preceding
paragraph, and any Physical Notes issued in exchange for all or a portion of an
Exchange Note that is a Global Note, shall be issued in the form of permanent
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certificated Notes in registered form in substantially the form set forth in
Exhibit B hereto (the "Physical Notes"). Notes issued pursuant to Section 2.09
in exchange for interests in the Global Note shall be in the form of Physical
Notes.
The terms and provisions contained in the form of the Notes, annexed
hereto as Exhibits A and B shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
SECTION 2.02. Execution and Authentication.
Two Officers shall execute the Notes on behalf of the Company by either
manual or facsimile signature. The Company's seal shall be impressed, affixed,
imprinted or reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note or at any time thereafter, the
Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. Such signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
an aggregate principal amount not to exceed $100,000,000 and (ii) Exchange Notes
for issue only in the Exchange Offer, pursuant to the Registration Rights
Agreement, for a like principal amount of Initial Notes exchanged in such
Exchange Offer, in each case upon receipt of an Officers' Certificate signed by
two Officers of the Company directing the Trustee to authenticate such Notes and
certifying that all conditions precedent to the issuance of the relevant Notes
contained herein have been complied with. The aggregate principal amount of
Notes outstanding at any time may not exceed $100,000,000, except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. Such authenticating agent shall have the same
rights as the Trustee in any dealings hereunder with the Company or with any of
the Company's Affiliates.
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SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan, The City of New York, State of New York) where
Notes may be presented for registration of transfer or for exchange (the
"Registrar"), an office or agency (which shall be located in the Borough of
Manhattan, The City of New York, State of New York) where Notes may be presented
for payment of principal, premium, if any, and interest (the "Paying Agent") and
an office or agency where notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-Registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent. Except as otherwise
expressly provided in this Indenture, the Company or any Affiliate thereof may
act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Registrar or Paying Agent. The
Company shall notify the Trustee of the name and address of any such Registrar
or Paying Agent. If the Company fails to maintain a Registrar, Paying Agent or
agent for service of notices and demands, or fails to give the foregoing notice,
the Trustee shall act as such and shall be entitled to appropriate compensation
in accordance with Section 7.08.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.04. Paying Agent to Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of principal of, or
interest on, the Notes (whether such money has been distributed to it by the
Company or any other obligor on the Notes), and the Company (or any other
obligor on the Notes) and the Paying Agent shall notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. If the Company or an Affiliate of the Company acts as Paying Agent, it
shall segregate the money and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to distribute all money held by it to the
Trustee and account for any funds disbursed and the Trustee may at any time
during the continuance of any Payment Default with respect to the Notes, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds distributed. Upon doing
so, the
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Paying Agent (other than an obligor on the Notes shall have no further
liability for the money so paid over to the Trustee.
SECTION 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at least ten Business
Days before each Interest Payment Date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders, including the
aggregate principal amount of Notes held by each such Holder, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to Section 2.11, when Notes are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Notes or to
exchange such Notes for an equal principal amount of Notes of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Notes surrendered for transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing and shall be
accompanied by such other documents or instruments, if any, as are required by
Sections 2.09 through 2.11. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Notes at the
Registrar's or co-Registrar's request. No service charge shall be made for any
transfer, exchange or redemption, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar governmental
charge payable upon exchange pursuant to Sections 2.02, 2.07, 2.13, 3.06, 4.12,
4.13 or 9.05 or the Exchange Offer without transfer to another person). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article 3, except the unredeemed portion of any
Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Note may be effected
only
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through a book-entry system maintained by the Holder of such Global Note
(or its agent), and that ownership of a beneficial interest in the Note shall be
required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note of
like tenor and amount if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Paying Agent or Registrar from any loss
which any of them may suffer if a Note is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Note, including
reasonable fees and expenses of counsel. Every replacement Note is an additional
obligation of the Company.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. A Note
does not cease to be outstanding because the Company or any of its Affiliates
holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07 .
If on a Redemption Date or a Maturity Date the Paying Agent (other than
the Company or an Affiliate of the Company) holds cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the Notes
payable on that date, and is not prohibited from paying such cash or U.S.
Government Obligations to the Holders of such Notes pursuant to the terms of
this Indenture, then on and after that date such Notes cease to be outstanding
and interest on them shall cease to accrue.
SECTION 2.09. Book-Entry Provisions for Global Note. (a) Each Global
Note initially shall (i) be registered in the name of the Depositary for such
Global Note or the nominee of such Depositary, (ii) be deposited with, or on
behalf of, the
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Depositary or with the Trustee, as custodian for such Depositary, and (iii)
bear the legends as set forth in Section 2.10 except a Global Note representing
the Exchange Notes shall not bear the Private Placement Legend set forth in
Section 2.10. Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary, or the Trustee as its custodian, or under
the Global Note, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in the Global Note
may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 2.11. In addition, Physical Notes
shall be issued to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Company notifies the Trustee in writing
that the Depositary is at any time unwilling or unable to continue as a
depository for the Global Note and a successor depository is not appointed by
the Company within 90 days, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in definitive
form under the Indenture, or (iii) there is continuing an Event of Default as
set forth herein and a Holder so requests.
(c) In connection with any transfer of a portion of the beneficial
interest in the Global Note pursuant to Section 2.09(b) to beneficial owners
who are required to hold Physical Notes, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the Global
Note in an amount equal to the principal amount of the beneficial interest in
the Global Note to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Notes of like
tenor and amount.
(d) In connection with the transfer of the entire Global Note
to beneficial owners pursuant to Section 2.09(b), the Global Note shall be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global Note an
equal aggregate principal amount of Physical Notes of authorized denominations.
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(e) Any Physical Note delivered in exchange for an interest in the
Global Note constituting an Initial Note pursuant to subsection (c) or
subsection (d) of this Section shall bear the applicable legend regarding
transfer restrictions set forth in Section 2.10.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
(g) Qualified institutional buyers ("QIBs") that are beneficial owners
of interests in a Global Note may receive Physical Notes (which shall bear the
Private Placement Legend if required by Section 2.10) in accordance with the
procedures of the Depositary. In connection with the execution, authentication
and delivery of such Physical Notes, the Registrar shall reflect on its books
and records a decrease in the principal amount of the relevant Global Note
equal to the principal amount of such Physical Notes and the Company shall
execute and the Trustee shall authenticate and deliver one or more Physical
Notes having an equal aggregate principal amount.
SECTION 2.10. Restrictive Legends.
Upon the registration of transfer, exchange or replacement of Notes not
bearing the legend substantially in the form set forth below (the "Private
Placement Legend"), the Registrar shall deliver Notes that do not bear the
Private Placement Legend. Upon the registration of transfer, exchange or
replacement of Notes bearing a legend substantially in the form of the Private
Placement Legend, the Registrar shall deliver only Notes that bear a legend
substantially in the form of the Private Placement Legend unless the condition
of paragraph (a)(i)(x) of Section 2.11 exists or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (iii) Initial Notes are validly tendered in the Exchange Offer
for Exchange Notes or sold under an effective registration statement.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS
A "QUALIFIED
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INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT TO A TRANSFEREE THAT, PRIOR TO SUCH TRANSFER FURNISHES TO
THE TRUSTEE A LETTER SIGNED BY THE TRANSFEROR CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE HEREOF, IF THE PROPOSED TRANSFEREE IS AN
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
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TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S
UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also bear a
legend substantially to the following effect on the face thereof:
UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY GLOBAL NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.09 AND 2.11 OF THE
INDENTURE.
SECTION 2.11. Special Transfer Provisions. Unless and until (i) an
Initial Note is sold under an effective registration statement, or (ii) an
Initial Note is exchanged for an Exchange Note in connection with the Exchange
Offer, in each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to Non-QIB Accredited Investors. The following provisions
shall apply with respect to the registration of any proposed transfer of an
Initial Note to any Accredited Investor that is not a QIB (excluding Non- U.S.
Persons) in a minimum principal amount of $250,000:
(i) The Registrar shall register the transfer of any
Initial Note, whether or not such Initial Note bears the Private
Placement Legend, if (x) the requested transfer is at least three
years after the Issue Date
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or (y) the proposed transferee has delivered to the Registrar a
certificate substantially in the form set forth in Section
2.18(a); and, if the Company so requests, an opinion of counsel
reasonably acceptable to the Company and the Trustee to the
effect that such transfer is in compliance with the Securities
Act; and
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the Global Note, upon receipt
by the Registrar of (x) the certificate and opinion, if any,
required by paragraph (i) above and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the Global
Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Notes of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Note to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (A) Physical
Notes, the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box
provided for on the form of Initial Note stating, or has
otherwise advised the Company and the Registrar in writing, that
the sale has been made in compliance with the provisions of Rule
144A to a transferee who has advised the Company and the
Registrar in writing, that it is a QIB, that it is purchasing the
Note for its own account or an account with respect to which it
exercises sole investment discretion (the beneficial owner of
which is a QIB) and that it and any such sale to it is being made
in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (B) an
interest in the Global Note, the transfer of such interest may be
affected only through the book entry system maintained by the
Depositary.
(ii) If the proposed transferor is an Agent Member, and
the Initial Note to be transferred consists of Physical Notes,
which after transfer are to be evidenced by an interest in the
Global Note, upon
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receipt by the Registrar of the documents referred to in clause
(i) and instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal
amount at maturity of the Global Note in an amount equal to the
principal amount at maturity of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Note so
transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall
apply with respect to any registration of transfer of an Initial Note to a Non-
U.S. Person:
(i) No transfer shall be made prior to expiration of 40 days from the
Issue Date.
(ii) The Registrar shall register any proposed transfer to any Non-U.S.
Person only upon receipt of a certificate substantially in the form set forth in
Section 2.18(b) from the proposed transferor.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of (x) the
certificate required by paragraph (ii) above and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount at maturity of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred. The Company shall execute, and the Trustee shall authenticate and
deliver, one or more Physical Notes in the principal amount of the Physical Note
or interest in the Global Note being transferred.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain until such time as no Notes remain
Outstanding copies of all letters, notices and other written communications
received pursuant to Section 2.09 or this Section 2.11. The Company shall have
the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
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SECTION 2.12. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any of its Affiliates shall be disregarded, except that, for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes that to the actual knowledge of
the Trustee are so owned shall be disregarded.
SECTION 2.13. Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.14. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent (other than
the Company or an Affiliate of the Company), and no one else, shall promptly
cancel and retain or, at the written request of the Company, may, dispose of
(subject to the record retention requirements of the Exchange Act), or return to
the Company in accordance with its normal practice, all Notes surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Notes to replace Notes that it has paid or delivered
to the Trustee for cancellation. If the Company shall acquire any of the Notes,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.14.
SECTION 2.15. Defaulted Interest.
If the Company defaults on a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent permitted by law) any interest
payable on the defaulted interest, in accordance with the terms hereof, to the
persons who are Holders on a subsequent special record date, which date shall be
at least five
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Business Days prior to the payment date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed. The Company shall fix such special
record date and payment date in a manner satisfactory to the Trustee. At least
15 days before such special record date, the Company shall mail to each Holder
a notice that states the special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if any,
to be paid.
SECTION 2.16. Cusip Number.
The Company in issuing the Notes may use a "CUSIP" number (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company will promptly notify the Trustee of any change in the CUSIP
number.
SECTION 2.17. Deposit of Moneys.
On or before 10:00 a.m., New York City Time, on each Interest Payment
Date and Maturity Date, the Company shall deposit with the Trustee or Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Paying Agent to remit payment to the Holders
on such Interest Payment Date or Special Redemption Date or Maturity Date, as
the case may be. The principal and interest on Global Notes shall be payable to
the Depositary or its nominee, as the case may be, as the sole registered owner
and the sole Holder of the Global Notes represented thereby. Principal and
interest on Physical Notes shall be payable at the office of the Paying Agent.
SECTION 2.18. Form of Certificate to Be Delivered.
(a) The following is the form of certificate to be delivered in
connection with transfers to non-QIB Accredited Investors.
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Ladies and Gentlemen:
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In connection with our proposed purchase of 10 3/4% Senior Subordinated
Notes due 2004 (the "Notes") of Prime Succession Acquisition Corp., a Delaware
corporation ("the Company"), we hereby confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated August 13, 1996, relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agree to the matters stated in pages 2
through 3 of the Offering Memorandum and in the section titled "Transfer
Restrictions" in the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Notes (as described in the Offering Memorandum) and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold within the United States or to or for the account or benefit of U.S.
persons, except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes to the Trustee (as defined in the Indenture relating to the
Notes) a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes (the form of which letter
can be obtained from the Trustee), (D) outside the United States in accordance
with Regulation S under the Securities Act (if available) upon furnishing the
Trustee a letter signed by the transferor containing certain representations and
agreements relating to transfer of the Notes (the form of which letter can be
obtained from the Trustee), (E) pursuant to an exemption from registration
provided by Rule 144 under the Securities Act (if available) or (F) pursuant to
an effective registration statement under the Securities Act. We further agree
to provide any person purchasing Notes from us a notice advising such purchaser
that resales of the Notes are restricted as stated herein.
4. We understand that, on any proposed resale of Notes, we will be
required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
5. We are an institutional "accredited investor" within the meaning of
Rule 501(a)(1),(2),(3) or (7) under Regulation D of the Securities Act and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of purchasing Notes and we and any accounts
for which we are acting are able to bear the economic risks of and an entire
loss of our or their investment in the Notes.
6. We are acquiring the Notes purchased by us for our own account or
for the account of one or more other accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion and for each of which we are acquiring not less than
$250,000 total principal amount.
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We acknowledge that you, New Prime and the Trustee and others will rely
upon our acknowledgments, representations, and agreements set forth herein, and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby. We agree to notify you promptly in
writing if any of our acknowledgments, representations or agreements herein
cease to be accurate and complete.
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as fiduciary or agent.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
- --------------------------------------------------
(Name of Purchaser)
By:______________________________________________
Name:
Title:
Address:
(b) The following is the form of certificate to be delivered in
connection with transfers pursuant to Regulation S.
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed sale of $_________ aggregate principal
amount of the 10 3/4% Senior Subordinated Notes due 2004 (the "Notes") of Prime
Succession Acquisition Corp., we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or a person in
the United States;
(2) either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or (b) the
transaction as executed in, on or through the facilities of a designated
offshore securities market and neither we nor any person acting on our behalf
knows the transaction has been pre-arranged with a buyer in the United States;
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(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________
Authorized Signature
ARTICLE 3
REDEMPTION OF NOTES
SECTION 3.01. Notices to the Trustee.
If the Company is permitted to, and elects to or is mandatorily
obligated to, redeem Notes pursuant to Paragraph 3(a) or 3(b) of the Notes, it
shall notify the Trustee of the Redemption Date and principal amount of Notes to
be redeemed.
The Company shall notify the Trustee by an Officers' Certificate,
stating that such redemption will comply with the provisions hereof and of the
Notes, of any redemption at least 45 days before the Redemption Date or, 60 days
before the Redemption Date in the case of a partial redemption or, in the case
of a redemption pursuant to Paragraph 3(b) of the Notes, such lesser number of
days as the Company and the Trustee may agree.
SECTION 3.02. Selection of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular Notes or
portions thereof to be redeemed shall be selected from the outstanding Notes not
previously called for redemption either (x) pro rata, by lot or by such other
method as the Trustee considers to be fair and appropriate or (y) in such manner
as complies with the requirements of the principal national securities exchange,
if any,
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on which the Notes being redeemed are listed. The amounts to be redeemed
shall be equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Registrar in
writing of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
SECTION 3.03. Notice of Redemption.
Subject to Section 3.07, notice of redemption shall be given by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date, to each Holder of Notes to be redeemed, at the
address of such Holder appearing in the Note register maintained by the
Registrar.
All notices of redemption shall identify the Notes to be redeemed and
shall state:
(i) the Redemption Date;
(ii) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(iii) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the Redemption Date, and the only remaining right of the Holders of such Notes
is to receive payment of the Redemption Price upon surrender to the Paying Agent
of the Notes redeemed;
(iv) if any Note is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such Note
to be redeemed and that on and after the Redemption Date, upon surrender for
cancellation of such original Note to the Paying Agent, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof will be
issued without charge to the Holder;
(v) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price and the name and address of the Paying
Agent;
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(vi) the CUSIP number, if any, relating to such Notes, but no
representation is made as to the correctness or accuracy of any such CUSIP
numbers; and
(vii) the paragraph of the Notes pursuant to which the Notes are
being redeemed.
Notice of redemption of Notes to be redeemed shall be given by the
Company or, at the Company's written request, by the Trustee in the name and at
the sole expense of the Company.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Notes called for redemption shall be paid at
the Redemption Price plus accrued interest to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption Date will be
payable on the relevant Interest Payment Dates to the Holders of record at the
close of business on the relevant record dates referred to in the Notes. Failure
to give notice or any defect in the notice to any Holder shall not affect the
validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price.
On or prior to 10:00 a.m., New York City time, on any Redemption Date,
the Company shall deposit with the Paying Agent an amount of money in same day
funds sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes or portions thereof which are to be redeemed on that date, other than
Notes or portions thereof called for redemption on that date which have been
delivered by the Company to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price and accrued and unpaid
interest on the Notes to be redeemed, interest on the Notes to be redeemed will
cease to accrue on and after the applicable Redemption Date, whether or not
such Notes are presented for payment. If any Note called for redemption shall
not be so paid upon surrender thereof for redemption, the principal, premium,
if any, and, to the extent lawful, accrued interest thereon shall, until paid,
bear interest from the Redemption Date at the rate provided in the Notes.
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SECTION 3.06. Notes Redeemed or Purchased in Part.
Upon surrender to the Paying Agent of a Note which is to be redeemed in
part, the Company shall execute and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes of like
tenor, of any authorized denomination as requested by such Holder in aggregate
principal amount equal to, and in exchange for, the unredeemed portion of the
principal of the Note so surrendered that is not redeemed.
SECTION 3.07. Special Redemption.
(a) Notice of a Special Redemption shall be mailed at least three
Business Days prior to the Special Redemption Date. Any redemption pursuant to
this Section 3.07 shall be consistent with the provisions of the Escrow
Agreement. In the event that the special redemption price is greater than the
Escrowed Amounts, the Company shall not, be under an obligation to pay, or
deposit with the Escrow Agent, the difference.
(b) The Company shall promptly notify the Trustee and the Escrow Agent
by means of an Officers' Certificate of the consummation of the Acquisition.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes.
The Company will pay, or cause to be paid, the principal of and
interest on the Notes on the dates and in the manner provided in the Notes and
this Indenture. An installment of principal or interest shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or any Affiliate thereof) holds on that date money
designated and set aside for and sufficient to pay the installment in a timely
manner and is not prohibited from paying such money to the Holders of the Notes
pursuant to the terms of this Indenture.
The Company will pay interest on overdue principal at the rate and in
the manner provided in the Notes; it shall pay interest on overdue installments
of interest at the same rate and in the same manner, to the extent lawful.
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SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the office of the Trustee
located at 114 West 47th Street, in the Borough of Manhattan, City of New York
10036-1532, as such office of the Company in accordance with this Section 4.02.
SECTION 4.03. Corporate Existence.
Subject to Article 5, the Company shall do or cause to be done all
things necessary to and will cause each of its Subsidiaries to, preserve and
keep in full force and effect the corporate or partnership existence and rights
(charter and statutory), licenses and/or franchises of the Company and each of
its Subsidiaries; provided, however, that the Company or any of its Subsidiaries
shall not be required to preserve any such rights, licenses or franchises if the
Board of Directors of the Company shall reasonably determine that (x) the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries taken as a whole and (y) the loss thereof is
not materially adverse to either the Company and its Subsidiaries taken as a
whole or to the ability of the Company to otherwise satisfy its obligations
hereunder.
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SECTION 4.04. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company
or any Subsidiary of the Company; provided, however, that the Company shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
provision has been made or where the failure to effect such payment or
discharge is not adverse in any material respect to the Company and its
Subsidiaries taken as a whole.
SECTION 4.05. Maintenance of Properties; Books and Records;
Compliance with Law.
(a) The Company shall, and shall cause each of its Subsidiaries to,
cause all properties and assets to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto, as
shall be reasonably necessary for the proper conduct of its business; provided,
however, that nothing in this Section 4.05(a) shall prevent the Company or any
of its Subsidiaries from discontinuing the operation and maintenance of any of
its properties or assets if such discontinuance is, in the judgment of the Board
of Directors of the Company or such Subsidiary, desirable in the conduct of its
business and if such discontinuance is not materially adverse to the Company and
its Subsidiaries taken as a whole.
(b) The Company shall, and shall cause each of its Subsidiaries to,
keep proper books of record and account, in which full and correct entries shall
be made of all business and financial transactions of the Company and each
Subsidiary of the Company and reflect on its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
(c) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially adversely
affect the
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business, earnings, properties, assets or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
SECTION 4.06. Compliance Certificate.
(a) The Company will deliver to the Trustee within 105 days after the
end of the Company's fiscal year an Officers' Certificate stating whether or not
the signers know of any Default or Event of Default under this Indenture by the
Company. If they do know of such a Default or Event of Default, the certificate
shall describe any such Default or Event of Default and its status. The Company
shall also deliver a certificate to the Trustee at least annually from its
principal executive, financial or accounting officer as to his or her knowledge
of the Company's compliance with all conditions and covenants under this
Indenture, such compliance to be determined without regard to any period of
grace or requirement of notice provided herein or therein.
(b) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware or should reasonably
have become aware of the occurrence of any Default, Event of Default or an event
of default by the Company under any Senior Indebtedness, an Officers'
Certificate specifying such Default, Event of Default or such event of default
and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.07. SEC Reports.
The Company shall file with the SEC the annual reports, quarterly
reports and the information, documents and other reports required to be filed
with the SEC pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Company has a class of securities registered under the Exchange Act. In the
event that The Loewen Group Inc. fully and unconditionally guarantees the
obligations of the Company under the Notes, the requirements hereunder may be
satisfied through the filing and provision of such information, documents and
reports which would otherwise be required pursuant to said sections in respect
of The Loewen Group Inc. Such requirements may also be satisfied, prior to
November 15, 1996, with the filing with the SEC of the Exchange Offer
Registration Statement. In accordance with the provisions of TIA ss. 314(a), the
Company shall file with the Trustee and provide to each Holder, within 15 days
after it files them with the SEC (or if such filing is not permitted under the
Exchange Act, 15 days after the Company would have been required to make such
filing), copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company (or The Loewen Group, if
applicable) is required to file with the SEC pursuant to Section 13 or 15 of the
Exchange Act. The
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Company also shall comply with the other provisions of TIA ss. 314(a). In
addition, following the registration of the common stock of the Company
pursuant to Section 12(b) or 12(g) of the Exchange Act, the Company shall cause
its annual reports to stockholders and any quarterly or other financial reports
furnished by it to stockholders generally to be filed with the Trustee and
mailed no later than the date such materials are mailed or made available to
the Company's stockholders, to the Holders at their addresses as set forth in
the register of securities maintained by the Registrar.
SECTION 4.08. Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or in any manner
become directly or indirectly liable, contingently or otherwise, with respect to
(in each case, "incur") any Indebtedness (including, without limitation, any
Acquired Indebtedness); provided, however, that the Company and any of its
Subsidiaries will be permitted to incur Indebtedness (including, without
limitation, Acquired Indebtedness) if at the time of such incurrence, and after
giving pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio of
the Company is at least equal to 2.00:1.
Notwithstanding the foregoing, the Company and its Subsidiaries may, to
the extent specifically set forth below, incur each and all of the following:
(a) Indebtedness of the Company evidenced by the Notes;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date;
(c) Indebtedness of the Company represented by the notes issued
under the Bank Term Facility;
(d) Indebtedness of the Company under the Revolving Credit Facility
(including with respect to letters of credit issued thereunder) or any other
revolving credit facility in an aggregate principal amount at any one time
outstanding not to exceed $25,000,000;
(e) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Subsidiary of the Company and (ii) Interest
Rate Protection Obligations of any Subsidiary of the Company covering
Indebtedness of such Subsidiary; provided, however, that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest Rate
Protection Obligations relate bears interest at fluctuating interest rates and
is otherwise
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permitted to be incurred under the provisions of this Section 4.08 and (y) the
notional principal amount of any such Interest Rate Protection Obligations does
not exceed the principal amount of the Indebtedness to which such Interest Rate
Protection Obligations relate;
(f) Indebtedness of a Wholly-Owned Subsidiary owed to and held by the
Company or another Wholly-Owned Subsidiary, in each case which is not
subordinated in right of payment to any Indebtedness of such Subsidiary (other
than Indebtedness under its guaranty of the Bank Credit Facilities), except that
(i) any transfer of such Indebtedness by the Company or a Wholly-Owned
Subsidiary (other than to the Company or to a Wholly-Owned Subsidiary) and (ii)
the sale, transfer or other disposition by the Company or any Subsidiary of the
Company of Capital Stock of a Wholly-Owned Subsidiary which is owed Indebtedness
of another Wholly-Owned Subsidiary such that it ceases to be a Wholly-Owned
Subsidiary of the Company shall, in each case, be an incurrence of Indebtedness
by such Subsidiary subject to the other provisions of this Section 4.08;
(g) Indebtedness of the Company owed to and held by a Wholly-Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under the
Bank Credit Facilities, this Indenture and the Notes except that (i) any
transfer of such Indebtedness by a Wholly-Owned Subsidiary of the Company (other
than to another Wholly-Owned Subsidiary of the Company) and (ii) the sale,
transfer or other disposition by the Company or any Subsidiary of the Company of
Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness of the
Company such that it ceases to be a Wholly-Owned Subsidiary shall, in each case,
be an incurrence of Indebtedness by the Company, subject to the other provisions
of this Section 4.08;
(h) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency Agreements do
not increase the Indebtedness of the Company and its Subsidiaries outstanding
other than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that such Indebtedness is
extinguished within two Business Days of incurrence;
(j) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as the
case
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may be, in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar requirements in
the ordinary course of business;
(k) purchase money Indebtedness incurred to finance the acquisition of
property or assets of the Company or any Subsidiary acquired in the ordinary
course of business within 90 days of such acquisition; provided that the amount
of such purchase money Indebtedness at any time outstanding may not exceed
$5,000,000 in the aggregate; provided, further, that any Lien arising in
connection with any such Indebtedness shall be limited to the property or assets
being financed;
(l) Indebtedness of the Company or any Subsidiary of the Company in
addition to that described in clauses (a) through (k) above, in an aggregate
principal amount outstanding at any time not exceeding $5,000,000; provided,
that if, at the time of incurrence of Indebtedness, the ratio of the aggregate
principal amount of Indebtedness on a pro forma basis after giving effect to the
Indebtedness then being incurred to Consolidated Cash Flow for the four full
fiscal quarters immediately preceding the date of such incurrence is less than
or equal to 6.00:1, then such amount shall be an aggregate principal amount not
exceeding $10,000,000; and
(m) (i) Indebtedness of the Company (including any Indebtedness
incurred in connection with a Sale-Leaseback Transaction permitted pursuant to
Section 4.17) the proceeds of which are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of the Company or any
of its Subsidiaries and (ii) Indebtedness of any Subsidiary of the Company the
proceeds of which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of such Subsidiary, in each case other
than the Indebtedness refinanced, redeemed or retired on the Issue Date;
provided, however, that (x) the principal amount of Indebtedness incurred
pursuant to this clause (m) (or, if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of Indebtedness
so refinanced, plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of such Indebtedness or the amount
of any premium reasonably determined by the Board of Directors of the Company
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith, (y) in the case of Indebtedness incurred by the Company pursuant to
this clause (m) to refinance Subordinated Indebtedness, such Indebtedness (A)
does not have a Stated Maturity prior to the Maturity of the Subordinated
Indebtedness being refinanced, (B) has an Average
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Life to Stated Maturity equal to or greater than the remaining Average Life to
Stated Maturity of the Subordinated Indebtedness being refinanced and (C) is
subordinated to the Notes in the same manner and to the same extent that the
Subordinated Indebtedness being refinanced is subordinated to the Notes and (z)
in the case of Indebtedness incurred by the Company pursuant to this clause (m)
to refinance Pari Passu Indebtedness, such Indebtedness (A) does not have a
Stated Maturity prior to the Stated Maturity of the Pari Passu Indebtedness
being refinanced, (B) has an Average Life to Stated Maturity equal to or
greater than the remaining Average Life to Stated Maturity of the Pari Passu
Indebtedness being refinanced and (C) constitutes Pari Passu Indebtedness or
Subordinated Indebtedness.
The Company shall promptly notify the Trustee, by means of an
Officers' Certificate, of the closing of the Bank Credit Agreement and any
replacement, refunding, restructuring or refinancing of any or all of the Bank
Credit Facilities.
SECTION 4.09. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of
its Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the
Company or any of its Subsidiaries (other than (x) the
dividends-in-kind payable on the Company's outstanding Preferred
Stock in accordance with the terms thereof and any other dividends
or distributions payable solely in Capital Stock of the Company
(other than Redeemable Capital Stock) or in options, warrants or
other rights to purchase Capital Stock of the Company (other than
Redeemable Capital Stock), (y) the declaration or payment of
dividends or other distributions to the extent declared or paid to
the Company or any Subsidiary of the Company and (z) the
declaration or payment of dividends or other distributions by any
Subsidiary of the Company to all holders of Common Stock of such
Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any of its Subsidiaries
(other than any such Capital
Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company (in each case other than in exchange for its Capital Stock
(other than Redeemable Stock)),
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(c) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior
to any scheduled maturity, scheduled repayment, scheduled sinking
fund payment or other Stated Maturity, any Subordinated
Indebtedness or Pari Passu Indebtedness other than (x) any such
Indebtedness owned by the Company or a Wholly-Owned Subsidiary of
the Company and (y) the prepayment or defeasance on or before
January 31, 1997 of the notes to certain former owners of funeral
homes acquired by Existing Prime which are outstanding on the
Issue Date, or
(d) make any Investment (other than any Permitted Investment) in
any Person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
such Restricted Payment), (A) no Default or Event of Default shall have occurred
and be continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, the Company would be able to incur $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 4.08 (assuming a market
rate of interest with respect to such additional Indebtedness) and (C) the
aggregate amount of all Restricted Payments declared or made from and after the
Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net
Income of the Company accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of the Company following the fiscal
quarter during which the Issue Date occurs and ending on the last day of the
fiscal quarter of the Company immediately preceding the date of such proposed
Restricted Payment, which period shall be treated as a single accounting period
(or, if such aggregate cumulative Consolidated Net Income of the Company for
such period shall be a deficit, minus 100% of such deficit) plus (2) the
aggregate net cash proceeds received by the Company either (x) as capital
contributions to the Company after the Issue Date from any Person (other than a
Subsidiary of the Company) or (y) from the issuance or sale of Capital Stock
(excluding Redeemable Capital Stock, but including Capital Stock issued upon the
conversion of convertible Indebtedness or from the exercise of options, warrants
or rights to purchase Capital Stock (other than Redeemable Capital Stock)) of
the Company to any Person (other than to a Subsidiary of the Company) after the
Issue Date plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date
(excluding any Investment described in clause (v) of the following paragraph),
an amount equal to the lesser of the return of capital with
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respect to such Investment and the cost of such Investment, in either case,
less the cost of the disposition of such Investment. For purposes of the
preceding clause (C)(2), the value of the aggregate net proceeds received by
the Company upon the issuance of Capital Stock upon the conversion of
convertible Indebtedness or upon the exercise of options, warrants or rights
will be the net cash proceeds received upon the issuance of such Indebtedness,
options, warrants or rights plus the incremental cash amount received by the
Company upon the conversion or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company or any Subsidiary of the Company in
exchange for, or out of the net cash proceeds of, a substantially concurrent
(x) capital contribution to the Company from any Person (other than a
Subsidiary of the Company) or (y) issue and sale of other shares of Capital
Stock (other than Redeemable Capital Stock) of the Company to any Person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement shall be excluded from clause (C)(2) of the
preceding paragraph; (iii) so long as no Default or Event of Default shall have
occurred and be continuing, any redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness by exchange for, or out of the net cash
proceeds of a substantially concurrent (x) capital contribution to the Company
from any Person (other than a Subsidiary of the Company) or (y) issue and sale
of (1) Capital Stock (other than Redeemable Capital Stock) of the Company to
any Person (other than to a Subsidiary of the Company); provided, however, that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase or other acquisition or retirement shall be excluded
from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of the
Company issued to any Person (other than a Subsidiary of the Company), so long
as such Indebtedness is Subordinated Indebtedness which (x) has no Stated
Maturity earlier than the Stated Maturity of the Subordinated Indebtedness so
purchased, exchanged, redeemed, acquired or retired, (y) has an Average Life to
Stated Maturity equal to or greater than the remaining Average Life to Stated
Maturity of the Subordinated Indebtedness so purchased, exchanged, redeemed,
acquired or retired, and (z) is subordinated to the Notes in the same manner
and at least to the same extent as the Subordinated Indebtedness so purchased,
exchanged, redeemed, acquired or retired; (iv) so long as no Default or Event
of Default shall have occurred and be continuing, any redemption, repurchase or
other acquisition or retirement of Pari Passu Indebtedness by exchange for, or
out of the net cash proceeds of, a substantially
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concurrent (x) capital contribution to the Company from any Person (other than
a Subsidiary of the Company) or (y) issue and sale of (1) Capital Stock (other
than Redeemable Capital Stock) of the Company to any Person (other than to a
Subsidiary of the Company); provided, however, that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement is excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of the Company issued to any Person (other than
a Subsidiary of the Company), so long as such Indebtedness is Subordinated
Indebtedness or Pari Passu Indebtedness which (x) has no Stated Maturity
earlier than the Stated Maturity of the Pari Passu Indebtedness so purchased,
exchanged, redeemed, acquired or retired and (y) has an Average Life to Stated
Maturity equal to or greater than the remaining Average Life to Stated Maturity
of the Pari Passu Indebtedness so purchased, exchanged, redeemed, acquired or
retired; (v) Investments constituting Restricted Payments made as a result of
the receipt of non-cash consideration from any Asset Sale made pursuant to and
in compliance with Section 4.13; (vi) so long as no Default or Event of Default
has occurred and is continuing, repurchases by the Company of Common Stock of
the Company or Existing Prime from employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such employees, in an aggregate amount not
exceeding $500,000 in any calendar year; (vii) other Restricted Payments not to
exceed $2,500,000; provided that at the time such Restricted Payment is made,
the ratio of the aggregate principal amount of Indebtedness on a pro forma
basis after giving effect to any Indebtedness incurred in connection with such
Restricted Payment to Consolidated Cash Flow for the four full fiscal quarters
immediately preceding the date of such Restricted Payment shall be less than or
equal to 6.00:1; (viii) any payments permitted to be made pursuant to clauses
(ii) through (vi) of the proviso set forth in Section 4.14, (ix) payments to
Existing Prime in an amount sufficient to pay (a) director's fees and the
reasonable expenses of directors, (b) accounting, legal or other administrative
expenses incurred by Existing Prime relating to the operations of the Company
in the ordinary course of business and (c) so long as Existing Prime files
consolidated income tax returns which include the Company, payments to Existing
Prime in an amount equal to the amount of income tax that the Company would
have paid if it had filed consolidated tax returns on a separate-company basis
or (x) payments to Existing Prime in an amount sufficient to consummate the
Acquisition. In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, Restricted Payments made
under the preceding clauses (v) and (vi) shall be included and clauses (i),
(ii), (iii), (iv), (vii), (viii), (ix) and (x) shall not be so included.
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SECTION 4.10. Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries.
The Company (a) will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or a Wholly-Owned Subsidiary of the
Company) and (b) will not permit any Person (other than the Company or a
Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of any
Subsidiary of the Company; provided, however, that this covenant shall not
prohibit the issuance and sale of (x) all, but not less than all, of the issued
and outstanding Capital Stock of any Subsidiary of the Company owned by the
Company or any of its Subsidiaries in compliance with the other provisions of
this Indenture (including, without limitation, Section 4.13); (y) directors'
qualifying shares or investments by foreign nationals mandated by applicable law
or (z) issuances of Preferred Stock to former owners of funeral homes acquired
by the Company or any Subsidiary of the Company; provided that the sum of (i)
the aggregate Fair Market Value of such Preferred Stock and (ii) the aggregate
Fair Market Value of all Investments permitted under clause (ix) of the
definition of "Permitted Investments" shall not exceed $5,000,000 at any time
outstanding.
SECTION 4.11. Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Liens of any kind against or upon
any of its property or assets, or any proceeds therefrom, unless (x) in the case
of Liens securing Subordinated Indebtedness, the Notes are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(y) in all other cases, the Notes are equally and ratably secured, except for
(a) Liens existing as of the Issue Date; (b) Liens securing the Notes; (c) Liens
on assets of the Company and its Subsidiaries securing Senior Indebtedness; (d)
Liens in favor of the Company; (e) Liens securing Indebtedness which is incurred
to refinance Indebtedness which has been secured by a Lien permitted under this
Indenture and which has been incurred in accordance with the provisions of this
Indenture; provided, however, that such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries not securing the
Indebtedness so refinanced; and (f) Permitted Liens.
SECTION 4.12. Change of Control.
Upon the occurrence of a Change of Control (the date of such
occurrence, the "Change of Control Date"), the Company shall make an offer to
purchase (the "Change of Control Offer") and shall purchase all Notes properly
tendered into the Change of Control Offer and not withdrawn, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the
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Change of Control Date all Notes then outstanding at a purchase price ("Change
of Control Purchase Price") equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Change of Control Purchase Date.
Notice of a Change of Control Offer shall be mailed by the Company not
later than the 30th day after the Change of Control Date to the Holders of Notes
at their last registered addresses with a copy to the Trustee and the Paying
Agent. The Change of Control Offer shall remain open from the time of mailing
for at least 20 Business Days and until 5:00 p.m., New York City time, on the
Change of Control Purchase Date. The notice, which shall govern the terms of the
Change of Control Offer, shall include such disclosures as are required by law
and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.12 and that all Notes validly tendered in connection with the Change
of Control Offer and not withdrawn will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Note, the Change of Control Purchase Date and the date on which
the Change of Control Offer expires;
(c) that any Note not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of the
purchase price, any Note accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to a Change
of Control Offer will be required to surrender their Notes, together with a
duly completed "Option of Holder to Elect Purchase" notice substantially in the
form of Exhibit C hereto, to the Paying Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the third Business Day prior
to the Change of Control Purchase Date and must complete any form of letter of
transmittal proposed by the Company and reasonably acceptable to the Trustee
and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City time, on
the first Business Day immediately prior to the Change of Control Purchase
Date, a tested telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes the Holder delivered for purchase,
the Note certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Notes purchased;
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(g) that Holders whose Notes are purchased only in part will be issued
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered;
(h) the instructions that Holders must follow in order to tender
their Notes; and
(i) information concerning the business of the Company, information
with respect to pro forma historical financial information after giving effect
to such Change of Control and such other information concerning the
circumstances and relevant facts regarding such Change of Control Offer as
would be material to a Holder of Notes in connection with the decision of such
Holder as to whether or not it should tender Notes pursuant to the Change of
Control Offer.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof validly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Notes or portions
thereof so tendered and accepted and (iii) deliver to the Trustee the Notes so
accepted together with an Officers' Certificate setting forth the Notes or
portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Change
of Control Offer not later than the first Business Day following the Change of
Control Purchase Date.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to a Change
of Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
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SECTION 4.13. Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its Subsidiaries
to, make any Asset Sale unless (i) the Company or such Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the shares or assets sold or otherwise disposed of and
(ii) at least 75% of such consideration consists of cash or Cash Equivalents. To
the extent the Net Cash Proceeds of any Asset Sale are not applied to repay the
Bank Term Facility or permanently reduce the commitments under the Revolving
Credit Facility, the Company or such Subsidiary, as the case may be, may, within
365 days from the receipt of the Net Cash Proceeds, apply such Net Cash Proceeds
to an investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto ("Replacement Assets").
Any Net Cash Proceeds from any Asset Sale that are neither used to repay the
Bank Term Facility, or permanently reduce the commitments under the Revolving
Credit Facility, nor invested in Replacement Assets within the 365-day period
described above constitute "Excess Proceeds" subject to disposition as provided
below.
(b) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000, the Company shall, not more than 40 Business Days thereafter, make
an offer to purchase (an "Asset Sale Offer") from all Holders, on a date (the
"Asset Sale Purchase Date") which is not less than 20 Business Days nor more
than 40 Business Days after the date of notice of such Asset Sale Offer
delivered pursuant to Section 4.13(d), an aggregate principal amount of Notes
equal to such Excess Proceeds, at a price payable in cash equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if any,
to the Asset Sale Purchase Date (the "Asset Sale Offer Price").
(c) Whenever Excess Proceeds received by the Company and its
Subsidiaries exceed $5,000,000, such Excess Proceeds shall, prior to the
purchase of Notes, be set aside by the Company or such Subsidiary, as the case
may be, in a separate account pending (i) deposit with the depositary of the
amount required to purchase the Notes tendered or (ii) delivery by the Company
of the Asset Sale Offer Price to the Holders of the Notes pursuant to an Asset
Sale Offer. Such Excess Proceeds may be invested in Cash Equivalents, as
directed by the Company, having a maturity date which is not later than the
earliest possible date for purchase or redemption of Securities pursuant to the
Asset Sale Offer. The Company shall be entitled to any interest or dividends
accrued, earned or paid on such Cash Equivalents.
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(d) Notice of an Asset Sale Offer shall be mailed by the Company to
all Holders of Notes not less than 20 Business Days nor more than 40 Business
Days before the Asset Sale Purchase Date at their last registered address with a
copy to the Trustee and the Paying Agent. The Asset Sale Offer shall remain open
from the time of mailing until at least 5:00 p.m., New York City time, on the
third Business Day prior to the Asset Sale Purchase Date. The notice, which
shall govern the terms of the Asset Sale Offer, shall include such disclosures
as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section
4.13;
(2) the Asset Sale Offer Price (including the amount of accrued
interest, if any) for each Note, the Asset Sale Purchase Date and the date on
which the Asset Sale Offer expires;
(3) that any Note not tendered or accepted for payment will continue to
accrue interest in accordance with the terms thereof;
(4) that, unless the Company shall default in the payment of the Asset
Sale Offer Price, any Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have Notes purchased pursuant to an Asset
Sale Offer will be required to surrender their Notes, together with a duly
completed "Option of Holder to Elect Purchase" notice substantially in the form
of Exhibit C hereto, to the Paying Agent at the address specified in the notice
prior to 5:00 p.m., New York City time, on the third Business Day prior to the
Asset Sale Purchase Date and must complete any form of letter of transmittal
proposed by the Company and reasonably acceptable to the Trustee and the Paying
Agent;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
first Business Day immediately prior to the Asset Sale Purchase Date, a tested
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Notes the Holder delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is withdrawing its
election to have such Notes purchased;
(7) that if the aggregate principal amount of Notes validly tendered
and not withdrawn by the Holders exceeds the Excess Proceeds, the Company shall
purchase Notes on a pro rata basis among the Notes tendered (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or integral multiples of $1,000 shall be acquired);
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(8) that Holders whose Notes are purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered;
(9) the instructions that Holders must follow in order to tender their
Notes; and
(10) information concerning the business of the Company,
information with respect to pro forma historical financial information after
giving effect to such Asset Sale and Asset Sale Offer and such other information
concerning the circumstances and relevant facts regarding such Asset Sale Offer
as would be material to a Holder of Notes in connection with the decision of
such Holder as to whether or not it should tender Notes pursuant to the Asset
Sale Offer.
(e) On the Asset Sale Purchase Date, the Company shall (i) accept for
payment, on a pro rata basis, Notes or portions thereof validly tendered
pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, in an amount sufficient to pay the Asset Sale Offer
Price of all Notes or portions thereof so tendered and accepted and (iii)
deliver to the Trustee the Notes so accepted together with an Officers'
Certificate setting forth the Notes or portions thereof tendered to and accepted
for payment by the Company. The Paying Agent shall promptly mail or deliver to
Holders of Notes so accepted payment in an amount equal to the Asset Sale Offer
Price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Asset Sale Offer not later than the first Business
Day following the Asset Sale Purchase Date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use such deficiency for general corporate
purposes. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset to zero. For purposes of this Section 4.13, the Trustee
shall act as Paying Agent.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations thereunder, in the event that the Company is required to
repurchase Notes pursuant to the Asset Sale Offer.
SECTION 4.14. Limitation on Transactions with Interested Persons.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of
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related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services) with,
or for the benefit of, any Affiliate of the Company or any beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately,
after the passage of time or upon the happening of an event) of 5% or more of
the Company's Common Stock at any time outstanding ("Interested Persons"),
unless (a) such transaction or series of related transactions is on terms that
are no less favorable to the Company or such Subsidiary, as the case may be,
than those which could have been obtained in a comparable transaction at such
time from Persons who are not Affiliates of the Company or Interested Persons,
(b) with respect to a transaction or series of transactions (other than
commercial arrangements with any limited partner of Blackstone Capital Partners
II Merchant Banking Fund L.P. or any Affiliate of such limited partners)
involving aggregate payments or value equal to or greater than $5,000,000, the
Company has obtained a written opinion from an Independent Financial Advisor
stating that the terms of such transaction or series of transactions are fair
to the Company or its Subsidiary, as the case may be, from a financial point of
view and (c) with respect to a transaction or series of transactions (other
than commercial arrangements with any limited partner of Blackstone Capital
Partners II Merchant Banking Fund L.P. or any Affiliate of such limited
partners) involving aggregate payments or value equal to or greater than
$1,000,000, the Company shall have delivered an Officers' Certificate to the
Trustee certifying that such transaction or series of transactions complies
with the preceding clause (a) and, if applicable, certifying that the opinion
referred to in the preceding clause (b) has been delivered and that such
transaction or series of transactions has been approved by a majority of the
Board of Directors of the Company; provided, however, that this Section 4.14
will not restrict the Company from (i) paying dividends in respect of its
Capital Stock permitted under Section 4.09, (ii) paying reasonable and
customary fees and indemnities to directors of the Company who are not
employees of the Company, (iii) making loans or advances to, or providing
indemnities of, officers, employees or consultants of the Company and its
subsidiaries (including travel and moving expenses) in the ordinary course of
business for bona fide business purposes of the Company or such Subsidiary not
in excess of $1,000,000 in the aggregate at any one time outstanding, (iv)
making loans to officers (or a partnership comprised of such officers) for the
purpose of purchasing common stock of Existing Prime and making any payment
required or specifically permitted by the terms of the Administrative Services
Agreement, (v) paying an annual monitoring fee of $250,000 (plus any increase
thereof which may be made to account for inflation) to Blackstone Management
Partners L.P. or any of its Affiliates designated by Blackstone Management
Partners L.P., (vi) making any payment to Existing Prime permitted by Section
4.09 or (vii) entering into any
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transaction with any of its Wholly-Owned Subsidiaries or restrict any
Subsidiary from entering into any transaction with any other Wholly-Owned
Subsidiary.
SECTION 4.15. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed to
the Company or any other Subsidiary of the Company, (c) make loans or advances
to, or any other Investment in, the Company or any other Subsidiary of the
Company, (d) transfer any of its properties or assets to the Company or any
other Subsidiary of the Company or (e) guarantee any Indebtedness of the Company
or any other Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of the Company or any Subsidiary of the Company, (iii) customary
restrictions on transfers of property subject to a Lien permitted under the
Indenture, (iv) any agreement or other instrument of a Person acquired by the
Company or any Subsidiary of the Company (or a Subsidiary of such Person) in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the properties
or assets of the Person, so acquired, (v) provisions contained in agreements or
instruments relating to Indebtedness which prohibit the transfer of all or
substantially all of the assets of the obligor thereunder unless the transferee
shall assume the obligations of the obligor under such agreement or instrument,
(vi) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary pending the closing of such
sale or disposition, (vii) any encumbrance or restriction arising or agreed to
in the ordinary course of business and that does not, individually or in the
aggregate, detract from the value of the property or assets of the Company or
any Subsidiary in any manner material to the Company or such Subsidiary and
(viii) encumbrances and restrictions under agreements in effect on the Issue
Date, including the Bank Credit Agreement, and encumbrances and restrictions in
permitted refinancings or replacements of Indebtedness evidenced by the
agreements referred to in this clause (viii) which are no less favorable to the
Holders than those contained in the Indebtedness so refinanced or replaced.
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SECTION 4.16. Limitation on the Issuance of Other Senior Subordinated
Indebtedness.
The Company will not, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of the Company, unless such Indebtedness (x) is pari passu with or
(y) is subordinate in right of payment to the Notes in the same manner and at
least to the same extent as the Notes are subordinated to Senior Indebtedness.
SECTION 4.17. Limitations on Sale-Leaseback Transactions.
The Company will not, and will not permit any of its Subsidiaries to,
enter into any Sale-Leaseback Transaction with respect to any property of the
Company or any of its Subsidiaries. Notwithstanding the foregoing, the Company
and its Subsidiaries may enter into Sale-Leaseback Transactions; provided that
(a) the Attributable Value of such Sale- Leaseback Transaction shall be deemed
to be Indebtedness of the Company or such Subsidiary, as the case may be, and
(b) either (i) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Company would be able to incur
$1.00 of additional Indebtedness pursuant to the first paragraph of Section 4.08
(assuming a market rate of interest with respect to such additional
Indebtedness) or (ii) the proceeds of such Sale-Leaseback Transaction are
applied to repay existing Indebtedness (other than Indebtedness outstanding
under any revolving credit facility).
SECTION 4.18. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc..
The Company will not, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and the Company
will not permit any of its Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company or the Company and its Subsidiaries, taken as a whole, to any other
Person or Persons, unless at the time of and after giving effect thereto (a)
either (i) if the transaction or series of transactions is a merger or
consolidation, the Company shall be the surviving Person of such merger or
consolidation, or (ii) the Person formed by such consolidation or into which
the Company or such Subsidiary is merged or to which the properties and assets
of the Company or such Subsidiary, as the case may be, are transferred (any
such surviving Person or transferee Person being the "Surviving Entity") shall
be a corporation organized and existing under the laws of the United States of
America, any state thereof, the District of Columbia, Canada or any province
thereof and shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee, all
the obligations of the Company under the Notes and this Indenture, and in each
case, the Indenture shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; (c) the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), could incur $1.00 of
additional Indebtedness pursuant to the first paragraph of Section 4.08
(assuming a market rate of interest with respect to such additional
Indebtedness); and (d) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth of the Company or the Surviving Entity, as the case may be, is at least
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equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions.
Notwithstanding the foregoing clauses (b), (c) and (d), (i) any
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (ii) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, transfer, lease, assignment or
other disposition and any supplemental indenture in respect thereof comply with
the requirements under the foregoing clause (a) of this Section 5.01 and that
all conditions precedent provided for in this Indenture relating to the
transaction or series of transactions have been complied with, provided,
however, that solely for purposes of computing amounts described in subclause
(C) of Section 4.09, any such successor Person shall only be deemed to have
succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
SECTION 5.02. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with Section 5.01 hereof, the successor
person or persons formed by such consolidation or into which the Company is
merged or the successor person to which such sale, assignment, conveyance,
transfer, lease or other disposition is made, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such successor had been
named as the Company herein; provided, however, that solely for purposes of
computing amounts described in subclause (C) of Section 4.09, any such successor
Person shall only be deemed to have succeeded to and be substituted for the
Company with respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.
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ARTICLE 6
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(a) default in the payment of the principal of or premium, if any, on
any Note when the same becomes due and payable (upon Stated Maturity,
acceleration, optional redemption, required purchase, scheduled principal
payment or otherwise); or
(b) default in the payment of an installment of interest on any of the
Notes, when the same becomes due and payable, and any such Default continues for
a period of 30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Notes or this Indenture (other than a Default
specified in clause (a) or (b) above) and such Default continues for a period of
30 days after written notice of such Default requiring the Company to remedy the
same shall have been given (i) to the Company by the Trustee or (ii) to the
Company and the Trustee by Holders of at least 25% in aggregate principal amount
of the Notes then outstanding; or
(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which the
Company or any Subsidiary of the Company then has outstanding Indebtedness in
excess of $5,000,000, individually or in the aggregate, and either (i) such
Indebtedness has not been paid at final maturity or (ii) such default or
defaults have resulted in the acceleration of the maturity of such Indebtedness;
or
(e) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the payment of
money in excess of $5,000,000, either individually or in the aggregate, shall be
entered against the Company or any Subsidiary of the Company or any of their
respective properties and shall not be discharged or fully bonded and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(f) the Company or any Significant Subsidiary of the Company pursuant
to or under or within the meaning of any Bankruptcy Law:
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(1) commences a voluntary case or proceeding;
(2) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(3) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(4) makes a general assignment for the benefit of its creditors; or
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(1) is for relief against the Company or any Significant Subsidiary
of the Company in an involuntary case or proceeding,
(2) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its properties, or
(3) orders the liquidation of the Company or any Significant
Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for 60 days.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall not be
charged with knowledge of any Default or Event of Default unless written notice
thereof shall have been given to a Trust Officer at the Corporate Trust Office
of the Trustee by the Company, the Paying Agent, any Holder, any holder of
Senior Indebtedness or any of their respective agents.
SECTION 6.02. Acceleration.
If an Event of Default (other than as specified in Sections 6.01(f)
and 6.01(g) with respect to the Company) shall occur and be continuing, the
Trustee, by written notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Trustee and the Company, may declare the principal of, premium, if any, and
accrued and unpaid interest, if any, on all of the Notes then outstanding to be
due and payable immediately, upon which declaration, all amounts payable in
respect of the Notes shall be immediately due and payable; provided, however,
that so long as the Bank Credit Agreement shall be in force and effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default specified in Sections
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6.01(f) and 6.01(g) with respect to the Company), any such acceleration shall
not be effective until the earlier to occur of (a) five Business Days following
delivery of a notice of such acceleration to the Bank Agent under the Bank
Credit Agreement and (b) the acceleration of any Indebtedness (or other
amounts) under the Bank Credit Facilities. If an Event of Default specified in
Sections 6.01(f) and 6.01(g) with respect to the Company occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest, if any, on all of the outstanding Notes shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal at the rate borne
by the Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction; and (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 6.04.
No such rescission shall affect any subsequent Default or Event of
Default or impair any right subsequent therein.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may
be enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee
or any Holder in exercising any right or remedy accruing upon an Event of
Default shall
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not impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to the provisions of Section 6.07 and 9.02, the Holders of not
less than a majority in aggregate principal amount of the outstanding Notes by
notice to the Trustee may, on behalf of the Holders of all the Notes, waive any
existing Default or Event of Default and its consequences, except a Default or
Event of Default specified in Section 6.01(a) or 6.01(b) or in respect of any
provision hereof which cannot be modified or amended without the consent of each
Holder so affected pursuant to Section 9.02. When a Default or Event of Default
is so waived, it shall be deemed cured and shall cease to exist.
SECTION 6.05. Control by Majority.
The Holders of not less than a majority in aggregate principal amount
of the outstanding Notes shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided, however, that
the Trustee may refuse to follow any direction (a) that conflicts with any rule
of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Noteholder, or (c) that may expose the
Trustee to personal liability unless the Trustee has been provided reasonable
indemnity against any loss or expense caused by its following such direction;
and provided, further, that the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any proceeding
or pursue any remedy with respect to this Indenture or the Notes unless:
(a) the Holder gives written notice to the Trustee of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity against any loss, liability or expense;
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(d) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of indemnity;
and
(e) during such 30-day period the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a direction
which is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of, premium, if any, or
accrued interest on, such Note on or after the respective due dates set forth
in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders to Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Security to receive payment of the principal of, premium, if any,
and interest on such Security, on or after the respective Stated Maturities
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after the respective Stated Maturities, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on the
Notes, for the whole amount of principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel and any other amounts due
the Trustee under Section 7.08.
SECTION 6.09. Trustee May File Proofs of Claims.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders allowed in
any judicial proceedings relative to the Company or the Subsidiaries of the
Company
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(or any other obligor upon the Notes), their creditors or their property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.08. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.08.
Second: subject to Article 10, to Holders for interest accrued on the
Notes, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest;
Third: subject to Article 10, to Holders for principal amounts
(including any premium) owing under the Notes, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal (including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in
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the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.11 does not apply to any
suit by the Trustee, any suit by a Holder pursuant to Section 6.07, or a suit
by Holders of more than 10% in aggregate principal amount of the outstanding
Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties.
(a) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default,
(1) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine
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whether or not they conform to the requirements of this Indenture, but need not
investigate the accuracy of mathematical calculations or other facts stated
therein.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01 hereof and the provisions of TIA ss. 315:
(a) the Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 11.04 and 11.05. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.
(c) the Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) the Trustee shall not be liable for any action taken or omitted by
it in good faith and reasonably believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than any
liabilities arising out of its own negligence.
(e) the Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
SECTION 7.03. Individual Rights of Trustee.
The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 7.11 and 7.12 and TIA ss.ss. 310 and
311, may otherwise deal with the Company and its Subsidiaries with the same
rights it would have if it were not the Trustee, Paying Agent, Registrar or such
other agent; provided that there shall be excluded from the operation of TIA ss.
310(b), any indenture or indentures under which other securities, or
certificates of interest or participations in other securities, of the Company
are outstanding if the requirements for exclusion set forth in TIA ss. 310(b)(i)
are met.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representations as to the validity or sufficiency
of this Indenture or of the Notes, it shall not be accountable for the Company's
use or application of the proceeds from the Notes, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee
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and it shall not be responsible for any statement in the Notes other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof;
provided, however, that, except in the case of a Default or an Event of Default
in the payment of the principal of, premium, if any, or interest on any Note,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee of the board of directors or a
committee of the directors of the Trustee and/or Trust Officers in good faith
determines that the withholding of such notice is in the interest of the
Holders.
SECTION 7.06. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder, except as the Trustee may agree with the
Company.
SECTION 7.07. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA ss. 313(a) shall have occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as
of such May 15 that complies with TIA ss. 313(a). The Trustee also shall comply
with TIA ss.ss. 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each securities exchange, if
any, on which the Notes are listed.
The Company shall notify the Trustee in writing if the Notes become
listed on any securities exchange.
SECTION 7.08. Compensation and Indemnity.
The Company covenants and agrees to pay the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall not
be
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limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, damage, claim or liability incurred by it arising out of or
in connection with the administration of this trust and its rights or duties
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity; however, the
failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.08, the
Trustee shall have a Lien prior to the Notes on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal of, premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 6.01(f) or 6.01(g), the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the
discharge of the Company's obligations pursuant to Article 8 and/or the
termination of this Indenture, including the termination and rejection hereof
in any bankruptcy proceedings to the extent permitted by applicable law.
SECTION 7.09. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor trustee
with the Company's prior written consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.11;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. The Trustee shall be
entitled to payment of its fees and reimbursement of its expenses while acting
as Trustee, and to the extent such amounts remain unpaid, the Trustee that has
resigned or has been removed shall retain the Lien afforded by Section 7.08.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the outstanding Notes may, with the Company's
prior written consent, appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.08, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.11, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.09, the Company's obligations under Section 7.08 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.10. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
SECTION 7.11. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(5) and which
shall have a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 7.12. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). If the present or any future Trustee
shall resign or be removed, it shall be subject to TIA ss. 311(a) to the extent
provided therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Termination of the Company's Obligations.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment money has theretofore been deposited with the Trustee or the
Paying Agent in trust or segregated and held in trust by the Company and
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thereafter repaid to the Company, as provided in Section 8.04) have been
delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article 3, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of the
redemption of all of the Notes under arrangements satisfactory to the Trustee
for the giving of such notice or (ii) all Notes have otherwise become due and
payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee reasonably satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit of
the Holders for that purpose, money in such amount as is sufficient without
consideration of reinvestment of such interest, to pay principal of, premium,
if any, and interest on the outstanding Notes to maturity or redemption, as
certified in a certificate of a nationally recognized firm of independent
public accountants; provided that the Trustee shall have been irrevocably
instructed to apply such money to the payment of said principal, premium, if
any, and interest with respect to the Notes and, provided, further, that from
and after the time of deposit, the money deposited shall not be subject to the
rights of holders of Senior Indebtedness pursuant to the provisions of Article
10;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligation under the
Notes and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02 and 7.08 shall survive until the
Notes are no longer outstanding pursuant to the last paragraph of Section 2.08.
After the Notes are no longer outstanding, the Company's obligations in
Sections 7.08, 8.03, 8.04 and 8.05 shall survive.
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After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, with respect to the Notes, elect to
have either paragraph (b) or paragraph (c) below be applied to the outstanding
Notes upon compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and the other
Sections of and matters under this Indenture referred to in (i) and (ii) below,
and to have satisfied all its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), and
Holders of the Notes and any amounts deposited under paragraph (d) below shall
cease to be subject to any obligations to, or the rights of, any holder of
Senior Indebtedness under Article 10 or otherwise, except for the following
which shall survive until otherwise terminated or discharged hereunder: (i) the
rights of Holders of outstanding Notes to receive solely from the trust fund
described in paragraph (d) below and as more fully set forth in such paragraph,
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations with respect
to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07 and 4.02, and, with
respect to the Trustee, under Section 7.08, (iii) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (iv) this Article 8. Subject
to compliance with this Section 8.02, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Notes.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Articles Five and Ten and
in Sections 4.07 through 4.17 with respect to the outstanding Notes on and
after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed to be not
"outstanding" for
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the purpose of any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes hereunder and
Holders of the Notes and any amounts deposited under paragraph (d) below shall
cease to be subject to any obligations to, or the rights of, any holder of
Senior Indebtedness under Article 10 or otherwise. For this purpose, such
covenant defeasance means that, with respect to the outstanding Notes, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision
herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01(c), but, except
as specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.11 who shall agree to comply with the provisions of this Section 8.02
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Notes, (x) cash, in United States
dollars, in an amount or (y) direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which guarantee or obligation the full faith and credit of the
United States is pledged ("U.S. Government Obligations") maturing as to
principal, premium, if any, and interest in such amounts of cash, in United
States dollars, and at such times as are sufficient without consideration of
any reinvestment of such interest, to pay principal of, premium, if any, and
interest on the outstanding Notes not later than one day before the due date of
any payment, or (z) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge principal of, premium, if any, and interest on the outstanding
Notes (except lost, stolen or destroyed Notes which have been replaced or paid)
on the Final Maturity Date or otherwise in accordance with the terms of this
Indenture and of such Notes; provided, however, that the Trustee (or other
qualifying trustee) shall have received an irrevocable written order from the
Company instructing the Trustee (or other qualifying trustee) to apply such
money or the proceeds of such U.S. Government Obligations to said payments with
respect to the Notes;
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(2) no Default or Event of Default or event which with notice or lapse
of time or both would become a Default or an Event of Default with respect to
the Notes shall have occurred and be continuing on the date of such deposit or,
insofar as Section 6.01(a) is concerned, at any time during the period ending
on the 91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(3) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of the
Company;
(4) such legal defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default under, this
Indenture or any other material agreement or instrument to which the Company is
a party or by which it is bound;
(5) in the case of an election under paragraph (b) above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the date of this Indenture, there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such legal defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not occurred;
(6) in the case of an election under paragraph (c) above, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred;
(7) in the case of an election under either paragraph (b) or (c) above,
an Opinion of Counsel to the effect that, (x) the trust funds will not be
subject to any rights of any holders of Senior Indebtedness, including, without
limitation, those rights arising under this Indenture, and (y) after the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable Bankruptcy Law; provided, however, that if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, no opinion needs to be given as to the effect of such
laws on the trust funds except the
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following: (A) assuming such trust funds remained in the Trustee's possession
prior to such court ruling to the extent not paid to Holders of Notes, the
Trustee will hold, for the benefit of the Holders of Notes, a valid and
enforceable security interest in such trust funds that is not avoidable in
bankruptcy or otherwise, subject only to principles of equitable subordination,
(B) the Holders of Notes will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used, and (C) no
property, rights in property or other interests granted to the Trustee or the
Holders of Notes in exchange for or with respect to any of such funds will be
subject to any prior rights of any other person, subject only to prior Liens
granted under Section 364 of Title 11 of the U.S. Bankruptcy Code (or any
section of any other Bankruptcy Law having the same effect), but still subject
to the foregoing clause (B); and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the legal defeasance under paragraph
(b) above or the covenant defeasance under paragraph (c) above, as the case may
be, have been complied with.
(e) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Notes shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(other than the Company or any Affiliate of the Company) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium and interest, but such money need not
be segregated from other funds except to the extent required by law. The Trustee
shall be under no duty to invest such funds or U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any,
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be
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required to be deposited to effect an equivalent legal defeasance or covenant
defeasance.
SECTION 8.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Notes.
SECTION 8.04. Repayment to Company.
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly pay
to the Company, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Section 8.02, held by it at any
time; provided that the Trustee shall, upon payment of all obligations under
this Indenture and upon request of the Company, pay to the Company any excess
money held by it. The Trustee and the Paying Agent shall pay to the Company,
upon request of the Company, any money held by it for the payment of principal,
premium, if any, or interest that remains unclaimed for two years after payment
to the Holders is required. After payment to the Company, Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had been made pursuant to this
Indenture until such time as the Trustee is permitted to apply all such money or
U.S. Government Obligations in accordance with this Indenture; provided,
however, that if the Company has made any payment of principal of, premium, if
any, or interest on any Notes because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
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ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution of its Board of
Directors, and the Trustee may amend, waive or supplement this Indenture or the
Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article 5;
(c) to provide for uncertificated Notes in addition to certificated
Notes;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to provide for the issuance of the Exchange Notes, which will have
terms substantially identical in all respects to the Initial Notes (except that
the transfer restrictions under the Securities Act contained in the Initial
Notes will be modified or eliminated, as appropriate), and which will be
treated, together with any outstanding Initial Notes, as a single issue of
securities;
(f) to provide for the guarantee of the Notes by The Loewen Group
Inc.;
(g) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder; or
(h) to evidence and provide for the acceptance and appointment
hereunder by a successor Trustee with respect to the Notes.
Notwithstanding the above, the Trustee and the Company may not make any
change that adversely affects the rights of any Holders hereunder. The Company
shall be required to deliver to the Trustee an Opinion of Counsel stating that
any such change made pursuant to paragraph (a) or (g) of this Section 9.01 does
not adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.04, the Company, when authorized by a Board
Resolution of its Board of Directors, and the Trustee may amend this Indenture
or
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the Notes with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and the Holders of
not less than a majority in aggregate principal amount of the Notes then
outstanding by written notice to the Trustee may waive future compliance by the
Company with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(a) reduce the percentage in outstanding aggregate principal amount of
Notes the Holders of which must consent to an amendment, supplement or waiver of
any provision of this Indenture or the Notes;
(b) reduce or change the rate or time for payment of interest on any
Note;
(c) change the currency in which any Note, or any premium or
interest thereon, is payable;
(d) reduce the principal amount outstanding of or extend the Stated
Maturity of any Note or alter the redemption provisions with respect thereto;
(e) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption or an offer to purchase required hereunder
with respect to, any Note;
(f) make the principal of, premium, if any, or interest on any Note
payable in money other than that stated in the Note;
(g) modify this Section 9.02 or Section 6.07;
(h) amend, alter, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate the offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto;
(i) modify or change any provision of this Indenture affecting the
subordination or ranking of the Notes in a manner adverse to the Holders; or
(j) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes.
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It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holder of each Security
affected thereby, with a copy to the Trustee, a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any amendment, supplement or waiver.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment of or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by such Holder and every subsequent
Holder of that Note or portion of that Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his Note or portion of a Note prior to such amendment, supplement or waiver
becoming effective. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. Notwithstanding the above, nothing in this paragraph
shall impair the right of any Holder under ss. 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the second
and third sentences of the immediately preceding paragraph, those persons who
were Holders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. Such consent shall be effective
only for actions taken within 120 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder; unless it makes a change described in any of clauses (a)
through (j) of Section 9.02; if it makes such a change, the amendment,
supplement or waiver
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shall bind every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee shall (in accordance with the specific direction of the Company) request
the Holder of the Note to deliver it to the Trustee. The Trustee shall (in
accordance with the specific direction of the Company) place an appropriate
notation on the Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or
issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 9.06. Trustee May Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 9 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver is authorized or permitted by this Indenture, that it is
not inconsistent herewith and that it will be valid and binding upon the Company
enforceable against the Company in accordance with its terms.
ARTICLE 10
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 10, the Indebtedness
represented by the Notes is hereby expressly made subordinate and subject in
right of payment as provided in this Article to the prior payment in full in
cash or Cash Equivalents of all amounts payable under all existing and future
Senior Indebtedness.
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This Article 10 shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become holders of, or continue to hold Senior
Indebtedness; and such provisions are made for the benefit of the holders of
Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
SECTION 10.02. Payment over of Proceeds upon Dissolution.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshaling of
assets or liabilities of the Company, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents of all Senior Indebtedness
(including, in the case of Designated Senior Indebtedness, any interest accruing
subsequent to the filing of a petition for bankruptcy at the rate provided for
in the documentation governing such Designated Senior Indebtedness, whether or
not such interest is an allowed claim under applicable law) before the Holders
of the Notes are entitled to receive any payment or distribution of any kind or
character (excluding securities of the Company that are equity securities or are
subordinated in right of payment to all Senior Indebtedness that may at the time
be outstanding to substantially the same extent as, or to a greater extent than,
the Notes as provided in this Article; such securities are hereinafter
collectively referred to as "Permitted Junior Notes") on account of principal
of, premium, if any, or interest on, or any other obligations to the Holders in
respect of, the Notes; and
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Notes), by set-off or otherwise, to which the Holders or the Trustee
would be entitled but for the provisions of this Article shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or Cash Equivalents of all
Senior Indebtedness remaining unpaid, after giving effect
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to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 10.02, the Trustee or the Holder of any Note shall have received
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, in respect of principal of, premium,
if any, or interest on or other obligations with respect to, the Notes before
all Senior Indebtedness is paid in full in cash or Cash Equivalents, then and
in such event such payment or distribution (excluding Permitted Junior Notes)
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other person
making payment or distribution of assets of the Company for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full in cash or Cash Equivalents or in any other
manner, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions
set forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article if the person formed by such consolidation or the surviving entity of
such merger or the person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5.
SECTION 10.03. Suspension of Payment When Senior Indebtedness in
Default.
(a) Unless Section 10.02 shall be applicable, upon the occurrence of a
Payment Default, no payment or distribution of any assets of the Company of any
kind or character (excluding Permitted Junior Notes) shall be made by or on
behalf of the Company on account of principal of, premium, if any, or interest
on or other obligations to the holders of the Notes in respect of the Notes or
on account of the purchase, redemption or other acquisition of any Notes (other
than payments previously made pursuant to Article 8) unless and until such
Payment Default shall have been cured or waived or shall have ceased to exist or
such Senior Indebtedness as to which such Payment Default relates shall have
been discharged or paid in full in cash or Cash Equivalents, after which,
subject to Section 10.02 (if
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applicable), the Company shall resume making any and all required payments in
respect of the Notes, including any missed payments.
(b) Unless Section 10.02 shall be applicable, upon the occurrence of a
Non-payment Default and upon the earlier to occur of (1) receipt by the Trustee
from a Senior Representative of written notice of such occurrence stating that
such notice is a Payment Blockage notice ("Payment Blockage Notice") pursuant
to Section 10.03(b) of this Indenture, or (2) if such Non-payment Default
results from acceleration of the Notes, the date of such acceleration, no
payment or distribution of any assets of the Company of any kind or character
(excluding Permitted Junior Notes and other than payments previously made
pursuant to Article 8) shall be made by or on behalf of the Company on account
of principal of, premium, if any, or interest on or other obligations with
respect to the Notes or on account of the purchase, redemption or other
acquisition of Notes for a period ("Payment Blockage Period") commencing upon
receipt by the Trustee of such notice or the date of acceleration referred to
in clause (2) above, as the case may be, unless and until the earliest to occur
of the following events: (w) 179 days shall have elapsed since receipt of such
written notice by the Trustee or the date of such acceleration (provided such
Designated Senior Indebtedness shall not theretofore have been accelerated),
(x) such Non-payment Default shall have been cured or waived or shall have
ceased to exist, (y) such Designated Senior Indebtedness shall have been
discharged or paid in full in cash or Cash Equivalents or (z) such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from the Senior Representative initiating such Payment Blockage
Period, after which, in each case, the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding anything in the foregoing to the contrary, a Payment Blockage
Notice may only be given and therefore shall only be effective in respect of
the Company and the Trustee if given by, (i) the Bank Agent as long as any
Senior Indebtedness remains outstanding under the Bank Credit Agreement and
(ii) if no Senior Indebtedness remains outstanding under the Bank Credit
Agreement, any other representative of outstanding Designated Senior
Indebtedness. Only one Payment Blockage Period with respect to the Notes may be
commenced within any consecutive 365-day period. No Non-payment Default with
respect to Designated Senior Indebtedness which existed or was continuing on
the date of the commencement of any Payment Blockage Period shall be, or be
made, the basis for the commencement of a second Payment Blockage Period,
whether or not within a period of 365 consecutive days, unless such default
shall have been cured for a period of not less than 180 consecutive days. In no
event shall a Payment Blockage Period extend beyond 179 days from the receipt
by the Trustee of the notice referred to in clause (1) of this Section 10.03(b)
or the date of the acceleration referred to in clause (2) of this Section
10.03(b) and there must
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be a 186 consecutive day period in any 365 consecutive day period during which
no Payment Blockage Period is in effect.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 10.03, then and in such event such payment
shall be paid over and delivered forthwith to the Senior Representatives or as a
court of competent jurisdiction shall direct for application to the payment of
any due and unpaid Senior Indebtedness, to the extent necessary to pay all such
due and unpaid Senior Indebtedness in cash or Cash Equivalents, after giving
effect to any concurrent payment to or for the holders of Senior Indebtedness.
SECTION 10.04. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall, in good faith,
mistakenly pay over or deliver to Holders, the Company or any other person
moneys or assets to which any holder of Senior Indebtedness shall be entitled
by virtue of this Article 10 or otherwise.
SECTION 10.05. Subrogation to Rights of Holders of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness in cash or Cash Equivalents,
the Holders of the Notes shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article 10 to
the holders of Senior Indebtedness by Holders of the Notes or the Trustee shall,
as among the Company, its creditors other than holders of Senior Indebtedness,
and the Holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 10 shall have been
applied,
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pursuant to the provisions of this Article 10, to the payment of all amounts
payable under the Senior Indebtedness of the Company, then and in such case the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of such Senior Indebtedness in excess of the amount sufficient to
pay all amounts payable under or in respect of such Senior Indebtedness in full
in cash or Cash Equivalents.
SECTION 10.06. Provisions Solely to Define Relative Rights.
The provisions of this Article 10 are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article 10 or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of, premium, if any, and interest on the Notes as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Notes and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 10 of
the holders of Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in
Section 10.02, to receive, pursuant to and in accordance with such Section,
cash, property and securities otherwise payable or deliverable to the Trustee
or such Holder, or (2) under the conditions specified in Section 10.03, to
prevent any payment prohibited by such Section or enforce their rights pursuant
to Section 10.03(c).
The failure to make a payment on account of principal of, premium, if
any, or interest on the Notes by reason of any provision of this Article 10
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
SECTION 10.07. Trustee to Effectuate Subordination.
Each Holder of a Note by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 10 and appoints the Trustee his attorney-in-fact for any and all such
purposes, including, in the event of any dissolution, winding-up, liquidation
or reorganization
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of the Company whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
Indebtedness of the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any Senior
Representative, may file such a claim on behalf of Holders of the Notes.
SECTION 10.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of Section 10.08(a), the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do
any one or more of the following: (1) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3)
release any person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company and any other person; provided, however, that in no event shall any
such actions limit the right of the Holders of the Notes to take any action to
accelerate the maturity of the Notes pursuant to Article 6 hereof or to pursue
any rights or remedies hereunder or under applicable laws if the taking of such
action does not otherwise violate the terms of this Indenture.
SECTION 10.09. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes. Notwithstanding the provisions of this
Article 10 or any other provision of this Indenture, the Trustee shall not be
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charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company
or a holder of Senior Indebtedness or from any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of this Section 10.09, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 10.09
at least three Business Days prior to the date upon which by the terms hereof
any money may become payable for any purpose under this Indenture (including,
without limitation, the payment of the principal of, premium, if any, or
interest on any Note), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice to the contrary which may be received by it within three Business
Days prior to such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or the elimination of the act or condition
preventing any such payment unless and until the Trustee shall have received an
Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a person representing himself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such person, the extent to which such person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article 10, and if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee, subject to the provisions of Section 7.01, and
the Holders, shall be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which such insolvency, bankruptcy,
receivership,
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liquidation, reorganization, dissolution, winding-up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other person making such payment or distribution, delivered to the Trustee or
to the Holders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 10 with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article 10 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.08.
SECTION 10.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 10 in addition to or in place of the Trustee; provided,
however, that Section 10.11 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 10.13. No Suspension of Remedies.
Nothing contained in this Article 10 shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Article 6 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article 10 of the holders, from time to time, of Senior Indebtedness.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 11.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:
If to the Company to:
Prime Succession Acquisition Corp.
691 Tekulve Road
Batesville, Indiana 47006
Attention: Gary Wright
With copies to:
The Blackstone Group
345 Park Avenue
New York, NY 10154
Attention: Howard A. Lipson
Loewen Group International, Inc.
50 River Center Blvd.
Covington, KY 41011
Attention: Randy Walters
Simpson Thacher & Bartlett
425 Lexington Avenue
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New York, NY 10017-3954
Attention: Wilson S. Neely
If to the Trustee to:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a Holder,
including any notice delivered in connection with TIA ss. 310(b), TIA ss.
313(c), TIA ss. 314(a) and TIA ss. 315(b), shall be mailed by first class mail
to such Holder at the address of such Holder as it appears on the Notes register
maintained by the Registrar and shall be sufficiently given to such Holder if so
mailed within the time prescribed. Copies of any such communication or notice to
a Holder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received, if
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The obligors,
the Trustee, the Registrar and any other person shall have the protection of TIA
ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, such obligor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if
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any, provided for in this Indenture relating to the proposed action have been
complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied with;
and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Notes without regard to principles of conflicts of law. The Trustee, the Company
and the Holders agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Indenture or the Notes.
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SECTION 11.08. No Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. No Recourse Against Others.
A director, officer, employee, stockholder or Affiliate, as such, of
the Company shall not have any liability for any obligations of the Company
under the Notes or this Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability.
SECTION 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all such executed copies together
represent the same agreement.
SECTION 11.12. Separability.
In case any provision in this Indenture or the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby, and a
Holder shall have no claim therefor against any party hereto.
SECTION 11.13. Table of Contents, Headings, Etc.
The Table of Contents and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
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SECTION 11.14. Benefits of Indenture.
Except as provided in Article 10, nothing in this Indenture or in the
Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
PRIME SUCCESSION ACQUISITION CORP.
By: /s/ Myles Cairns
----------------------------------
Title: Chief Financial Officer,
Secretary, Treasurer
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: /s/ Christine C. Collins
----------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
THIS GLOBAL NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
GLOBAL NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS GLOBAL NOTE RESELL OR OTHERWISE
TRANSFER THIS GLOBAL NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS GLOBAL NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT TO A TRANSFEREE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A LETTER SIGNED BY THE TRANSFEROR CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS GLOBAL NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
GLOBAL NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS GLOBAL NOTE WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE HEREOF, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO
A-1
<PAGE>
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE
SECURITIES ACT. UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY GLOBAL NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.09 AND 2.11 OF THE
INDENTURE.
PRIME SUCCESSION ACQUISITION CORP.
10 3/4% SENIOR SUBORDINATED NOTE DUE 2004
No. ______ $[ ]
CUSIP No. ________
Prime Succession Acquisition Corp. (to be renamed Prime Succession Inc.), a
corporation incorporated under the laws of the State of Delaware (herein called
the "Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
[_____________], or registered assigns, the principal sum of [ ] on August 15,
2004, at the office or agency of the Company referred to below, and to pay
interest thereon on February 15 and August 15, in each year, commencing on
February 15, 1997, accruing from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest has been paid,
from the original date of issuance, at the rate of 10 3/4% per annum (subject to
adjustment as
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hereinafter provided), until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Global Note (or one or
more Predecessor Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be February 1 or August 1 (whether or
not a Business Day), as the case may be, immediately
preceding such Interest Payment Date (each a "Regular Record Date"). Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the rate borne by the Global Note, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the person in whose name this Global Note (or one or more
Predecessor Notes) is registered at the close of business on a special record
date for the payment of such defaulted interest to be fixed by the Company in a
manner satisfactory to the Trustee, which date in any event shall be at least
five Business Days prior to the payment date and notice of which shall be given
to the Holder of this Global Note not less than 15 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which this
Global Note may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
The Holder of this Global Note is entitled to the benefits of a
Registration Rights Agreement, dated as of August 15, 1996, between the Company
and the Initial Purchaser named therein (the "Registration Rights Agreement").
The Registration Rights Agreement contains provisions permitting an increase in
the interest rate borne by this Global Note in the event of the failure to file
or to have declared effective an Exchange Offer Registration Statement or Shelf
Registration Statement (as such terms are defined in the Registration Rights
Agreement), or to consummate an Exchange Offer within prescribed time periods
specified in such Registration Rights Agreement.
Payment of the principal of, premium, if any, and interest on this
Global Note will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan in The City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
Note register maintained by the Registrar.
Reference is hereby made to the further provisions of this Global Note
set forth on the reverse hereof.
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Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Global Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by its duly authorized officer.
Dated: , 199 Prime Succession Acquisition Corp.
By:
-------------------------------
Name:
Title:
[SEAL]
Attest:
- ------------------------------------
Authorized Signature
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
as Trustee
By:
----------------------------------------
Authorized Signatory
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<PAGE>
(Reverse of Global Note)
1. Indenture. This Global Note is one of a duly authorized issue of
Notes of the Company designated as its 10 3/4% Senior Subordinated Notes due
2004, limited (except as otherwise provided in the Indenture referred to below)
in aggregate principal amount to $100,000,000 (the "Notes"), which may be
issued under an indenture (herein called the "Indenture") dated as of August
15, 1996, between Prime Succession Acquisition Corp., a Delaware corporation,
as issuer (the "Company"), and United States Trust Company of New York, a New
York corporation, as trustee (herein called the "Trustee," which term includes
any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee, and the Holder of the Global Note and
of the terms upon which this Global Note is, and is to be, authenticated and
delivered.
All capitalized terms used in this Global Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Global
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Global Note at the times, place and rate, and in the coin
or currency, herein prescribed.
2. Subordination. The Indebtedness evidenced by this Global Note is, to
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full in cash or Cash Equivalents of
all Senior Indebtedness (including in the case of Designated Senior
Indebtedness, any interest accruing subsequent to the filing of a petition for
bankruptcy of the Company at the rate provided for in the documentation
governing such Designated Senior Indebtedness of the Company, whether or not
such interest is an allowed claim under applicable law) as defined in the
Indenture, and this Global Note is issued subject to such provisions. The Holder
of this Global Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Global Note shall cease to be so subordinate and
subject in right of payment upon any defeasance of this Global Note referred to
in Paragraph 6 below.
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<PAGE>
3. Redemption.
(a) Optional Redemption. This Global Note will be redeemable at
the option of the Company, in whole or in part, in principal amounts of $1,000
or any integral multiple of $1,000, at any time on or after August 15, 2000, on
not less than 30 nor more than 60 days' prior notice at the Redemption Prices
(expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on or after August 15 of the years indicated
below:
Redemption
Year Price
---- ----------
2000. . . . . . . . . . . . . . . . . 105.375%
2001. . . . . . . . . . . . . . . . . 103.583%
2002. . . . . . . . . . . . . . . . . 101.792%
2003 and thereafter. . . . . . 100.000%
(b) Special Redemption. The Notes may be redeemed at the option of the
Company, in whole but not in part, at any time on or prior to December 20, 1996
at 101% of the principal amount thereof, plus accrued interest to the date of
redemption, if, in the sole judgment of the Company, the Acquisition will not
be consummated by December 15, 1996. In addition, such special redemption shall
mandatorily occur on December 20, 1996 if the Acquisition has not been
consummated by December 15, 1996.
(c) Interest Payments. In the case of any redemption of this Note,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holder of this Global Note, or one or more
Predecessor Notes, of record at the close of business on the relevant Record
Date referred to on the face hereof. This Global Note (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date.
(d) Partial Redemption. In the event of redemption of this Note
in part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
4. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture provide
that upon the occurrence of a Change of Control and following certain Asset
Sales, and subject to further limitations contained therein, the Company shall
make an offer to purchase certain amounts of this Global Note in accordance with
the procedures set forth in the Indenture.
A-8
<PAGE>
5. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
6. Defeasance. The Indenture contains provisions (which provisions
apply to this Global Note) for defeasance at any time of (a) the entire
indebtedness of the Company under this Global Note and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Notes at
the time outstanding, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and this Global Note and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Global Note
shall be conclusive and binding upon such Holder and upon all future Holders of
this Global Note and of any Global Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Global Note.
8. Denominations, Transfer and Exchange. The Notes are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Global Note is registrable on the Note register
of the Company, upon surrender of this Global Note for registration of transfer
at the office or agency of the Company maintained for such purpose in the
Borough of Manhattan in The City of New York or at such other office or agency
of the Company as may be maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by, the Holder hereof or his attorney
duly authorized
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<PAGE>
in writing, and thereupon one or more new Notes, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
9. Persons Deemed Owners. Prior to and at the time of due presentment
of this Global Note for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the person in whose name this
Global Note is registered as the owner hereof for all purposes, whether or not
this Global Note shall be overdue, and neither the Company, the Trustee nor any
agent shall be affected by notice to the contrary.
10. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of law principles.
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<PAGE>
Schedule A
Exchange of (a) portions of this Global Note
for Physical Notes or (b) Physical Notes
for an interest in this Global Note.
Principal Amount of
Physical Notes
Issued in Exchange
for, or Exchanged for Remaining Prin-
an Interest in, the cipal Amount of Notation
Date Global Note this Global Note Made By
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
- ---- --------------------- ---------------- --------
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<PAGE>
EXHIBIT B
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT TO A TRANSFEREE THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A LETTER SIGNED BY THE TRANSFEROR CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE HEREOF, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION
B-1
<PAGE>
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER
THE SECURITIES ACT.
PRIME SUCCESSION ACQUISITION CORP.
10 3/4% SENIOR SUBORDINATED NOTE DUE 2004
No. ______ $[___________]
CUSIP No. ________
Prime Succession Acquisition Corp. (to be renamed Prime Succession
Inc.), a corporation incorporated under the laws of the State of Delaware
(herein called the "Company", which term includes any successor corporation
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to [_____________], or its registered assigns the principal sum
of [ ] on August 15, 2004, at the office or agency of the Company referred to
below, and to pay interest thereon on February 15 and August 15, in each year,
commencing on February 15, 1997, accruing from the most recent Interest Payment
Date to which interest has been paid or duly provided for or, if no interest
has been paid, from the original date of issuance, at the rate of 10 3/4% per
annum (subject to adjustment as hereinafter provided), until the principal
hereof is paid or duly provided for. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be February 1 or August 1 (whether or not a
Business Day), as the case may be, immediately preceding such Interest Payment
Date (each a "Regular Record Date"). Any such interest not so punctually paid,
or duly provided for, and interest on such defaulted interest at the rate borne
by the Note, to the extent lawful, shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a special record date for the payment of such defaulted interest to
be fixed by the Company in a manner satisfactory to the Trustee, which date in
any event shall be at least five Business Days prior to the payment date and
notice of which shall be
B-2
<PAGE>
given to the Holders of the Notes not less than 15 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which this
Note may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in such Indenture.
The Holder of this Note is entitled to the benefits of a Registration
Rights Agreement, dated as of August 15, 1996, between the Company and the
Initial Purchaser named therein (the "Registration Rights Agreement"). The
Registration Rights Agreement contains provisions permitting an increase in the
interest rate borne by this Note in the event of the failure to file or to have
declared effective an Exchange Offer Registration Statement or Shelf
Registration Statement (as such terms are defined in the Registration Rights
Agreement), or to consummate an Exchange Offer within prescribed time periods
specified in such Registration Rights Agreement.
Payment of the principal of, premium, if any, and interest on this Note
will be made at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan in The City of New York, or at such other office or
agency of the Company as may be maintained for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
address of the person entitled thereto as such address shall appear on the Note
register maintained by the Registrar.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Note shall not be entitled to any benefit under
the Indenture, or be valid or obligatory for any purpose.
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by its duly authorized officer.
Dated: , 199 Prime Succession Acquisition Corp.
By:
--------------------------------
Name:
Title:
[SEAL]
Attest:
- ------------------------------------
Authorized Signature
B-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
as Trustee
By:
----------------------------------------
Authorized Signatory
B-5
<PAGE>
(Reverse of Note)
1. Indenture. This Note is one of a duly authorized issue of Notes of
the Company designated as its 10 3/4% Senior Subordinated Notes due 2004,
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $100,000,000 (the "Notes"), which may be issued
under an indenture (herein called the "Indenture") dated as of August 15, 1996,
between Prime Succession Acquisition Corp., a Delaware corporation, as issuer
(the "Company"), and United States Trust Company of New York, a New York
corporation, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Trustee, and the Holders of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.
2. Subordination. The Indebtedness evidenced by this Note is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Senior Indebtedness (including in the case of Designated Senior Indebtedness,
any interest accruing subsequent to the filing of a petition for bankruptcy of
the Company at the rate provided for in the documentation governing such
Designated Senior Indebtedness of the Company, whether or not such interest is
an allowed claim under applicable law) as defined in the Indenture, and this
Note is issued subject to such provisions. The Holder of this Note, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; provided, however, that the Indebtedness evidenced by this Note shall
cease to be so subordinate and subject in right of payment upon any defeasance
of the Notes referred to in Paragraph 6 below.
B-6
<PAGE>
3. Redemption.
(a) Optional Redemption. The Notes will be redeemable at the
option of the Company, in whole or in part, in principal amounts of $1,000 or
any integral multiple of $1,000, at any time on or after August 15, 2000, on
not less than 30 nor more than 60 days' prior notice at the Redemption Prices
(expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on or after August 15 of the years indicated
below:
Redemption
Year Price
---- ----------
2000. . . . . . . . . . . . . . . . . 105.375%
2001. . . . . . . . . . . . . . . . . 103.583%
2002. . . . . . . . . . . . . . . . . 101.792%
2003 and thereafter. . . . . . 100.000%
(b) Special Redemption. The Notes may be redeemed at the option of the
Company, in whole but not in part, at any time on or prior to December 20, 1996
at 101% of the principal amount thereof, plus accrued interest to the date of
redemption, if, in the sole judgment of the Company, the Acquisition will not
be consummated by December 15, 1996. In addition, such special redemption shall
mandatorily occur on December 20, 1996 if the Acquisition has not been
consummated by December 15, 1996.
(c) Interest Payments. In the case of any redemption of this Note,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holder of this Note, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. This Note (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(d) Partial Redemption. In the event of redemption of this Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
4. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture provide
that upon the occurrence of a Change of Control and following certain Asset
Sales, and subject to further limitations contained therein, the Company shall
make an offer to purchase certain amounts of Notes in accordance with the
procedures set forth in the Indenture.
B-7
<PAGE>
5. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
6. Defeasance. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company under this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount
of the Notes at the time outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Note and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
8. Denominations, Transfer and Exchange. The Notes are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable on the Note register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
B-8
<PAGE>
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
9. Persons Deemed Owners. Prior to and at the time of due presentment
of this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this Note
is registered as the owner hereof for all purposes, whether or not this Note
shall be overdue, and neither the Company, the Trustee nor any agent shall be
affected by notice to the contrary.
10. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of law principles.
B-9
<PAGE>
EXHIBIT C
[To be inserted at end of Exhibits A and B]
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.12 or 4.13 of the Indenture, check the appropriate box:
Section 4.12 |_|
Section 4.13 |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.12 or 4.13 of the Indenture, state the amount:
$------
Date:__________ Your Signature:
-------------------------
(Sign exactly as your
name appears on the other
side of this Note)
Signature Guarantee:
------------------
C-1
<PAGE>
[To be inserted at end of Exhibits A and B]
TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.
[To be inserted at end of Exhibits A and B for Initial Notes only]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective registration or (ii)
three years after the later of the original issuance of this Note or the last
date on which this Note was held by an Affiliate of the Issuer, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.06 of the Indenture shall have been satisfied.
C-2
<PAGE>
Dated:
------------------------ ----------------------------------
NOTICE: The signature to this
assignment must correspond with
the name as written upon the
face of the within-mentioned
instrument in every particular,
without alteration or any
change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional Buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
------------------------ ----------------------------------
NOTICE: To be executed by an
executive officer
C-3
<PAGE>
[LETTERHEAD OF SIMPSON THACHER & BARTLETT]
October 22, 1996
Prime Succession, Inc.
691 Tekulve Road
Batesville, Indiana 47006
Ladies and Gentlemen:
We have acted as special counsel for Prime Succession, Inc.
(formerly known as Prime Succession Acquisition Corp.), a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the issuance by the Company of $100,000,000
aggregate principal amount of its 10 3/4% Senior Subordinated Notes due 2004
(the "Exchange Notes"), which are to be offered by the Company in exchange for
$100,000,000 aggregate principal amount of its outstanding 10 3/4% Senior
Subordinated Notes due 2004 (the "Notes").
We have examined the Registration Statement and the Indenture
dated as of August 15, 1996 (the "Indenture") between the Company and United
States Trust Company of New York, as Trustee (the "Trustee"), which has been
filed with the Commission as an Exhibit to the Registration Statement. In
addition, we have examined,
<PAGE>
Prime Succession, Inc. -2- October 22, 1996
and have relied as to matters of fact upon, the originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements, documents and other instruments and such certificates or comparable
documents of public officials and of officers and representatives of the
Company, and have made such other and further investigations, as we have deemed
relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed that the Indenture has been
duly authorized, executed and delivered by the Trustee. In addition, we have
assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, and the authenticity of the originals of such latter
documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we hereby advise you that in our opinion the Exchange
Notes, when executed and authenticated in accordance with the provisions of the
Indenture and delivered in exchange for the Notes as contemplated in the
Registration Statement and the Indenture, will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
Our opinion set forth above is subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether
<PAGE>
Prime Succession, Inc. -3- October 22, 1996
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the federal law of the United States. This opinion is rendered to
you solely in connection with the above-described transaction and may not be
relied upon for any other purpose without our prior written consent.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXECUTION COPY
_________________________________________________________________
STOCKHOLDERS' AGREEMENT
Among
PRIME SUCCESSION, INC. (to be
renamed Prime Succession Holdings, Inc.),
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.
PSI MANAGEMENT DIRECT L.P.
And
LOEWEN GROUP INTERNATIONAL INC.
________________________________
Dated as of August 26, 1996
________________________________
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................. 2
Section 1.1 Certain Defined Terms................................... 2
ARTICLE II
SUBSCRIPTION; RECAPITALIZATION..................... 3
Section 2.1 Subscriptions for Common Stock and
Preferred Stock...................................... 3
Section 2.2 Organizational Documents................................ 3
(a) Restated Certificate of Incorporation..................... 3
(b) Bylaws.................................................... 3
Section 2.3 Debt Financing.
(a) High Yield Financing...................................... 3
(b) Bank Financing............................................ 3
(c) Transfer of Capital Stock and Other Assets................ 3
(d) Declaration of Dividend................................... 4
Section 2.4 Assignment of Rights Under the Stock
Purchase Agreement; Purchase of Shares by
Existing Prime....................................... 4
(a) Assignment of Rights...................................... 4
(b) Purchase of Existing Prime Shares......................... 4
Section 2.5 Payment of Expenses by New Prime........................ 4
ARTICLE III
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK............... 4
Section 3.1 BCP, PSIM............................................... 4
Section 3.2 LGII.................................................... 5
Section 3.3 Transfers Void; Conditions to Permitted
Transfers............................................ 5
Section 3.4 Put and Call Options.................................... 5
Section 3.5 Redemption of Preferred Stock........................... 5
Section 3.6 Additional Issuance of Capital Stock.................... 5
ARTICLE IV
GOVERNANCE............................... 6
Section 4.1 Election of the Board of Directors...................... 6
-1-
<PAGE>
Page
Section 4.2 New Prime Board of Directors............................ 6
Section 4.3 Declaration and Payment of Dividends.................... 6
ARTICLE V
OTHER ARRANGEMENTS........................... 7
Section 5.1 Transaction Fees........................................ 7
Section 5.3 Other Expenses.......................................... 7
Section 5.4 Additional Equity for Cure Event Purposes............... 7
Section 5.5 Capital Stock of Subsidiaries........................... 8
ARTICLE VI
MISCELLANEOUS............................. 9
Section 6.1 Legend.................................................. 9
Section 6.2 Notices................................................. 9
Section 6.3 Severability............................................ 10
Section 6.4 Entire Agreement........................................ 11
Section 6.5 Amendment and Waiver.................................... 11
Section 6.6 Consent to Specific Performance......................... 11
Section 6.7 Assignment.............................................. 11
Section 6.8 Variations in Pronouns.................................. 11
Section 6.9 Term.................................................... 11
Section 6.10 Governing Law.......................................... 11
Section 6.11 Further Assurances..................................... 12
Section 6.12 Headings............................................... 12
Section 6.13 Counterparts........................................... 12
-2-
<PAGE>
Exhibit A Subscription Agreement
Exhibit B Restated Certificate of Incorporation of Prime
Holdings
Exhibit C By-Laws of Prime Holdings
-3-
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of August 26, 1996 (this
"Agreement"), among Prime Succession, Inc. ("Existing Prime"), a Delaware
corporation to be renamed Prime Succession Holdings, Inc. ("Prime Holdings");
Prime Succession Acquisition Corp. ("New Prime"), a Delaware corporation to be
renamed Prime Succession, Inc. and previously known as Blackhawk Acquisition
Corp.; Blackstone Capital Partners II Merchant Banking Fund L.P., a Delaware
limited partnership ("BCPII"); Blackstone Offshore Capital Partners II L.P., a
Cayman Islands limited partnership ("BOCP"); Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership ("BFIP" and, together with
BCPII, BOCP and each of their respective permitted assigns and transferees as
provided herein, "BCP"); Loewen Group International, Inc., a Delaware
corporation (together with its permitted assigns and transferees as provided
herein, "LGII"); and PSI Management Direct L.P., a Delaware limited partnership
("PSIM"). BCP, LGII and PSIM are herein collectively referred to as the
"Stockholders" and individually as a "Stockholder."
WHEREAS, pursuant to a stock purchase agreement dated as of June 14,
1996 (the "Stock Purchase Agreement"), among Existing Prime, the other
individuals or entities listed on the signature pages thereto as selling
stockholders (collectively, the "Sellers"), The Loewen Group Inc., a British
Columbia corporation and New Prime, New Prime obtained the right to acquire all
of the capital stock of Existing Prime held by the Sellers, which right has
previously been assigned to Blackhawk Onshore Acquisition Company L.L.C. and
Blackhawk Offshore Acquisition Company L.L.C. and is being further assigned to
Existing Prime at the Closing (as defined below), such that Existing Prime would
repurchase such capital stock from such Sellers;
WHEREAS, at the Closing the Stockholders will subscribe for newly
issued shares of capital stock of Existing Prime, such that upon the
consummation of such subscription and the repurchase by Existing Prime of its
shares held by the Sellers as described above, the Stockholders will hold all of
the then issued and outstanding shares of capital stock of Existing Prime;
WHEREAS, at the Closing New Prime will become a wholly owned
subsidiary of Existing Prime, and Existing Prime will contribute to New Prime
all of Existing Prime's currently held subsidiaries and other assets such that
New Prime will hold all the businesses previously held by Existing Prime; and
WHEREAS, the parties hereto desire to enter into this Agreement for
the purpose of setting forth certain agreements regarding future relationships
among parties to this Agreement;
<PAGE>
2
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used herein and
not otherwise defined herein shall have the following meanings:
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Board of Directors" means the Board of Directors of
Prime Holdings.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to close.
"Closing" means the consummation of the transactions
described in Article II hereof.
"Closing Date" means the date on which the Closing pursuant to the
Stock Purchase Agreement occurs.
"Common Stock" means the common stock, par value $.01 per share, of
Prime Holdings.
"Existing Prime Shares" means all the shares of capital stock of
Existing Prime held by the Sellers.
"Offering Memorandum" means the offering memorandum dated August 13,
1996 relating to the offering of New Prime's 10-3/4% Senior Subordinated Notes
due 2004.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or other entity or a country or
government or any agency or political subdivision or instrumentality thereof or
of such subdivision.
"Preferred Stock" means the 10% Paid-in-Kind Cumulative Preferred
Stock, par value $.01 per share, of Prime Holdings.
"Securities Act" means the Securities Act of 1933, as amended.
"Transaction" means the acquisition and recapitalization of Existing
Prime as contemplated by the Stock
<PAGE>
3
Purchase Agreement together with the debt financings described in Section 2.3
hereof.
"Transfer" means to directly or indirectly sell, give, transfer,
assign, pledge, hypothecate or otherwise dispose of, or to contract or agree to
do any of the foregoing.
ARTICLE II
SUBSCRIPTION; RECAPITALIZATION
Section 2.1 Subscriptions for Common Stock and Preferred Stock. At
the Closing, the Stockholders will enter into a subscription agreement,
substantially in the form attached hereto as Exhibit A (the "Subscription
Agreement"), pursuant to which such parties will subscribe for newly issued
shares of capital stock of Existing Prime in accordance with the provisions
thereof such that, upon the repurchase by Existing Prime of all of its currently
outstanding shares of capital stock as part of the Transaction and the
effectiveness of the Amended Charter (as defined below), the Stockholders will
hold all of the then issued and outstanding shares of capital stock of Prime
Holdings.
Section 2.2 Organizational Documents.
(a) Restated Certificate of Incorporation. The parties hereto agree
that the restated certificate of incorporation of Existing Prime, substantially
in the form attached hereto as Exhibit B (the "Amended Charter"), will be filed
with the Secretary of State of the State of Delaware on the Closing Date. In
addition, on the Closing Date the certificate of incorporation of New Prime will
be amended to change its name to Prime Succession, Inc.
(b) Bylaws. The parties hereto shall, on the Closing Date, cause the
Board of Directors to adopt bylaws of Prime Holdings substantially in the form
attached hereto as Exhibit C.
Section 2.3 Debt Financing.
(a) High Yield Financing. Prior to the Closing Date, New Prime
issued $100 million aggregate principal amount of its 10-3/4% Senior
Subordinated Notes Due 2004 (the "Notes").
(b) Bank Financing. On the Closing Date, New Prime will obtain a
term loan in a principal amount of $90 million (the "Term Loan"), pursuant to an
agreement among New Prime and a syndicate of financial institutions, which
agreement shall also provide for a $25 million revolving credit facility to be
made available to New Prime.
(c) Transfer of Capital Stock and Other Assets. At the Closing, the
Stockholders shall (i) cause the filings
<PAGE>
4
referred to in subsection 2.2(a) hereof to occur (ii) cause there to be
transferred or otherwise issued to Existing Prime all the issued and outstanding
shares of New Prime and (iii) cause there to be transferred by Existing Prime to
New Prime all of the assets directly held by Existing Prime as of the time
immediately prior to the Closing.
(d) Declaration of Dividend. At the Closing, the Board of Directors
of New Prime will declare and authorize immediate payment of a dividend in an
amount equal to approximately $41.8 million (the "Intercompany Dividend"), which
amount, together with other funds to be received by Existing Prime, will enable
Existing Prime to repurchase all of its shares pursuant to the Stock Purchase
Agreement.
Section 2.4 Assignment of Rights Under the Stock Purchase Agreement;
Purchase of Shares by Existing Prime.
(a) Assignment of Rights. Prior to the Closing, New Prime assigned
all of its rights and obligations as a purchaser under the Stock Purchase
Agreement to Blackhawk Onshore Acquisition Company L.L.C. and Blackhawk Offshore
Acquisition Company L.L.C. (together, the "Assignees"). At the Closing, the
Assignees will assign to Existing Prime all of the Assignees' rights and
obligations with respect to the purchase of the Existing Prime Shares from the
Sellers pursuant to the Stock Purchase Agreement.
(b) Purchase of Existing Prime Shares. At the Closing, Existing
Prime shall repurchase the Existing Prime Shares from the Sellers pursuant to
the Stock Purchase Agreement. The aggregate net proceeds received by Existing
Prime pursuant to the Subscription Agreement and the Intercompany Dividend shall
be used by Existing Prime to pay the purchase price (the "Purchase Price") for
such Shares.
Section 2.5 Payment of Expenses by New Prime. New Prime shall use
the aggregate net proceeds of the high yield financing described in subsection
2.3(a) hereof and the Term Loan held by it after giving effect to the
Intercompany Dividend to (i) discharge the liabilities described on Schedule 1
attached hereto and (ii) for general corporate purposes including, but not
limited to, payment in accordance with Sections 5.1, 5.2 and 5.3 hereof of the
fees and expenses described therein.
ARTICLE III
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK
Section 3.1 BCP, PSIM. Each of BCPII, BOCP and BFIP may, subject to
the last sentence of Section 3.3 hereof, Transfer all or part of its shares of
Common Stock to any of such Person's Affiliates, but may not Transfer such
shares to any other Person
<PAGE>
5
without the prior written consent of LGII, provided, that if LGII fails to
comply with its obligations under Section 4.1 or Article VIII of the Put/Call
Agreement (as defined below) such restriction shall lapse. Without the consent
of BCP and LGII, PSIM may not transfer shares of Common Stock to any Person.
Section 3.2 LGII. LGII may, subject to the last sentence of Section
3.3 hereof, Transfer its shares of Common Stock or Preferred Stock to any
Affiliate of LGII, but may not Transfer such shares to any other Person without
the prior written consent of BCP, provided, that LGII may and shall effect the
Transfer of such shares if so directed by BCP in accordance with Section 7.4 of
the Put/Call Agreement.
Section 3.3 Transfers Void; Conditions to Permitted Transfers. Each
Stockholder agrees that it will not Transfer any Common Stock or Preferred Stock
that such Stockholder now owns or hereafter acquires without complying with the
terms and conditions of this Agreement. Any Transfer of Common Stock or
Preferred Stock in violation of this Agreement shall be void ab initio. No
Stockholder may do indirectly, through a sale of its capital stock or otherwise,
that which is not permitted by this Section 3. No shares of Common Stock or
Preferred Stock may be Transferred or issued to any Person unless such Person,
prior to or concurrently with such Transfer or issuance, undertakes by a written
supplemental agreement to be bound by the terms of this Agreement and the
Put/Call Agreement to the same extent and in the same manner as the other
Stockholders.
Section 3.4 Put and Call Options. Notwithstanding the foregoing
provisions of this Article III, pursuant to a separate put and call agreement
entered into concurrently herewith (the "Put/Call Agreement"), LGII shall have
an option to purchase the shares of Common Stock held by BCP and PSIM, and BCP
and PSIM shall have an option to require LGII to purchase the shares of Common
Stock held by BCP and PSIM, subject, in each case, to the provisions of the
Put/Call Agreement. Transfers of Common Stock in accordance with the exercise of
the Options described in the Put/Call Agreement shall be permitted
notwithstanding anything to the contrary in Sections 3.1, 3.2 or 3.3 hereof.
Section 3.5 Redemption of Preferred Stock. Notwithstanding the
provisions of paragraphs 5 and 6 of Article Fifth of the Amended Charter, there
shall be no redemption of Preferred Stock held by LGII or its Affiliates without
the consent of LGII and BCP.
Section 3.6 Additional Issuance of Capital Stock. Except as provided
in Section 5.4 hereof and section (b) of Article Fifth of the Amended Charter,
subsequent to the Closing Date, Prime Holdings will not issue additional shares
of Common Stock or Preferred Stock without the consent of BCP and LGII.
<PAGE>
6
ARTICLE IV
GOVERNANCE
Section 4.1 Election of the Board of Directors. (a) Except as
provided below, each Stockholder shall vote all of the shares of Common Stock
owned or held of record by it so as to elect and continue in office a Board of
Directors comprised of eight directors, five of whom BCP shall have the right to
designate (the "BCP Directors") and three of whom LGII shall have the right to
designate (the "LGII Directors").
(b) If at any time that this Agreement is in effect BCP or LGII
shall notify the other of its desire to remove, with or without cause, any
director of Prime Holdings previously designated by it, each Stockholder shall
vote all of the shares of Common Stock owned or held of record by it so as to
remove such director.
(c) If at any time that this Agreement is in effect any director
previously designated by BCP or LGII ceases to serve on the Board of Directors
(whether by reason of death, resignation, removal or otherwise), the Stockholder
who designated such director shall be entitled to designate a successor director
to fill the vacancy created thereby. Each Stockholder agrees that it will vote
all of the shares of Common Stock owned or held of record by it so as to elect
such director.
(d) The provisions of this Section 4.1 shall terminate upon a sale
of Common Stock pursuant to Section 7.4 of the Put/Call Agreement.
Section 4.2 New Prime Board of Directors. Each party to this
Agreement agrees that Prime Holdings shall cause the board of directors of New
Prime to at all times consist of the same individuals who comprise the Board of
Directors of Prime Holdings.
Section 4.3 Declaration and Payment of Dividends. The parties hereto
agree to cause the Board of Directors to declare on a quarterly basis, subject
to their fiduciary duties and the provisions of the General Corporation Law of
the State of Delaware (the "GCL"), and Prime Holdings to pay on a quarterly
basis, subject to the provisions of the GCL, dividends on the Preferred Stock in
accordance with the Amended Charter.
Section 4.4 New Prime shall not make any significant changes in (i)
its current preneed cemetery sales policies or practices or (ii) its trusting or
insurance practices without the approval of its Board of Directors.
<PAGE>
7
ARTICLE V
OTHER ARRANGEMENTS
Section 5.1 Transaction Fees. If the Transaction is consummated, New
Prime shall pay on the Closing Date (a) a fee equal to $3,200,000 to Blackstone
Management Partners L.P. and (b) a consulting fee equal to $1,500,000 and a
reimbursement of expenses in the amount of $1,000,000 to LGII.
Section 5.2 Monitoring Fees. The Stockholders shall each vote their
shares of Common Stock and take such other action as may be reasonably necessary
so as to cause an annual monitoring fee in the amount of $250,000 to be paid by
Prime Holdings, annually in advance, to Blackstone Management Partners L.P. from
the Closing Date through the date on which the option of either of BCP or LGII
is exercised pursuant to the Put/Call Agreement.
Section 5.3 Other Expenses. (a) If the Transaction is consummated,
New Prime shall reimburse (i) BCP for (or otherwise pay on behalf of BCP) all
out-of-pocket expenses (including amounts paid by BCP to its professional
advisors) incurred in connection with the Transaction and (ii) LGII for amounts
payable to LGII's professional advisors in connection with the Transaction and
paid by LGII.
(b) LGII shall reimburse Prime Holdings for any withholding taxes
incurred by Prime Holdings in respect of, or related to, the dividends payable
by LGII at the time such liabilities are incurred.
Section 5.4 Additional Equity for Cure Event Purposes. (a) Following
the Closing Date, if an additional equity contribution to New Prime is necessary
to either cure or prevent an event of default under or breach of any financial
covenant contained in the credit agreement relating to New Prime's Term Loan,
BCP shall have the right to contribute 100% of such additional equity. If BCP
elects to make such a contribution, it shall give LGII written notice (the "BCP
Additional Equity Notice") to such effect and LGII shall have the right,
exercisable by written notice to BCP within five Business Days from receipt of
the BCP Additional Equity Notice, to replace (prior to BCP's making such
contribution) a portion of BCP's contribution with a contribution by LGII up to
an amount equal to the ratio (before such contributions) of the LGII
Contribution to the BCP Contribution (each as defined in the Put/Call
Agreement). If BCP elects not to make such a contribution, it shall give LGII
written notice to such effect and LGII shall have the right to contribute 100%
of such additional equity. If LGII elects to make such 100% contribution, it
shall give BCP written notice (the "LGII Additional Equity Notice") to such
effect and BCP shall have the right, exercisable by written notice to LGII
within five Business Days from receipt of the LGII Additional
<PAGE>
8
Equity Notice, to replace (prior to LGII's making such contribution) a portion
of LGII's contribution with a contribution by BCP up to an amount equal to the
ratio (before such contributions) of the BCP Contribution to the LGII
Contribution. Such capital contributions will involve the purchase of additional
shares of Common Stock or Preferred Stock, as the case may be, and the purchase
price shall be the same price per share paid by BCP and LGII on the Closing
Date.
(b) In the event an additional equity contribution is required to be
made pursuant to subparagraph (a) of this Section 5.4, BCP, LGII and PSIM hereby
agree to vote the shares of Common Stock held by each of them to authorize the
filing of an amendment to the Amended Charter and to take all such other actions
required in order to authorize and consummate the issuance of additional shares
of capital stock of Prime Holdings in connection with such additional equity
contribution.
(c) Each party electing to make an additional equity contribution
pursuant to subparagraph (a) of this Section 5.4, whether individually or on a
pro rata basis, shall contribute such additional equity to Prime Holdings no
later than ten Business Days from the date the BCP Additional Equity Notice or
the LGII Additional Equity Notice, as the case may be, was given and, in any
event, simultaneously with the making of the contribution by the other party
electing to make such contribution (the "Additional Equity Closing Date").
(d) As of each Additional Equity Closing Date, New Prime hereby
reaffirms to BCP and/or LGII, as the case may be, that the representations and
warranties contained in Article II of the Subscription Agreement are true and
correct on such Additional Equity Closing Date in all material respects as if
made on and as of such Additional Equity Closing Date.
Section 5.5 Capital Stock of Subsidiaries. Notwithstanding the
foregoing, the parties hereby agree that Prime Holdings shall not permit any of
its director or indirect subsidiaries directly or indirectly, to issue any
shares of capital stock (other than the issuance of common stock of New Prime
pursuant to the Transaction) to any entity or person other than a wholly-owned
subsidiary of Prime Holdings.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Legend. Each certificate representing shares of Common
Stock or Preferred Stock now held or hereafter acquired by any Stockholder shall
bear the following legend (until such time as subsequent transfers thereof are
no longer restricted in accordance with the Securities Act of 1933, as amended
or this Agreement):
<PAGE>
9
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE GIVEN,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF UNLESS SUCH GIFT, SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF
THE STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT"), DATED
AS OF AUGUST 26, 1996, AMONG PRIME SUCCESSION HOLDINGS, INC., PRIME
SUCCESSION, INC., BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING
FUND L.P., BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P., BLACKSTONE
FAMILY INVESTMENT PARTNERSHIP II L.P., LOEWEN GROUP INTERNATIONAL
INC. AND PSI MANAGEMENT DIRECT L.P. A COPY OF THE STOCKHOLDERS'
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES
LAWS OF ANY STATE, AND EXCEPT AS OTHERWISE PROVIDED IN THE
STOCKHOLDERS' AGREEMENT NO SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ALL APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS OR (B) TO THE EXTENT REQUESTED BY THE
COMPANY, IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL WHICH SHALL BE REASONABLY SATISFACTORY TO THE COMPANY TO THE
EFFECT THAT SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF THE ACT AND
THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND IS NOT IN
VIOLATION OF APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, ACKNOWLEDGES THAT IT
IS BOUND BY THE PROVISIONS OF THE STOCKHOLDERS' AGREEMENT TO THE
EXTENT PROVIDED THEREIN."
Section 6.2 Notices. Notices hereunder shall be given only by
personal delivery, registered or certified mail, return receipt requested,
overnight courier service, or telex, telegram or other form of electronic mail
or by telecopy (and subsequently confirmed by any other permitted means
hereunder) and shall be deemed transmitted when personally delivered or
deposited in the mail or delivered to a courier service or a carrier for
electronic transmittal (as the case may be), postage or charges prepaid, and
addressed to the particular party to whom the notice is to be sent as follows:
(a) in the case of Prime Holdings:
Prime Succession, Inc.
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8725
<PAGE>
10
Attention: Howard A. Lipson
with a copy to:
(b) in the case of BCP or PSIM:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8725
Attention: Howard A. Lipson
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: Wilson S. Neely, Esq.
(c) in the case of LGII:
Loewen Group International, Inc.
50 East River Center Boulevard
Covington, Kentucky 41011
Telecopier No.: (606) 655-7154
Attention: Legal Department
with a copy to:
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 358
Telecopier No.: (604) 473-7305
Attention: Senior Vice President and Chief Financial
Officer
or to such address as a party may instruct by notice hereunder.
Section 6.3 Severability. In the event any provision
hereof is held void or unenforceable by any court, then such provisions shall be
severable and shall not affect the remaining provisions hereof.
Section 6.4 Entire Agreement. This Agreement, together with the
other agreements referred to herein, is the entire Agreement among the parties,
and, when executed by the parties hereto, supersedes all prior agreements and
communications, either verbal or in writing (including the Amended and Restated
Term Sheet dated August 13, 1996), between the parties hereto with respect to
the subject matter contained herein.
<PAGE>
11
Section 6.5 Amendment and Waiver. This Agreement may not be amended,
modified or supplemented unless consented to in writing by the parties hereto.
Any failure by a party hereto to comply with any obligation, agreement or
condition herein may be expressly waived in writing by each of the other parties
hereto, but such waiver or failure to insist upon strict compliance with such
obligation, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any such subsequent or other failure.
Section 6.6 Consent to Specific Performance. The parties hereto
declare that it is impossible to measure in money the damages which would accrue
to a party by reason of failure to perform any of the obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the other party has an adequate
remedy at law.
Section 6.7 Assignment. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, no Stockholder may assign to any Person any of
its rights hereunder other than in connection with a Transfer to such Person of
shares of Common Stock or Preferred Stock in accordance with all the provisions
of this Agreement.
Section 6.8 Variations in Pronouns. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the antecedent person or persons or entity or
entities may require.
Section 6.9 Term. This Agreement shall terminate upon the earlier to
occur of (i) consummation of the exercise of the Option (as defined in the
Put/Call Agreement) pursuant to the Put/Call Agreement, without any default in
connection therewith and (ii) any date agreed upon in writing by BCP and LGII.
Section 6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 6.11 Further Assurances. Each of the parties shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
Section 6.12 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
interpretation of this Agreement.
Section 6.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be
<PAGE>
12
deemed an original, but all of which together shall constitute one and the same
instrument.
[Remainder of page intentionally left blank]
<PAGE>
13
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
PRIME SUCCESSION, INC. (to be
renamed Prime Succession Holdings,
Inc.)
By: /s/ Gary L. Wright
--------------------------------
Name: Gary L. Wright
Title: President and Chief
Financial Officer
LOEWEN GROUP INTERNATIONAL INC.
By: /s/ Timothy Hogenkamp
--------------------------------
Name: Timothy Hogenkamp
Title: President and Chief
Operating Officer
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ Howard A. Lipson
---------------------------
Name: Howard A. Lipson
Title: Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ Howard A. Lipson
---------------------------
Name: Howard A. Lipson
Title: Member
<PAGE>
14
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ Howard A. Lipson
---------------------------
Name: Howard A. Lipson
Title: Member
PSI MANAGEMENT DIRECT L.P.
By: PSI P&S CORP.
General Partner
By: /s/ Michael Puglisi
---------------------------
Name: Michael Puglisi
Title: Vice President and
Treasurer
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (the "Agreement") is made and
entered into as of August 26, 1996 (the "Effective Date") by and between Prime
Succession Acquisition Corp. (which shall be renamed Prime Succession, Inc.)
("Prime"), a Delaware corporation, and Loewen Group International, Inc.
("Loewen"), a Delaware corporation.
RECITALS
WHEREAS, Prime owns and operates a chain of funeral homes and cemeteries
throughout the United States (the "Business");
WHEREAS, Loewen also owns and operates a chain of funeral homes and
cemeteries throughout the United States and, in several markets, competes with
Prime in the death care industry;
WHEREAS, Loewen has acquired, through a series of investment transactions
(the "Investment"), approximately 23% of the common equity of Prime Succession
Holdings, Inc. ("Prime Holdings"), which owns all of the capital stock of Prime
and, as a result of a call option granted to Loewen (the "Call Option") and a
put option granted to Blackstone Capital Partners II Merchant Banking Fund, L.P.
and certain of its affiliates (the "Put Option") in connection with the
Investment, has an opportunity to acquire all of Prime Holdings' outstanding
Common Stock;
WHEREAS, to maintain independence between Loewen and Prime for purposes of
fostering competition, Loewen currently treats its minority investment in Prime
Holdings as a passive investment, and, with the exception of the business
arrangements addressed by this Agreement, Loewen and Prime operate separate
businesses and operations; and
WHEREAS, to achieve certain cost efficiencies, Loewen has agreed to
provide, and Prime has agreed to accept the provision of, administrative
services and support to the Business as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1: SERVICES AND SUPPORT TO BE PROVIDED
1.1 The Services. Loewen will furnish to Prime and Prime will use such of
the following administrative services and support (individually a "Service" and
collectively, the "Services") as Prime may request from time to time:
a. Licenses to use any or all of the software packages and any
enhancements thereto, listed on Exhibit A
<PAGE>
together with the necessary information systems support to ensure that such
licensed software functions appropriately and maintenance support for the
hardware necessary to operate the licensed software; provided that, to
avoid the disclosure of confidential pricing, financial or market
information or significant competitive terms, Loewen support personnel
maintaining the licensed software shall not have access to such
information;
b. Certain non-strategic legal services, including regular and
periodic assistance with the preparation and filing of, and general
guidance with respect to, federal, state or local governmental reports,
case management of the defense or prosecution of non-strategic litigation,
and the procurement, retention, management and coordination of legal
services furnished by independent counsel;
c. Certain employee training and support services relating to
regulatory compliance in the following areas: (i) Occupational Safety &
Health Administration Standards, including an annual on-site safety survey;
(ii) Americans With Disabilities Act, Title III, Physical Accommodations by
Public Entities; (iii) licensing; (iv) environmental; (v) employment law,
including wage and hour, sexual harassment, employment discrimination, the
Fair Labor Standards Act, the Family and Medical Leave Act, employee
discipline, employee termination, and employment applications; (vi)
funeral, cemetery, crematory services and advanced planning procedural
issues; (vii) the Federal Trade Commission's Funeral Services Practices
Rule; and (viii) the Federal Truth in Lending Act;
d. Risk management services for the purposes of cost effectiveness,
including the brokering and administration of insurance programs and the
processing and administration of insurance claims;
e. Access to certain telecommunications equipment and services, and
technical support with respect to such equipment, including access to
equipment used for electronic mail, voice mail and other such purposes;
provided that the equipment accessed by Prime shall be partitioned from
that used by Loewen so that neither user shall, in any way, have access to
the other's communications systems and the information contained therein;
f. Environmental support for general regulatory, compliance and
remedial purposes;
g. Travel Services from Loewen Travel for certain Prime employees; and
h. Other related or similar Services to which the parties mutually
agree.
-2-
<PAGE>
1.2 Additional Services.
a. In addition to the Services listed above, Loewen hereby agrees that
it may also provide Prime with the ability to purchase supplies under
certain of Loewen's supply agreements with third parties.
b. Loewen and Prime agree that to the extent it is feasible and cost
effective in particular markets they shall provide to each other:
(i) Access to each other's embalming facilities in particular
markets; and
(ii) Access to each other's automobile fleets where appropriate.
The costs associated with any shared services under this Section (b) shall
be allocated between Loewen and Prime on a mutually agreeable basis based
on relative usage.
1.3 Maintaining Competition and Confidentiality. Notwithstanding anything
to the contrary in this Agreement, Loewen and Prime hereby agree that Loewen
shall not provide to Prime, and Prime shall not request the provision of, any
Services that, in the opinion of counsel for either party, would unreasonably
inhibit competition between Loewen and Prime, including, but not limited to, any
Services that would require the sharing of confidential information or
information relating to significant competitive terms such as price, territory
or customers. To the extent that based on the opinion of such counsel there is a
significant reduction in the services provided from those set forth in Sections
1.1 and 1.2 hereof, the parties agree to negotiate in good faith a reducation of
the Administrative Fee referred to in Section 3.1 hereof.
ARTICLE 2: CONDITIONS RELATING TO SERVICES
2.1 Standard of Care. Loewen will use reasonable commercial efforts in
providing services to the Business. Loewen shall not take any action in
connection with the provision of the Services which would tend to materially
injure, diminish the value of, or reflect adversely upon Loewen, Prime or the
Business.
2.2 Independent Contractor. Notwithstanding any other provision of this
Agreement to the contrary, the parties acknowledge and expressly agree that
Loewen shall be an independent contractor of Newco and Prime while providing the
Services. Nothing herein shall be construed to establish a partnership, a joint
venture or an agency relationship between or among the parties.
2.3 Personnel Providing Services. The Services shall be provided by, or
under the supervision of, qualified personnel of
-3-
<PAGE>
Loewen or one or more of its Affiliates (as such term is defined below) as
designated by Loewen. The employees of Loewen providing Services hereunder shall
be, during the term of this Agreement, employees of or consultants to Loewen and
not employees of Prime, and shall be under the direct supervision of Loewen.
Loewen shall have full control over and full responsibility for the assignment
of employees providing the Services and for the terms and conditions of
employment of such employees including hiring, discharging, disciplining,
scheduling and all other matters relating to the terms and conditions of
employment.
ARTICLE 3: COMPENSATION
3.1 Administrative Fee. In consideration for the provision of the Services,
Newco and Prime agree to pay Loewen an administrative fee equal to $250,000 in
immediately available funds on the Effective Date of this Agreement for the
first year of the Term of this Agreement. On each anniversary of the Effective
Date thereafter throughout the Term of the Agreement, the administrative fee to
be paid by Newco and Prime to Loewen shall increase annually by 2.5%.
3.2 Expenses. Prime shall also reimburse Loewen for all out of pocket costs
and expenses incurred from third parties in connection with the provision of
services hereunder including, but not limited to, reimbursement for travel
expenses, insurance costs and supplies purchased under a Loewen supply
agreement. Loewen shall use its reasonable business judgment in engaging and
contracting with third parties pursuant to the immediately preceding sentence
(including the decision as to whether such services are performed by Loewen or
by a third party provider) as if Loewen was engaging and contracting with third
parties for its own benefit. All such transactions with third party providers
shall be conducted on an arm's length basis. From time to time Loewen shall
report to and consult with the Board of Directors of Prime with respect to the
services provided hereunder directly by Loewen personnel and the services
provided by third party providers and the costs therefor.
ARTICLE 4: TERM AND TERMINATION
4.1 Term and Termination. The term of this Agreement shall be eight years
("Term"). This Agreement shall be terminated as follows (the date of any such
termination referred to as the "Termination Date");
a. Automatically on the eighth anniversary of the date hereof without
any notice or other action required;
b. If required pursuant to a final, nonappealable order of a court or
other governmental agency having jurisdiction over the Business, Newco or
Loewen;
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<PAGE>
c. By any party in the event of a material breach by any other party
of any provision of this Agreement including, without limitation, rejection
of this Agreement in a proceeding under the Bankruptcy Act of 1978, as
amended (or any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up or
composition or readjustment of debts), which breach is not remedied by the
breaching party within 30 days after receipt of written notice thereof (a
"Notice of Breach") from the terminating party; provided that;
(i) if the breaching party shall notify the non-breaching party
within 10 days following the receipt of the Notice of Breach that the
breaching party disputes that it has materially breached the
Agreement, then the dispute shall be submitted to Arbitration in
accordance with Article 10 of this Agreement and the 30 day cure
period shall commence to run, if appropriate, upon the termination of
the Arbitration procedure; and
(ii) if a breach is not reasonably capable of a cure within such
30 day period and the breaching party is diligently pursuing a cure of
such material breach, the period for effecting a remedy shall be
extended for such reasonable period of time, not to exceed 90 days
from the later to occur of (x) the date of receipt of the Notice of
Breach and (y) the conclusion of the Arbitration procedures, if
applicable, as may be necessary to allow the breaching party
sufficient opportunity to effect such cure.
d. Automatically upon closing following the exercise of the Option as
such term is defined in that certain Put/Call Agreement of even date
herewith among Loewen, The Loewen Group Inc., Blackstone Capital Partners
II Merchant Banking Fund, L.P., Blackstone Family Investment Partnership
II, L.P., Blackstone Offshore Capital Partners II, L.P. and PSI Management
Direct, L.P.
e. At the option of Prime upon transfer of the shares of Prime's
common stock held by Loewen or its affiliates pursuant to Section 7.4 of
the Put/Call Agreement such that Loewen or its affiliates own less than 10%
of Prime's common stock then outstanding.
4.2 Effect of Termination.
a. Termination of this Agreement in accordance with this Section 4
shall not affect the rights of any party hereto to receive payments in
accordance herewith or to recover any damages either shall have suffered as
a result of any breach of this Agreement, nor shall it affect the rights of
any party accruing during the Term of this Agreement.
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b. If this Agreement is terminated, then effective as of the
Termination Date Loewen's right to provide and Newco's and Prime's right to
request services to the Business shall terminate immediately and Loewen,
Prime and Newco hereby agree to such termination of rights.
c. Upon termination of this Agreement, Prime shall be entitled to a
refund from Loewen of that portion, if any, of the annual administrative
fee paid to Loewen but unearned by Loewen as of the Termination Date, based
upon an equal 12- month allocation of such administrative fee.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
5.1 Representations of Loewen. Loewen hereby represents and warrants to
Prime as follows:
a. Authorization and Binding Obligation. Loewen has full corporate
power and authority to enter into, deliver and perform fully its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Loewen, and constitutes the valid and binding obligation of
Loewen, enforceable against Loewen in accordance with its terms.
b. No Conflict. The execution delivery and performance by Loewen of
its obligations under this Agreement does not conflict with or result in a
breach of, or require any consent under, the charter or by-laws of Loewen
or any applicable law or regulation, or any order, writ, injunction or
decree of any court of governmental authority or agency, or any agreement
or instrument to which Loewen is a party or by which it is bound or to
which it is subject, or constitute a default under any such agreement or
instrument.
5.2 Representations and Warranties of Prime. Prime hereby represents and
warrants to Loewen as follows:
a. Authorization and Binding Obligation. Prime has full corporate
power and authority to enter into, deliver and perform fully its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Prime and constitutes the valid and binding obligation
thereof, enforceable against Prime in accordance with its terms.
b. No Conflict. The execution, delivery and performance by Prime of
its obligations under this Agreement does not conflict with or result in a
breach of, or require any consent under, the charter or by-laws of Prime or
any applicable law or regulation, or any order, writ, injunction or decree
of any court of governmental authority or agency, or any agreement or
instrument to which Prime is a party or by which it is bound or to which it
is subject, or constitute a default under any such agreement or instrument.
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<PAGE>
ARTICLE 6: ARBITRATION
All disputes arising out of, or in connection with this Agreement, which
are not promptly settled by mutual agreement of the parties hereto, shall be
finally settled by arbitration in accordance with the rules of the American
Arbitration Association. Such arbitration shall be conducted by a single
arbitrator appointed in accordance with such rules unless such dispute involves
an amount greater than $1,000,000, in which case such arbitration shall be
conducted by a panel of three arbitrators appointed in accordance with such
rules. Arbitration shall take place in Cincinnati, Ohio. Such arbitration shall
be governed by this Agreement and shall be final and binding upon the parties
hereto. The validity, construction, performance or termination of any agreement
by and between the parties submitted to arbitration shall be determined on the
basis of the contractual obligations of the parties. The arbitrator shall
determine his jurisdiction over persons and subject matter if such jurisdiction
is challenged by one of the parties. The award of the arbitrator shall: (a) be
rendered in writing stating the grounds on which the arbitrators base same, and
how the costs of arbitration shall be borne; the expenses of any party in
defense of its interests shall be borne by such party; (b) be dated and notified
to the parties by registered mail, return receipt requested; (c) be carried out
voluntarily and without delay, and failing this, be made enforceable through
either party by entry of a judgment in a competent court of any jurisdiction;
and (d) be final and not subject to appeal before any court, nor other
jurisdiction nor any authority.
ARTICLE 7: MISCELLANEOUS
7.1 Notices. All notices, demands, and requests required or permitted to be
given under this Agreement shall be in writing and shall be deemed duly given if
(i) personally delivered, (ii) sent by confirmed facsimile transmission to the
facsimile numbers provided below, (iii) sent by registered or certified mail,
postage pre-paid, return receipt requested, or (iv) transmitted by a recognized
overnight courier service, addressed as follows:
(a) in the case of Loewen:
Loewen Group International, Inc.
50 East RiverCenter Boulevard
Covington, Kentucky 41011
Attention: Legal Department
with a copy to:
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia, Canada V5G 358
Attention: Senior Vice President and Chief
Financial Officer
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<PAGE>
(b) in the case of Prime:
Prime Succession, Inc.
691 Tekulve Road
Batesville, Indiana 47006
Attention: Chief Executive Officer
with a copy to:
The Blackstone Group
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
or to any such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
7.1.
7.2 Benefit and Binding Effect. No party hereto may assign this Agreement
without the prior written consent of the other parties. Any attempt to assign
this Agreement or any part hereof in violation of this Section 7.2 shall be null
and void and of no effect whatsoever. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
7.3 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies (without giving effect
to the principles of conflicts or law).
7.4 Headings. The headings preceding the text of sections and subsections
of this Agreement are included for ease of reference only and shall not be
deemed part of this Agreement.
7.5 Gender and Number. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
7.6 Entire Agreement. This Agreement, all exhibits hereto, and all
documents, certificates, and the like to be delivered by the parties pursuant
hereto, collectively represent the entire understanding and agreement between
the parties hereto with respect to the specific subject matter hereof. All
exhibits attached to this Agreement shall be deemed part of this Agreement and
incorporated herein, where applicable, as if fully set forth herein. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented or changed except by an agreement in writing which makes
specific reference to this Agreement or an agreement delivered pursuant hereto,
as the case may be, and which is signed by the party against which
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<PAGE>
enforcement of any such amendment, supplement or modification is sought.
7.7 Further Assurances. The parties shall take any actions and execute any
other documents that may be necessary or desirable for the implementation and
consummation of this Agreement or which may be reasonably requested by any other
party hereto. Each party will cooperate with the other parties and provide any
assistance reasonably requested by any other party to effectuate the terms of
this Agreement.
7.8 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent by any court of competent jurisdiction, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
7.9 Counterparts. This Agreement may be signed in counterparts, each of
which shall be deemed to be an original but which, when taken together, shall
constitute one and the same instrument.
7.10 Third-Party Beneficiaries. No provision of this Agreement shall create
any third-party beneficiary rights in any Person, including, without limitation,
employees or former employees of Prime and no provisions of this Agreement shall
create such third-party beneficiary rights in any such person.
7.11 Cooperation. In the event and for so long as either party is
investigating, contesting or defending against any Claim involving the Business,
each of the other parties hereto will, to the extent requested by the
investigating, contesting or defending party, make available its personnel, and
provide such testimony and access to its books and records as shall be necessary
in connection with the investigation, contest or defense, and provide such other
cooperation as the other party may reasonably request in connection with the
investigation, contest or defense.
7.12 Amendments, Supplements. This Agreement may be amended or supplemented
at any time by additional written agreements executed by all of the parties
hereto, as may mutually be determined by such parties to be necessary, desirable
or expedient to further the purposes of this Agreement, or to clarify the
intention of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ Timothy Hogenkamp
-------------------------------
Name: Timothy Hogenkamp
Title: President and Chief
Operating Officer
PRIME SUCCESSION ACQUISITION CORP.
By: /s/ Gary L. Wright
-------------------------------
Name: Gary L. Wright
Title: President and Chief
Executive Officer
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<PAGE>
EXECUTION
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 26, 1996
AMONG
PRIME SUCCESSION, INC.
(TO BE RENAMED PRIME SUCCESSION HOLDINGS, INC.),
AS GUARANTOR,
PRIME SUCCESSION ACQUISITION CORP.
(TO BE RENAMED PRIME SUCCESSION, INC.),
AS BORROWER,
THE LENDERS FROM TIME TO TIME PARTIES HERETO,
AS LENDERS,
GOLDMAN, SACHS & CO.,
AS SYNDICATION AGENT
AND ARRANGING AGENT,
AND
THE BANK OF NOVA SCOTIA,
AS ADMINISTRATIVE AGENT
================================================================================
EXECUTION
<PAGE>
PRIME SUCCESSION, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
SECTION 1.
DEFINITIONS.............................. 2
1.1 Certain Defined Terms.................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement............................. 33
1.3 Other Definitional Provisions and Rules of Construction.. 33
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS............... 33
2.1 Commitments; Making of Loans; the Register; Notes........ 33
2.2 Interest on the Loans.................................... 40
2.3 Fees..................................................... 44
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral and Payments Under
Guaranties............................................... 44
2.5 Use of Proceeds.......................................... 52
2.6 Special Provisions Governing Eurodollar Rate Loans....... 53
2.7 Increased Costs; Taxes; Capital Adequacy................. 55
2.8 Obligation of Lenders and Issuing Lender to Mitigate..... 60
SECTION 3.
LETTERS OF CREDIT........................... 61
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein................................... 61
3.2 Letter of Credit Fees.................................... 63
3.3 Drawings and Reimbursement of Amounts Paid Under Letters
of Credit................................................ 64
3.4 Obligations Absolute..................................... 66
3.5 Indemnification; Nature of Issuing Lender's Duties....... 67
3.6 Increased Costs and Taxes Relating to Letters of Credit.. 68
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT............... 69
4.1 Conditions to AXELs and Initial Revolving Loans and
Swing Line Loans......................................... 70
4.2 Conditions to All Loans.................................. 76
4.3 Conditions to Letters of Credit.......................... 77
EXECUTION
(i)
<PAGE>
Page
----
SECTION 5.
REPRESENTATIONS AND WARRANTIES..................... 77
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries................................ 78
5.2 Authorization of Borrowing, etc.......................... 78
5.3 Financial Condition...................................... 80
5.4 No Material Adverse Change; No Restricted Junior
Payments................................................. 80
5.5 Title to Properties; Liens............................... 81
5.6 Litigation; Adverse Facts................................ 81
5.7 Payment of Taxes......................................... 81
5.8 Performance of Agreements; Materially Adverse
Agreements; Material Contracts........................... 82
5.9 Governmental Regulation.................................. 82
5.10 Securities Activities.................................... 82
5.11 Employee Benefit Plans................................... 82
5.12 Certain Fees............................................. 83
5.13 Environmental Protection................................. 83
5.14 Employee Matters......................................... 84
5.15 Solvency................................................. 85
5.16 Matters Relating to Collateral........................... 85
5.17 Representations and Warranties in Acquisition Agreement.. 86
5.18 Disclosure............................................... 86
SECTION 6.
AFFIRMATIVE COVENANTS......................... 86
6.1 Financial Statements and Other Reports................... 87
6.2 Corporate Existence, etc................................. 92
6.3 Payment of Taxes and Claims; Tax Consolidation........... 92
6.4 Maintenance of Properties; Insurance; Application of Net
Insurance/Condemnation Proceeds.......................... 92
6.5 Inspection Rights........................................ 94
6.6 Compliance with Laws, etc................................ 94
6.7 Environmental Review and Investigation, Disclosure,
Etc.; Borrower's Actions Regarding Hazardous Materials
Activities, Environmental Claims and Violations of
Environmental Laws....................................... 94
6.8 Execution of Subsidiary Guaranty and Personal Property
Collateral Documents by Certain Subsidiaries and Future
Subsidiaries............................................. 98
6.9 Interest Rate Protection................................. 98
6.10 Future Capital Contributions............................. 99
6.11 Delivery of Certain Pledged Shares....................... 99
6.12 Post Closing Deliveries.
EXECUTION
(ii)
<PAGE>
Page
----
SECTION 7.
NEGATIVE COVENANTS.......................... 99
7.1 Indebtedness............................................ 100
7.2 Liens and Related Matters............................... 102
7.3 Investments; Joint Ventures............................. 104
7.4 Contingent Obligations.................................. 105
7.5 Restricted Junior Payments.............................. 106
7.6 Financial Covenants..................................... 106
7.7 Restriction on Fundamental Changes; Asset Sales and
Acquisitions............................................ 110
7.8 Consolidated Adjusted Capital Expenditures.............. 111
7.9 Sales and Lease-Backs................................... 112
7.10 Transactions with Shareholders and Affiliates........... 112
7.11 Disposal of Subsidiary Stock............................ 113
7.12 Conduct of Business..................................... 113
7.13 Amendments or Waivers of Certain Related Agreements;
Designation of "Senior Indebtedness".................... 113
7.14 Fiscal Year............................................. 114
SECTION 8.
EVENTS OF DEFAULT.......................... 114
8.1 Failure to Make Payments When Due....................... 114
8.2 Default in Other Agreements............................. 114
8.3 Breach of Certain Covenants............................. 115
8.4 Breach of Warranty...................................... 115
8.5 Other Defaults Under Loan Documents..................... 115
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.... 115
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc...... 116
8.8 Judgments and Attachments............................... 116
8.9 Dissolution............................................. 116
8.10 Employee Benefit Plans.................................. 116
8.11 Change in Control....................................... 117
8.12 Invalidity of Guaranties; Failure of Security;
Repudiation of Obligations.............................. 117
8.13 Subordinated Indebtedness............................... 117
SECTION 9.
AGENTS................................ 118
9.1 Appointment............................................. 118
9.2 Powers and Duties; General Immunity..................... 120
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness........................... 121
9.4 Right to Indemnity...................................... 122
9.5 Successor Administrative Agent and Swing Line Lender.... 122
EXECUTION
(iii)
<PAGE>
Page
----
9.6 Collateral Documents and Guaranties..................... 123
SECTION 10.
MISCELLANEOUS............................ 124
10.1 Assignments and Participations in Loans and Letters of
Credit.................................................. 124
10.2 Expenses................................................ 127
10.3 Indemnity............................................... 128
10.4 Set-Off; Security Interest in Deposit Accounts.......... 129
10.5 Ratable Sharing......................................... 129
10.6 Amendments and Waivers.................................. 130
10.7 Independence of Covenants............................... 131
10.8 Notices................................................. 131
10.9 Survival of Representations, Warranties and Agreements.. 132
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative... 132
10.11 Marshalling; Payments Set Aside......................... 132
10.12 Severability............................................ 132
10.13 Obligations Several; Independent Nature of Lenders'
Rights.................................................. 133
10.14 Headings................................................ 133
10.15 Applicable Law.......................................... 133
10.16 Successors and Assigns.................................. 133
10.17 Consent to Jurisdiction and Service of Process.......... 133
10.18 Waiver of Jury Trial.................................... 134
10.19 Confidentiality......................................... 135
10.20 Maximum Amount.......................................... 135
10.21 Counterparts; Effectiveness............................. 136
Signature pages S-1
EXECUTION
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF AXEL NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF COMPLIANCE CERTIFICATE
VIII FORM OF OPINION OF COUNSEL TO LOAN PARTIES
IX FORM OF OPINION OF O'MELVENY & MYERS LLP
X FORM OF ASSIGNMENT AGREEMENT
XI FORM OF CERTIFICATE RE NON-BANK STATUS
XII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIII FORM OF BORROWER PLEDGE AGREEMENT
XIV FORM OF BORROWER SECURITY AGREEMENT
XV FORM OF SUBSIDIARY GUARANTY
XVI FORM OF SUBSIDIARY PLEDGE AGREEMENT
XVII FORM OF SUBSIDIARY SECURITY AGREEMENT
XVIII FORM OF HOLDINGS GUARANTY
XIX FORM OF HOLDINGS PLEDGE AGREEMENT
XX FORM OF INTERCOMPANY NOTE
EXECUTION
(v)
<PAGE>
SCHEDULES
1.1A EXISTING INDEBTEDNESS
1.1B PRO FORMA EBITDA ADJUSTMENT
1.1C REMAINING EXISTING INDEBTEDNESS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
3.1 CERTAIN STANDBY LETTERS OF CREDIT EXCEEDING ONE YEAR
5.1 SUBSIDIARIES OF COMPANY
5.3 CONTINGENT OBLIGATIONS
5.4 MATERIAL ADVERSE CHANGES
5.6 LITIGATION
5.8 MATERIAL CONTRACTS
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
5.13 ENVIRONMENTAL MATTERS
6.11 ENCUMBERED SUBSIDIARY SHARES
6.12 POST CLOSING DELIVERIES
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2A CERTAIN EXISTING LIENS
7.2D PERMITTED RESTRICTIONS ON SUBSIDIARIES
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
EXECUTION
(vi)
<PAGE>
PRIME SUCCESSION, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of August 26, 1996 and entered into by
and among PRIME SUCCESSION, INC., a Delaware corporation (to be renamed Prime
Succession Holdings, Inc.) ("Holdings"), PRIME SUCCESSION ACQUISITION CORP., a
Delaware corporation (to be renamed Prime Succession, Inc.) ("Borrower"),
GOLDMAN, SACHS & CO., as syndication agent and arranging agent (in such
capacities, "Syndication Agent" and "Arranging Agent", respectively), THE
FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO (each individually
referred to herein as a "Lender" and collectively as "Lenders"), and THE BANK OF
NOVA SCOTIA ("Scotiabank"), as administrative agent for Lenders (in such
capacity, "Administrative Agent").
R E C I T A L S
WHEREAS, Borrower, a corporation newly formed by the Investors (this and
other capitalized terms used in these recitals without definition being used as
defined in subsection 1.1), has entered into the Acquisition Agreement with the
Existing Stockholders and Holdings, pursuant to which Borrower has the right to
acquire all of the outstanding capital stock of Holdings;
WHEREAS, (i) on or before the Closing Date, Borrower will assign to the
Investors all of its rights and obligations under the Acquisition Agreement and
the Investors will in turn assign all such rights and obligations to Holdings
and (ii) on the Closing Date, Holdings will acquire all of the outstanding
capital stock of Holdings owned by the Existing Stockholders pursuant to the
terms of the Acquisition Agreement;
WHEREAS, on the Closing Date, (i) Loewen and the Blackstone Investors will
purchase $130,000,000 in the aggregate of Holdings Preferred Stock and Holdings
Common Stock, (ii) the Investors will contribute to Holdings all of the
outstanding capital stock of Borrower and Borrower will become a wholly owned
subsidiary of Holdings, (iii) Holdings will contribute all of the outstanding
capital stock of each of its directly owned Subsidiaries together with all of
its other assets (other than the cash proceeds referred to in (i) above) to
Borrower, and Borrower will assume all existing liabilities of Holdings, so that
Holdings shall have no assets or liabilities other than the capital stock of
Borrower, and (iv) the name of Holdings will be changed from Prime Succession,
Inc. to Prime Succession Holdings, Inc. and the name of Borrower will be changed
from Prime Succession Acquisition Corp. to Prime Succession, Inc. (all of the
foregoing herein referred to collectively as the "Reorganization");
EXECUTION
1
<PAGE>
WHEREAS, on or before the Closing Date, Borrower will issue and sell the
Senior Subordinated Notes for gross proceeds of not less than $100,000,000 and
Borrower will distribute approximately $52,000,000 of such proceeds to Holdings
in the form of a dividend or intercompany loan (the "Borrower Distribution");
WHEREAS, Holdings will use the proceeds of the $130,000,000 from the sale
of the Holdings Common Stock and Holdings Preferred Stock to the Investors
together with the $52,000,000 received from the Borrower Distribution to fund
the purchase price under the Acquisition Agreement;
WHEREAS, Lenders have agreed to extend certain credit facilities to
Borrower, the proceeds of which will be used (i) together with a portion of the
proceeds of the issuance and sale of the Senior Subordinated Notes, to repay the
Existing Indebtedness, (ii) to prefund certain capital expenditures in an amount
not to exceed $4,000,000, (iii) to pay fees and expenses in connection with the
Acquisition, the Reorganization and the other transactions contemplated hereby
and (iv) to provide financing for working capital and other general corporate
purposes of Borrower and its Subsidiaries;
WHEREAS, Borrower desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a First Priority Lien on substantially all of its personal property
including a pledge of all of the capital stock of each of its domestic
Subsidiaries, 65% of the capital stock of each direct foreign Subsidiary and a
pledge of all Intercompany Notes; and
WHEREAS, Holdings and all of the domestic Subsidiaries of Borrower have
agreed to guarantee the Obligations hereunder and under the other Loan Documents
and to secure their guaranties by granting to Administrative Agent, on behalf of
Lenders, a First Priority Lien on substantially all of their respective personal
property including a pledge of all of the capital stock of each of their
respective domestic Subsidiaries and 65% of the capital stock of each direct
foreign Subsidiary and a pledge of all Intercompany Notes:
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Borrower, Lenders and
Agents agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Acquired Business" has the meaning assigned to that term in the
definition of "Business Acquisition".
EXECUTION
2
<PAGE>
"Acquisition" means the transactions contemplated by the Acquisition
Agreement.
"Acquisition Agreement" means that certain Stock Purchase Agreement
by and among Holdings, the other individuals or entities listed on the
signature pages thereof (the "Existing Stockholders"), Loewen Group and
Borrower, dated as of June 14, 1996, in the form delivered to Arranging
Agent prior to the execution of this Agreement and as such agreement may
be amended from time to time thereafter to the extent permitted under
subsection 7.13A.
"Adjusted Eurodollar Rate" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar
Rate Loan, the rate per annum obtained by dividing (i) (a) the per annum
rate for deposits in Dollars for a period corresponding to the duration of
the relevant Interest Period which appears on Telerate Page 3750 at
approximately 11:00 a.m. (London time) on such Interest Rate Determination
Date or (b) if such rate does not appear on Telerate Page 3750 on such
Interest Rate Determination Date, the per annum rate (rounded upward to
the nearest 1/16 of one percent) at which deposits in Dollars are offered
by Administrative Agent to first-class banks in the London interbank
market, in the approximate amount of Administrative Agent's relevant
Eurodollar Loan and having a maturity approximately equal to such Interest
Period, at approximately 11:00 a.m. (London time) on such Interest Rate
Determination Date by (ii) one minus the Reserve Requirement (expressed as
a decimal) applicable on such Interest Rate Determination Date. The
reference to Telerate Page 3750 in this definition shall be construed to
be a reference to the relevant page or any other page that may replace
such page on the Telerate service or any other service that may be
nominated by the British Bankers' Association as the information vendor
for the purpose of displaying British Bankers' Association Interest
Settlement Rates for deposits in Dollars.
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"Administrative Agreement" means the Administrative Services
Agreement dated as of August 26, 1996, by and between Borrower and Loewen,
as such agreement may be amended from time to time to the extent permitted
under subsection 7.13A.
"Affected Lender" has the meaning assigned to that term in
subsection 2.6C.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or
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cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agent" means, individually, each of Arranging Agent, Syndication
Agent and Administrative Agent and "Agents" means Arranging Agent,
Syndication Agent and Administrative Agent, collectively.
"Agreement" means this Credit Agreement dated as of August 26, 1996,
as it may be amended, supplemented or otherwise modified from time to
time.
"Applicable Margin" means, for each AXEL and Revolving Loan, as of
any date of determination, a percentage per annum as set forth below plus
the Pricing Premium, if any, less the Pricing Reduction, if any:
==============================================================================
AXELs | Revolving Loans
==============================================================================
| | |
Base Rate | Eurodollar | Base | Eurodollar
Rate Loans | Rate Loans | Rate Loans | Rate Loans
==============================================================================
| | |
2.00% | 3.00% | 1.75% | 2.75%
==============================================================================
"Arranging Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Asset Sale" means the sale by Holdings or any of its Subsidiaries
to any Person other than Holdings or any of its Wholly Owned Subsidiaries
of (i) any of the stock of any of Holdings' Subsidiaries, (ii)
substantially all of the assets of any division or line of business of
Holdings or any of its Subsidiaries, or (iii) any other assets (whether
tangible or intangible) of Holdings or any of its Subsidiaries (other than
(a) inventory sold in the ordinary course of business and (b) any such
other assets to the extent that the aggregate value of such assets sold in
any single transaction or related series of transactions is equal to or
less than $500,000).
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit X annexed hereto.
"Available Excess Consolidated Capital Expenditure Amount" means, as
of any date of determination, the Excess Consolidated Capital Expenditure
Amount as of the date of determination minus the aggregate portion of the
Excess Consolidated Capital Expenditure Amount used to make Consolidated
Adjusted Capital Expenditures and Permitted Acquisitions as of the date of
determination. For purposes of calculating the Available Excess
Consolidated Capital Expenditure Amount, (i) Consolidated Adjusted Capital
Expenditures for each Fiscal Year shall be deemed to have been made first
from any carry forward of the Maximum
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Consolidated Capital Expenditures Amount from the previous Fiscal Year
permitted pursuant to subsection 7.8, second from the Maximum Consolidated
Capital Expenditures Amount for such Fiscal Year, and third from the
Available Excess Consolidated Capital Expenditure Amount and (ii)
Permitted Acquisitions shall be deemed to have been made first from the
Permitted Acquisition Amount set forth in subsection 7.7(v) and second
from the Available Excess Consolidated Capital Expenditure Amount.
"AXEL" means a Loan made by a Lender to Borrower as an amortization
extended loan pursuant to subsection 2.1A(i), and "AXELs" means any such
Loan or Loans, collectively.
"AXEL Commitment" means the commitment of a Lender to make an AXEL
to Borrower pursuant to subsection 2.1A(i), and "AXEL Commitments" means
such commitments of all Lenders in the aggregate.
"AXEL Exposure" means, with respect to any Lender as of any date of
determination (i) prior to the funding of the AXELs, that Lender's AXEL
Commitment and (ii) after the funding of the AXELs, the outstanding
principal amount of the AXEL of that Lender.
"AXEL Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(a) on the Closing Date and (ii) any
promissory notes issued by Borrower pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the AXEL Commitments
or AXELs of any Lenders, in each case substantially in the form of Exhibit
IV annexed hereto, as they may be amended, supplemented or otherwise
modified from time to time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (i) the Prime Rate or
(ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Loans" means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
"Batesville Agreement" means that certain Casket Supply Agreement
dated as of January 1, 1993 between Batesville Casket Company, Inc. and
Holdings, as in effect on the Closing Date, which agreement will be
assumed by Borrower on the Closing Date.
"Batesville Liability" means any liability of Holdings or any of its
Subsidiaries arising under the Batesville Agreement.
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"Blackstone Investors" means Blackstone Capital Partners II Merchant
Banking Fund L.P. and its Affiliates.
"Borrower" means Prime Succession Acquisition Corp., a Delaware
corporation, to be renamed Prime Succession, Inc. as of the Closing Date.
"Borrower Distribution" has the meaning assigned to that term in the
Recitals.
"Borrower Pledge Agreement" means the Borrower Pledge Agreement
executed and delivered by Borrower and Administrative Agent on the Closing
Date, substantially in the form of Exhibit XIII annexed hereto, as such
Borrower Pledge Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"Borrower Security Agreement" means the Borrower Security Agreement
executed and delivered by Borrower and Administrative Agent on the Closing
Date, substantially in the form of Exhibit XIV annexed hereto, as such
Borrower Security Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"Business Acquisition" means any acquisition by Holdings or any of
its Subsidiaries (whether by purchase of assets or stock or by merger,
consolidation or otherwise) of any funeral home or cemetery (including any
peripheral business relating to the death care industry such as monument
companies, flower shops or vault companies) (each, an "Acquired Business")
in a single transaction or series of related transactions.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or
required by law or other governmental action to close, and (ii) with
respect to all notices, determinations, fundings and payments in
connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans,
any day that is a Business Day described in clause (i) above and that is
also a day for trading by and between banks in Dollar deposits in the
interbank Eurodollar market.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally
guaranteed as to interest and
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principal by the United States Government or (b) issued by any agency of
the United States the obligations of which are backed by the full faith
and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such
state or any public instrumentality thereof, in each case maturing within
one year after such date and having, at the time of the acquisition
thereof, the highest rating obtainable from either Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's");
(iii) commercial paper maturing no more than one year from the date of
creation thereof and having, at the time of the acquisition thereof, a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year
after such date and issued or accepted by any Lender or by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of
not less than $100,000,000; and (v) shares of any money market mutual fund
that (a) has at least 95% of its assets invested continuously in the types
of investments referred to in clauses (i) and (ii) above, (b) has net
assets of not less than $500,000,000, and (c) has the highest rating
obtainable from either S&P or Moody's.
"Certificate re Non-Bank Status" means a certificate substantially
in the form of Exhibit XI annexed hereto delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii).
"Class" means, as applied to Lenders, each of the following classes
of Lenders: (i) Lenders having AXEL Exposure and (ii) Lenders having
Revolving Loan Exposure.
"Closing Date" means the date on or before November 15, 1996, on
which the initial Loans are made.
"Collateral" means, collectively, all of the personal property
(including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement executed and delivered by Borrower and Administrative Agent on
the Closing Date, substantially in the form of Exhibit XII annexed hereto,
as such Collateral Account Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
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"Collateral Documents" means the Holdings Pledge Agreement, the
Borrower Pledge Agreement, the Borrower Security Agreement, the Collateral
Account Agreement, the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement, and all other instruments or documents delivered by
any Loan Party pursuant to this Agreement or any of the other Loan
Documents in order to grant to Administrative Agent, on behalf of Lenders,
a Lien on any personal property of that Loan Party as security for the
Obligations.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or
services by Borrower or any of its Subsidiaries.
"Commitments" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit VII annexed hereto delivered to Administrative Agent and
Lenders by Borrower pursuant to subsection 6.1(iv).
"Confidential Information Memorandum" means that certain
Confidential Information Memorandum prepared by Borrower relating to the
AXELs and Revolving Loans dated July 1996, together with any supplements
thereto.
"Consolidated Adjusted Capital Expenditures" means, for any period,
Consolidated Capital Expenditures for that period minus any portion of
such Consolidated Capital Expenditures (i) in respect of Permitted
Acquisitions or (ii) financed with insurance or condemnation proceeds.
"Consolidated Adjusted EBITDA" means, for any period, the amounts
(without duplication) for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes, (iv) total
depreciation expense, (v) total amortization expense, (vi) Management
Fees, (vii)(a) other non-cash items reducing Consolidated Net Income less
(b) non-cash items increasing Consolidated Net Income and (viii)(a)
non-recurring items reducing Consolidated Net Income less (b)
non-recurring items increasing Consolidated Net Income, all of the
foregoing as determined on a consolidated basis for Holdings and its
Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether paid in Cash or other consideration
or accrued as a liability and including that portion of Capital Leases
which is capitalized on the consolidated balance sheet of Holdings and its
Subsidiaries) by Holdings and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to
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property, plant or equipment" or comparable items reflected in the
consolidated statement of cash flows of Holdings and its Subsidiaries.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense, but excluding, however, interest expense
(including amortization of financing fees) not payable in Cash.
"Consolidated Current Assets" means, as at any date of
determination, the total assets of Holdings and its Subsidiaries on a
consolidated basis which may properly be classified as current assets in
conformity with GAAP, excluding Cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Holdings and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities
in conformity with GAAP.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a) Consolidated Adjusted EBITDA, (b) the Consolidated
Working Capital Adjustment and (c) the Deferred Merchandising Adjustment
minus (ii) the sum, without duplication, of the amounts for such period of
(a) voluntary and scheduled repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the
Revolving Loan Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Adjusted Capital Expenditures minus any
portion of Consolidated Adjusted Capital Expenditures financed during such
period with the proceeds of Indebtedness permitted under subsection
7.1(vi), (c) Consolidated Cash Interest Expense, (d) the provision for
current taxes of Holdings and its Subsidiaries payable in cash with
respect to such period, (e) to the extent not included in Consolidated
Interest Expense, Cash payments in respect of Covenants not to Compete and
the Batesville Liability, and (f) to the extent not included in the
determination of Consolidated Adjusted EBITDA, (1) non-recurring Cash
charges, (2) Management Fees and (3) Cash costs of purchasing Hedge
Agreements during such period.
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) scheduled repayments of Indebtedness included in
Consolidated Total Debt and (iii) taxes based on income actually paid by
Holdings and its Subsidiaries during such period, all of the foregoing as
determined on a consolidated basis for Holdings and its Subsidiaries.
"Consolidated Interest Expense" means, for any period, total
interest expense (including that portion attributable to Capital Leases,
Covenants not to Compete and the Batesville Liability in accordance with
GAAP and capitalized interest) of Holdings and its Subsidiaries on a
consolidated basis with respect to all outstanding
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Indebtedness of Holdings and its Subsidiaries, including all commissions,
discounts and other fees and charges owed with respect to letters of
credit and bankers' acceptance financing and net costs under Interest Rate
Agreements, but excluding, however, any amounts referred to in subsection
2.3 payable to Agents and Lenders on or before the Closing Date and
excluding interest expense incurred on the Remaining Existing Indebtedness
prior to but not after January 31, 1997.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Holdings and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of
any Person (other than a Subsidiary of Holdings) in which any other Person
(other than Holdings or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions
actually paid to Holdings or any of its Subsidiaries by such Person during
such period, (ii) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary of Holdings or is merged into or consolidated
with Holdings or any of its Subsidiaries or that Person's assets are
acquired by Holdings or any of its Subsidiaries, (iii) the income of any
Subsidiary of Holdings to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is
not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) any after-tax
gains or losses attributable to Asset Sales or returned surplus assets of
any Pension Plan, and (v) (to the extent not included in clauses (i)
through (iv) above) any net extraordinary gains or net non-cash
extraordinary losses.
"Consolidated Total Debt" means, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness and
Contingent Obligations of Holdings and its Subsidiaries in respect of
Indebtedness, in each case other than Indebtedness in respect of Covenants
not to Compete and the Batesville Liability, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Working Capital" means, as at any date of
determination, the excess of Consolidated Current Assets over Consolidated
Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds
(or is less than) Consolidated Working Capital as of the end of such
period.
"Contingent Obligation", as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of
another if the primary purpose or intent thereof by the Person incurring
the Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another
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will be paid or discharged, or that any agreements relating thereto will
be complied with, or that the holders of such obligation will be protected
(in whole or in part) against loss in respect thereof, (ii) with respect
to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Hedge Agreements. Contingent Obligations shall include (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of
another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of
another through any agreement (contingent or otherwise) (1) to purchase,
repurchase or otherwise acquire such obligation or any security therefor,
or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (2) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the
case of any agreement described under subclauses (1) or (2) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal
to the amount of the obligation so guaranteed or otherwise supported or,
if less, the amount to which such Contingent Obligation is specifically
limited.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is
subject.
"Covenants not to Compete" means any covenants not to compete,
consulting agreements, former owner agreements (including employment
agreements) or other similar arrangements pursuant to which Holdings or
any of its Subsidiaries agree to make periodic payments to certain Persons
in connection with the acquisition of funeral homes and cemeteries.
"Cumulative Consolidated Adjusted EBITDA" means, at any date of
determination, Consolidated Adjusted EBITDA for the period from the
Closing Date through such date.
"Cure Amount" means the amount of Cash received by Holdings and
contributed to Borrower from the issuance of Permitted Cure Securities by
Holdings or from other contributions to the capital of Holdings pursuant
to the exercise by Holdings of any Cure Right.
"Cure Right" has the meaning assigned to that term in subsection
7.6F.
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"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Holdings or any of its
Subsidiaries is a party.
"Deferred Merchandising Adjustment" means, for any period, the
difference (whether positive or negative) between (a) cash flow from
pre-need funeral sales during such period and (b) Consolidated Adjusted
EBITDA from pre-need funeral sales during such period, in each case
determined pursuant to the calculations set forth in the form of the
Compliance Certificate.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"Dollars" and the sign "$" mean the lawful money of the United
States of America.
"Eligible Assignee" means (i)(a) a commercial bank organized under
the laws of the United States or any state thereof; (b) a savings and loan
association or savings bank organized under the laws of the United States
or any state thereof; (c) a commercial bank organized under the laws of
any other country or a political subdivision thereof; provided that (1)
such bank is acting through a branch or agency located in the United
States or (2) such bank is organized under the laws of, and acting through
a branch or agency located in, a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (d) any finance company, insurance
company, or other financial institution or fund (whether a corporation,
partnership, trust or other entity) that is engaged in making, purchasing
or otherwise investing in commercial loans in the ordinary course of its
business and having a combined capital and surplus or net assets of at
least $100,000,000; and (ii) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Borrower shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is or was maintained or contributed to by
Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates.
"Environmental Claim" means any investigation, written notice,
written notice of violation, claim, action, suit, proceeding, written
demand, written abatement order or other written order or directive
(conditional or otherwise), by any governmental authority or any other
Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity,
or (iii) in connection with any actual or alleged damage, injury, threat
or harm to health, safety, natural resources or the environment.
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"Environmental Laws" means any and all applicable statutes,
ordinances, orders, rules, regulations, judgments, Governmental
Authorizations, or any other binding requirements of governmental
authorities relating to (i) environmental matters, including those
relating to any Hazardous Materials Activity, (ii) the generation, use,
storage, transportation or disposal of Hazardous Materials, or (iii)
occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare as relating to the
environment, in any manner applicable to Holdings or any of its
Subsidiaries or any Facility, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. ss.136 et seq.), the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.), the Oil Pollution Act (33 U.S.C.
ss. 2701 et seq) and the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. ss. 11001 et seq.), each as amended or supplemented, any
analogous state or local statutes or laws, and any regulations promulgated
pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is a member; (ii) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal
Revenue Code of which that Person is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of
the Internal Revenue Code of which that Person, any corporation described
in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of Holdings or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of
Holdings or such Subsidiary within the meaning of this definition with
respect to the period such entity was an ERISA Affiliate of Holdings or
such Subsidiary and with respect to liabilities arising after such period
for which Holdings or such Subsidiary could be liable under the Internal
Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect
to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to
meet the minimum funding standard of Section 412 of the Internal Revenue
Code with respect to any Pension Plan (whether or not waived in accordance
with Section 412(d) of the Internal Revenue
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Code) or the failure to make by its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension
Plan or the failure to make any required contribution to a Multiemployer
Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the withdrawal by Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan
resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition which could reasonably be
expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of material liability on Holdings, any of its Subsidiaries or
any of their respective ERISA Affiliates pursuant to Section 4062(e) or
4069 of ERISA or by reason of the application of Section 4212(c) of ERISA;
(vii) the withdrawal of Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within
the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there could reasonably be expected to be any material liability
therefor, or the receipt by Holdings, any of its Subsidiaries or any of
their respective ERISA Affiliates of notice from any Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA, or that it intends to terminate or has terminated under
Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could give rise to the imposition on Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates of material
fines, material penalties, material taxes or material related charges
under Chapter 43 of the Internal Revenue Code or under Section 409,
Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any
Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than
a Multiemployer Plan or the assets thereof, or against Holdings, any of
its Subsidiaries or any of their respective ERISA Affiliates in connection
with any Employee Benefit Plan; (x) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan
to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a material Lien pursuant
to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant
to ERISA with respect to any Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
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"Excess Consolidated Capital Expenditure Amount" means, as of any
date of determination, the sum of the Yearly Excess Cash Flow Amounts for
each Fiscal Year ending after the Closing Date and on or prior to the date
of determination. As used in this definition, "Yearly Excess Cash Flow
Amount" means, for each Fiscal Year, the lesser of (i) Consolidated Excess
Cash Flow for such Fiscal Year and (ii) the sum of $5,000,000 and 50% of
Consolidated Excess Cash Flow in excess of $5,000,000 for such Fiscal
Year; provided in no event shall the Yearly Excess Cash Flow Amount be
less than zero in any Fiscal Year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Indebtedness" means the Indebtedness set forth on Schedule
1.1A annexed hereto which shall be repaid in full on the Closing Date.
"Existing Stockholders" has the meaning assigned to that term in the
definition of Acquisition Agreement.
"Facilities" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter
or heretofore owned, leased, operated or used by Holdings or any of its
Subsidiaries or any of their respective predecessors or Affiliates.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized
standing selected by Administrative Agent.
"Financial Performance Covenants" means the covenants of Holdings
and Borrower set forth in subsections 7.6A, 7.6B, 7.6C and 7.6D.
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i)
such Lien has priority over any other Lien on such Collateral (other than
Liens permitted pursuant to subsection 7.2A) and (ii) such Lien is the
only Lien (other than Permitted Encumbrances and Liens permitted pursuant
to subsection 7.2) to which such Collateral is subject.
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"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Holdings and its Subsidiaries
ending on December 31 of each calendar year.
"Funding and Payment Office" means (i) the office of Administrative
Agent and Swing Line Lender located at 600 Peachtree Street, N.E., Suite
2700, Atlanta, GA 30308 or (ii) such other office of Administrative Agent
and Swing Line Lender located in the United States as may from time to
time hereafter be designated as such in a written notice delivered by
Administrative Agent and Swing Line Lender to Borrower and each Lender.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, in each case as the same are
applicable to the circumstances as of the date of determination; provided
that to the extent there exist differences in GAAP as applied in the
preparation of the interim, non-restated financial statements of Holdings
and its Subsidiaries as at March 31, 1995 and the interim financial
statements of Holdings and its Subsidiaries as at March 31, 1996 presented
in the Offering Memorandum dated August 13, 1996 relating to the Senior
Subordinated Notes, GAAP as applied in the preparation of such
non-restated financial statements shall not be considered to be GAAP for
purposes of this Agreement to the extent of such differences.
"Governmental Authorization" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from
any federal, state or local governmental authority, agency or court.
"Guaranties" means the Holdings Guaranty and the Subsidiary
Guaranty.
"Hazardous Materials" means (i) any chemical, material or substance
at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "acutely hazardous waste", "radioactive waste",
"biohazardous waste", "pollutant", "toxic pollutant", "contaminant",
"restricted hazardous waste", "infectious waste", "toxic substances", or
any other term or expression intended to define, list or classify
substances by reason of properties harmful to health, safety or the indoor
or outdoor environment (including harmful properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
"TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws); (ii) any oil, petroleum, petroleum
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fraction or petroleum derived substance; (iii) any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal
resources; (iv) any explosives; (v) any radioactive materials; (vi) any
asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or which may or could pose a
hazard to the health and safety of the owners, occupants or any Persons in
the vicinity of any Facility or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, possession, storage, holding,
presence, existence, location, Release, threatened Release, discharge,
placement, generation, transportation, processing, construction,
treatment, abatement, removal, remediation, disposal, disposition or
handling of any Hazardous Materials, and any corrective action or response
action with respect to any of the foregoing.
"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"Holdings" means Prime Succession, Inc., a Delaware corporation, to
be renamed Prime Succession Holdings, Inc. as of the Closing Date.
"Holdings Certificate of Designations" means the provisions of
Holdings' Certificate of Incorporation relating to the Holdings Preferred
Stock, in the form delivered to Arranging Agent, prior to the execution of
this Agreement and as such provisions may be amended from time to time
thereafter to the extent permitted under subsection 7.13A.
"Holdings Common Stock" means the common stock of Holdings, par
value $.01 per share.
"Holdings Guaranty" means the Holdings Guaranty executed and
delivered by Holdings on the Closing Date, substantially in the form of
Exhibit XVIII annexed hereto, as such Holdings Guaranty may thereafter be
amended, supplemented or otherwise modified from time to time.
"Holdings Preferred Stock" means the Preferred Stock of Holdings,
with a liquidation preference of $10,000 per share and with the other
terms set forth in the Holdings Certificate of Designations.
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"Holdings Pledge Agreement" means the Holdings Pledge Agreement
executed and delivered by Holdings and Administrative Agent on the Closing
Date, substantially in the form of Exhibit XIX annexed hereto, as such
Holdings Pledge Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"Indebtedness", as applied to any Person, means (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to
Capital Leases that is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations
for borrowed money, (iv) any obligation owed for all or any part of the
deferred purchase price of property or services (including those portions
of obligations with respect to Covenants not to Compete and the Batesville
Liability that are properly classified as liabilities on a balance sheet
in conformity with GAAP, but excluding any such obligations incurred under
ERISA), which purchase price is (a) due more than six months from the date
of incurrence of the obligation in respect thereof or (b) evidenced by a
note or similar written instrument, (v) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that
Person or is nonrecourse to the credit of that Person and (vi) any
reimbursement obligations of that Person in respect of letters of credit.
Obligations under Interest Rate Agreements and Currency Agreements
constitute (1) in the case of Hedge Agreements, Contingent Obligations,
and (2) in all other cases, Investments, and in neither case constitute
Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection
10.3.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for
the conduct of the business of Borrower and its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise),
business or operations of Borrower and its Subsidiaries, taken as a whole.
"Intercompany Note" means a promissory note executed by a Loan Party
or any of its Subsidiaries evidencing intercompany Indebtedness
substantially in the form of Exhibit XX annexed hereto.
"Interest Payment Date" means (i) with respect to any Base Rate
Loan, each February 1, May 1, August 1 and November 1 of each year,
commencing on the first such date to occur after the Closing Date, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan; provided that in the case of each
Interest Period of longer than three months "Interest Payment Date" shall
also include each date that is three months, or an integral multiple
thereof, after the commencement of such Interest Period.
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"Interest Period" has the meaning assigned to that term in
subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Borrower or any of its
Subsidiaries is a party.
"Interest Rate Determination Date" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any
successor statute.
"Inventory" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which
are then held by such Person for sale or lease, including raw materials
and work in process.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Holdings or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary
of Holdings), (ii) any direct or indirect redemption, retirement, purchase
or other acquisition for value, by any Subsidiary of Holdings from any
Person other than Holdings or any of its Subsidiaries, of any equity
Securities of such Subsidiary, (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course
of business) or capital contribution by Holdings or any of its
Subsidiaries to any other Person (other than a Wholly Owned Subsidiary of
Holdings), including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to
that other Person in the ordinary course of business, or (iv) Interest
Rate Agreements or Currency Agreements not constituting Hedge Agreements.
The amount of any Investment shall be (a) the original cost of such
Investment plus (b) the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment minus (c) the lesser of (1)
the aggregate amount of any repayments, redemptions, dividends or
distributions thereon or proceeds from the sale thereof, in each case to
the extent of any Cash payments (including any Cash received by way of
deferred payment pursuant to, or by monetization of, a note receivable or
otherwise, but only as and when so received) actually received by Borrower
or any of its Subsidiaries in connection therewith, and (2) the aggregate
amount described in the immediately preceding clauses (a) and (b).
"Investors" means collectively Loewen and the Blackstone Investors.
"Issuing Lender" means, Scotiabank, or any Person serving as
successor Administrative Agent hereunder, in its capacity as Issuing
Lender.
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"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1, and the term
"Lenders" shall include Swing Line Lender unless the context otherwise
requires; provided that the term "Lenders", when used in the context of a
particular Commitment, shall mean Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means Commercial Letters
of Credit and Standby Letters of Credit issued or to be issued by Issuing
Lender for the account of Borrower pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding plus (ii) the aggregate amount of all drawings under Letters
of Credit honored by Issuing Lender and not theretofore reimbursed by
Borrower (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B).
"Leverage Ratio" means the ratio of (i) Consolidated Total Debt as
of the last day of any Fiscal Quarter to (ii) Consolidated Adjusted EBITDA
for the four-Fiscal Quarter period then ended, in each case as set forth
in the most recent Compliance Certificate delivered by Borrower to
Administrative Agent and Lenders pursuant to clause (iii) of subsection
6.1.
"Lien" means any lien, mortgage, pledge, collateral assignment,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest) and any
option or trust having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the AXELs, Revolving Loans or
Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, any applications
for, or reimbursement agreements or other documents or certificates
executed by Borrower in favor of Issuing Lender relating to, the Letters
of Credit, the Guaranties, the Collateral Documents and any Hedge
Agreements entered into with Lenders or their Affiliates.
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"Loan Party" means each of Holdings, Borrower and any of Holdings'
Subsidiaries from time to time executing a Loan Document, and "Loan
Parties" means all such Persons, collectively.
"Loewen" means Loewen Group International Inc., a Delaware
corporation and a wholly owned Subsidiary of Loewen Group.
"Loewen Group" means The Loewen Group, Inc., a corporation organized
under the laws of British Columbia.
"Management Fees" means fees payable to Affiliates of the Blackstone
Investors in an aggregate amount not to exceed $250,000 per annum, as
adjusted for inflation.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Material Adverse Effect" means (i) any material adverse effect on
or affecting the financial position, prospects or results of operations of
Holdings and its Subsidiaries, taken as a whole, or (ii) the impairment of
the ability of Holdings, Borrower or the Loan Parties, taken as a whole,
to perform, or of Administrative Agent or Lenders to enforce, the
Obligations.
"Material Contract" means any contract or other arrangement to which
Holdings or any of its Subsidiaries is a party (other than the Loan
Documents) for which breach, nonperformance, cancellation or failure to
renew could have a Material Adverse Effect.
"Maximum Consolidated Capital Expenditures Amount" has the meaning
assigned to that term in subsection 7.8.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale,
Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but
only as and when so received) received from such Asset Sale, net of any
bona fide direct costs incurred in connection with such Asset Sale,
including (i) taxes reasonably estimated to be actually payable within two
years of the date of such Asset Sale as a result of any gain recognized in
connection with such Asset Sale and (ii) payment of the outstanding
principal amount of, interest on, and premium or penalty, if any, with
respect to any Indebtedness (other than the Loans) that is secured by a
Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.
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"Net Insurance/Condemnation Proceeds" means any Cash payments or
proceeds received by Holdings or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered
loss thereunder or (ii) as a result of the taking of any assets of
Holdings or any of its Subsidiaries by any Person pursuant to the power of
eminent domain, condemnation or otherwise, or pursuant to a sale of any
such assets to a purchaser with such power under threat of such a taking
(a "Condemnation"), in each case net of (a) any actual and reasonable
documented costs incurred by Holdings or any of its Subsidiaries in
connection with the adjustment or settlement of any claims of Holdings or
such Subsidiary in respect thereof and (b) any bona fide direct costs
incurred in connection with such Condemnation or casualty, including (1)
taxes reasonably estimated to be actually payable within two years of the
date of such Condemnation or casualty as a result of any gain recognized
in connection with such Condemnation or casualty and (2) payment of the
outstanding principal amount of, interest on, and premium or penalty, if
any, with respect to any Indebtedness (other than the Loans) that is
secured by a Lien on the assets in question and that is required to be
repaid under the terms thereof as a result of such Condemnation or
casualty.
"Notes" means one or more of the AXEL Notes, Revolving Notes or
Swing Line Note or any combination thereof.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Borrower to Administrative Agent
pursuant to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Borrower to
Administrative Agent pursuant to subsection 2.2D with respect to a
proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice
substantially in the form of Exhibit III annexed hereto delivered by
Borrower to Administrative Agent pursuant to subsection 3.1B(i) with
respect to the proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each Loan
Party from time to time owed to Agents, Lenders or their respective
Affiliates or any of them under the Loan Documents, whether for principal,
interest, reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the
board (if an officer) or its president or one of its vice presidents and
by its chief financial officer or its treasurer; provided that any
Officers' Certificate with respect to compliance with a
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condition precedent to the making of the initial Loans hereunder shall
include (i) a statement that the officer or officers making or giving such
Officers' Certificate have read such condition and any definitions or
other provisions contained in this Agreement relating thereto, (ii) a
statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to
enable them to express an informed opinion as to whether or not such
condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease
other than any such lease under which that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multi-employer Plan, which is subject to Section 412 of the Internal
Revenue Code or Section 302 of ERISA.
"Permitted Acquisition" means a Business Acquisition for an
aggregate purchase price (including any Covenants not to Compete
reasonably discounted to present value) (i) that is less than or equal to
5.5 times the Pro Forma Projected EBITDA for an Acquired Business
(the"Maximum Acquisition Amount") or (ii) if such aggregate purchase price
exceeds the Maximum Acquisition Amount, that is funded to the extent of
such excess by common equity contributions to, or purchases of common
equity from, Holdings by the Investors, the proceeds of which are
contributed to Borrower.
"Permitted Cure Security" means an equity Security of Holdings
having no mandatory redemption, repurchase or similar requirements prior
to February 1, 2004 and upon which all dividends, at the election of
Holdings, may be payable in additional shares of such equity Security.
"Permitted Encumbrances" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or by ERISA, any such Lien relating to or
imposed in connection with any Environmental Claim, and any such Lien
expressly prohibited by any applicable terms of any of the Collateral
Documents):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 6.3;
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(ii) statutory Liens of landlords, statutory Liens of banks
and rights of set-off, statutory Liens of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law, in each case incurred in the ordinary course of
business (a) for amounts not yet overdue or (b) for amounts that are
overdue and that are being contested in good faith by appropriate
proceedings, so long as (1) such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been
made for any such contested amounts, and (2) in the case of a Lien
with respect to any material portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of
the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money), so
long as no foreclosure, sale or similar proceedings have been
commenced with respect to any material portion of the Collateral on
account thereof;
(iv) any attachment or judgment Lien not constituting an Event
of Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not
interfering in any material respect with the ordinary conduct of the
business of Borrower or any of its Subsidiaries or resulting in a
material diminution in the value of any Collateral as security for
the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments,
and other minor defects or irregularities in title, in each case
which do not and will not interfere in any material respect with the
ordinary conduct of the business of Borrower or any of its
Subsidiaries or result in a material diminution in the value of any
Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under
any lease, (b) restriction or encumbrance that the interest or title
of such lessor or sublessor may be subject to, or (c) subordination
of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in the preceding clause (b),
so long as the holder of such restriction or encumbrance agrees to
recognize the rights of such lessee or sublessee under such lease;
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(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(x) any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the use
of any real property; and
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the
ordinary course of business of Borrower and its Subsidiaries.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments (whether federal, state or local, domestic or foreign, and
including political subdivisions thereof) and agencies or other
administrative or regulatory bodies thereof.
"Pledged Collateral" means, collectively, the "Pledged Collateral"
as defined in the Holdings Pledge Agreement, the Borrower Pledge Agreement
and the Subsidiary Pledge Agreement.
"Potential Event of Default" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"Pricing Premium" means, if as of the end of any Fiscal Quarter,
commencing with the Fiscal Quarter ending March 31, 1997, the ratio of
Consolidated Adjusted EBITDA to Consolidated Interest Expense (excluding
Premium Interest, as hereinafter defined) for the four Fiscal Quarter
period then ended is less than 1.50:1.00, then the Applicable Margin set
forth in the chart in the definition of "Applicable Margin" shall be
increased by 0.25% per annum (such additional .25% referred to herein as
"Premium Interest") on all Loans outstanding during such Fiscal Quarter
(or with respect to the initial test on March 31, 1997, on all Loans at
any time outstanding during the period from the Closing Date through March
31, 1997). The Pricing Premium shall be determined on the basis of the
financial statements and Compliance Certificates delivered by Borrower to
Administrative Agent and Lenders pursuant to clauses (ii) or (iii) and
(iv) of subsection 6.1.
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"Pricing Reduction" means (i) if at any time after the first
anniversary of the Closing Date as of the end of any Fiscal Quarter, the
Leverage Ratio is equal to or less than 6.00:1.00, a pricing reduction
equal to .25% and (ii) if at any time after the second anniversary of the
Closing Date, as of the end of any Fiscal Quarter, the Leverage Ratio is
equal to or less than 5.25:1.00, a pricing reduction equal to .50%. The
Pricing Reduction shall be determined by reference to the Leverage Ratio
set forth in the most recent financial statements delivered by Borrower to
Administrative Agent and Lenders pursuant to clause (i) or (ii) of
subsection 6.1 (accompanied by a Compliance Certificate delivered by
Borrower pursuant to clause (iii) of subsection 6.1). Any changes in the
Pricing Reduction shall become effective on the day following delivery of
the relevant Compliance Certificate to Administrative Agent and Lenders
and shall remain in effect through the next scheduled date for delivery of
a Compliance Certificate. It is understood and agreed that the Pricing
Reductions set forth in clause (i) and (ii) are not cumulative.
Notwithstanding anything herein to the contrary, (a) from the Closing Date
to and including the date of the first anniversary of the Closing Date,
the Pricing Reduction shall be zero and (b) at any time an Event of
Default shall have occurred and be continuing, the Pricing Reduction shall
be zero.
"Prime Rate" means the rate that Administrative Agent announces from
time to time as its prime lending rate for Dollars at its Funding and
Payment Office, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Administrative Agent or any other Lender
may make commercial loans or other loans at rates of interest at, above or
below the Prime Rate.
"Pro Forma EBITDA Adjustment" means, as of any date of determination
prior to the first anniversary of the Closing Date, the sum of the pro
forma cost savings set forth on Schedule 1.1B annexed hereto multiplied by
a fraction, the numerator of which is 365 minus the number of days elapsed
since the Closing Date and the denominator of which is 365.
"Pro Forma Projected EBITDA" means, with respect to any Acquired
Business to be acquired in a Permitted Acquisition, the net income
attributable to the Acquired Business for the most recently ended four
quarter period of the Acquired Business, after giving effect on a pro
forma basis to (i) the elimination of any expense items attributable to
the Acquired Business which will not be assumed by Borrower in connection
with the proposed acquisition of the Acquired Business and (ii) any
projected cost savings reasonably projected by Borrower and reasonably
acceptable to Administrative Agent in connection with the proposed
acquisition of the Acquired Business plus, to the extent deducted in
computing the net income attributable to the Acquired Business, the sum of
(a) interest expense, (b) provisions for taxes based on income
attributable to the Acquired Business, (c) depreciation and amortization
expenses and (d) any other non-cash items reducing net income less, to the
extent added in calculating net income attributable to the Acquired
Business
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(e) any non-cash items increasing net income and (f) any extraordinary
gains, all as determined with respect to the Acquired Business in
conformity with GAAP and as set forth in reasonable detail in an Officers'
Certificate delivered by Borrower to Administrative Agent, accompanied by
the financial statements of the Acquired Business for the periods covered
by the Officers' Certificate and accompanied by such other supporting
documentation as may be reasonably requested by Administrative Agent.
"Pro Rata Share" means (i) with respect to all payments,
computations and other matters relating to the AXEL Commitment or the AXEL
of any Lender, the percentage obtained by dividing (a) the AXEL Exposure
of that Lender by (b) the aggregate AXEL Exposure of all Lenders, (ii)
with respect to all payments, computations and other matters relating to
the Revolving Loan Commitment or the Revolving Loans of any Lender or any
Letters of Credit issued or participations therein purchased by any Lender
or any participations in any Swing Line Loans purchased by any Lender, the
percentage obtained by dividing (a) the Revolving Loan Exposure of that
Lender by (b) the aggregate Revolving Loan Exposure of all Lenders, and
(iii) for all other purposes with respect to each Lender, the percentage
obtained by dividing (a) the sum of the AXEL Exposure of that Lender plus
the Revolving Loan Exposure of that Lender by (b) the sum of the aggregate
AXEL Exposure of all Lenders plus the aggregate Revolving Loan Exposure of
all Lenders, in any such case as the applicable percentage may be adjusted
by assignments permitted pursuant to subsection 10.1. The initial Pro Rata
Share of each Lender for purposes of each of clauses (i), (ii) and (iii)
of the preceding sentence is set forth opposite the name of that Lender in
Schedule 2.1 annexed hereto.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(iii).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means, collectively, the Acquisition Agreement,
the Holdings Certificate of Designations, the Senior Subordinated Note
Indenture and the Administrative Agreement.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including the abandonment or disposal of any barrels,
containers or other closed receptacles
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containing any Hazardous Materials), including the movement of any
Hazardous Materials through the air, soil, surface water or groundwater.
"Remaining Existing Indebtedness" means the Indebtedness set forth
on Schedule 1.1C annexed hereto in an aggregate amount not to exceed
$7,556,583.53 which shall remain outstanding after the Closing Date, of
which all Indebtedness in excess of $1,000,000 shall be repaid or defeased
in full on or prior to January 31, 1997.
"Reorganization" has the meaning assigned to that term in the
Recitals.
"Requisite Class Lenders" means, at any time of determination (i)
for the Class of Lenders having AXEL Exposure, Lenders having or holding
more than 50% of the sum of the aggregate AXEL Exposure of all Lenders and
(ii) for the Class of Lenders having Revolving Loan Exposure, Lenders
having or holding more than 50% of the sum of the aggregate Revolving Loan
Exposure of all Lenders.
"Requisite Lenders" means Lenders having or holding more than 50% of
the sum of the aggregate AXEL Exposure of all Lenders plus the aggregate
Revolving Loan Exposure of all Lenders.
"Reserve Requirement" means, for any Interest Rate Determination
Date, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under
Regulation D on such Interest Rate Determination Date.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Holdings or Borrower now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to the holders of
that class, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of Borrower or Holdings now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire shares of
any class of stock of Borrower or Holdings now or hereafter outstanding,
and (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with
respect to, any Subordinated Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Borrower pursuant to subsection 2.1A(ii), and
"Revolving Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Revolving Loan Commitment Termination Date" means August 26, 2001.
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"Revolving Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the termination of the Revolving
Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after
the termination of the Revolving Loan Commitments, the sum of (a) the
aggregate outstanding principal amount of the Revolving Loans of that
Lender plus (b) in the event that Lender is Issuing Lender, the aggregate
Letter of Credit Usage in respect of all Letters of Credit issued by that
Lender (in each case net of any participations purchased by other Lenders
in such Letters of Credit or any unreimbursed drawings thereunder) plus
(c) the aggregate amount of all participations purchased by that Lender in
any outstanding Letters of Credit or any unreimbursed drawings under any
Letters of Credit plus (d) in the case of Swing Line Lender, the aggregate
outstanding principal amount of all Swing Line Loans (net of any
participations therein purchased by other Lenders) plus (e) the aggregate
amount of all participations purchased by that Lender in any outstanding
Swing Line Loans.
"Revolving Loans" means the Loans made by Lenders to Borrower
pursuant to subsection 2.1A(ii).
"Revolving Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(b) on the Closing Date and (ii) any
promissory notes issued by Borrower pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Revolving Loan
Commitments and Revolving Loans of any Lenders, in each case substantially
in the form of Exhibit V annexed hereto, as they may be amended,
supplemented or otherwise modified from time to time.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to, purchase
or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Senior Subordinated Note Indenture" means the indenture pursuant to
which the Senior Subordinated Notes are issued, as such indenture may be
amended from time to time to the extent permitted under subsection 7.13A.
"Senior Subordinated Notes" means the $100,000,000 in aggregate
principal amount of 10.75% Senior Subordinated Notes due 2004 of Borrower
issued pursuant to the Senior Subordinated Note Indenture.
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"Solvent" means, with respect to any Person, that as of the date of
determination both (i)(a) the then fair saleable value of the property of
such Person is (1) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (2) not less than the amount
that will be required to pay the probable liabilities on such Person's
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to
such Person; (b) such Person's capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction;
and (c) such Person does not intend to incur, or believe (nor should it
reasonably believe) that it will incur, debts beyond its ability to pay
such debts as they become due; and (ii) such Person is "solvent" within
the meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness
of Borrower or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Borrower or any of its Subsidiaries, (iii) the obligations of third party
insurers of Borrower or any of its Subsidiaries arising by virtue of the
laws of any jurisdiction requiring third party insurers, (iv) obligations
with respect to Capital Leases or Operating Leases of Borrower or any of
its Subsidiaries, (v) performance, payment, deposit or surety obligations
of Borrower or any of its Subsidiaries, in any case if required by law or
governmental rule or regulation or in accordance with custom and practice
in the industry and (vi) other obligations of Borrower and its
Subsidiaries permitted hereunder; provided that Standby Letters of Credit
may not be issued without the consent of Issuing Lender (which consent may
be withheld in the sole discretion of Issuing Lender) for the purpose of
supporting (a) trade payables or (b) any Indebtedness constituting
"antecedent debt" (as that term is used in Section 547 of the Bankruptcy
Code).
"Subordinated Indebtedness" means (i) Indebtedness of Borrower
evidenced by the Senior Subordinated Notes and (ii) any other Indebtedness
of Borrower subordinated in right of payment to the Obligations pursuant
to documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in
form and substance satisfactory to Administrative Agent and Requisite
Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or
other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to
the occurrence of any contingency) to vote in the election of the Person
or Persons (whether directors, managers, trustees or other
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Persons performing similar functions) having the power to direct or cause
the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means any Subsidiary of Borrower that
executes and delivers a counterpart of the Subsidiary Guaranty on the
Closing Date or from time to time thereafter pursuant to subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by existing domestic Subsidiaries of Borrower on the Closing
Date and to be executed and delivered by additional domestic Subsidiaries
of Borrower from time to time thereafter in accordance with subsection
6.8, substantially in the form of Exhibit XV annexed hereto, as such
Subsidiary Guaranty may hereafter be amended, supplemented or otherwise
modified from time to time.
"Subsidiary Pledge Agreement" means the Subsidiary Pledge Agreement
executed and delivered by existing Subsidiary Guarantors and
Administrative Agent on the Closing Date and to be executed and delivered
by any additional Subsidiary Guarantors from time to time thereafter in
accordance with subsection 6.8, substantially in the form of Exhibit XVI
annexed hereto, as such Subsidiary Pledge Agreement may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary Security Agreement" means the Subsidiary Security
Agreement executed and delivered by existing Subsidiary Guarantors and
Administrative Agent on the Closing Date and to be executed and delivered
by any additional Subsidiary Guarantors from time to time thereafter in
accordance with subsection 6.8, substantially in the form of Exhibit XVII
annexed hereto, as such Subsidiary Security Agreement may be amended,
supplemented or otherwise modified from time to time.
"Supplemental Collateral Agent" has the meaning assigned to that
term in subsection 9.1D.
"Swing Line Lender" means Scotiabank, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing Line
Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line
Lender to make Swing Line Loans to Borrower pursuant to subsection
2.1A(iii).
"Swing Line Loans" means the Loans made by Swing Line Lender to
Borrower pursuant to subsection 2.1A(iii).
"Swing Line Note" means (i) the promissory note of Borrower issued
pursuant to subsection 2.1E(ii) on the Closing Date and (ii) any
promissory note issued by Borrower to any successor Administrative Agent
and Swing Line Lender pursuant to
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the last sentence of subsection 9.5B, in each case substantially in the
form of Exhibit VI annexed hereto, as it may be amended, supplemented or
otherwise modified from time to time.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "Tax on the overall net
income" of a Person shall be construed as a reference to a tax imposed by
the jurisdiction in which that Person is organized or in which that
Person's principal office (and/or, in the case of a Lender, its lending
office) is located or in which that Person (and/or, in the case of a
Lender, its lending office) is deemed to be doing business on all or part
of the net income, profits or gains (whether worldwide, or only insofar as
such income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) of that Person (and/or, in the case
of a Lender, its lending office).
"Total Senior Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness and Contingent
Obligations of Holdings and its Subsidiaries in respect of Indebtedness,
in each case other than Indebtedness evidenced by the Senior Subordinated
Notes and Indebtedness in respect of the Batesville Liability and
Covenants not to Compete, all as determined on a consolidated basis in
accordance with GAAP.
"Total Utilization of Revolving Loan Commitments" means, as at any
date of determination, the sum of (i) the aggregate principal amount of
all outstanding Revolving Loans (other than Revolving Loans made for the
purpose of repaying any Refunded Swing Line Loans or reimbursing Issuing
Lender for any amount drawn under any Letter of Credit but not yet so
applied) plus (ii) the aggregate principal amount of all outstanding Swing
Line Loans plus (iii) the Letter of Credit Usage.
"Transaction Costs" means the fees, costs and expenses payable by
Borrower on or before the Closing Date in connection with the transactions
contemplated by the Loan Documents and the Related Agreements.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
"Wholly Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person of which such Person owns, directly or
indirectly, 90% or more of all classes of the capital stock.
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1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Borrower to Lenders pursuant to clauses (i), (ii), (iii) and (xi)
of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(iv)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
restated financial statements referred to in subsection 5.3; provided that the
purchase accounting adjustments made in connection with the Acquisition shall be
included; and provided further, that if Borrower notifies Lenders that Borrower
wishes to amend any covenant in subsection 2.4B(iii)(d), 7.6 or 7.8 or any
related definition to eliminate the effect of any change in GAAP occurring after
the date of this Agreement on the operation of such covenant (or if
Administrative Agent notifies Borrower that Lenders wish to amend subsection
2.4B(iii)(d), 7.6 or 7.8 or any related definition for such purpose), then
Borrower and Lenders hereby agree to negotiate in good faith to agree upon an
appropriate amendment to such covenant.
1.3 Other Definitional Provisions and Rules of Construction.
Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
References to "Sections" and "subsections" shall be to Sections and subsections,
respectively, of this Agreement unless otherwise specifically provided. The use
herein of the word "include" or "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as "without limitation" or "but not limited to" or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that fall within the broadest possible scope of such general
statement, term or matter.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Borrower herein set
forth, each Lender hereby severally agrees to make the Loans described in
subsections 2.1A(i) and 2.1A(ii) and Swing Line Lender hereby agrees to make the
Loans described in subsection 2.1A(iii).
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(i) AXELs. Each Lender severally agrees to lend to Borrower on the
Closing Date an amount not exceeding its Pro Rata Share of the aggregate
amount of the AXEL Commitments to be used for the purposes identified in
subsection 2.5A. The amount of each Lender's AXEL Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
of the AXEL Commitments is $90,000,000; provided that the AXEL Commitments
of Lenders shall be adjusted to give effect to any assignments of the AXEL
Commitments pursuant to subsection 10.1B. Each Lender's AXEL Commitment
shall expire immediately and without further action on November 15, 1996
if the AXELs are not made on or before that date. Borrower may make only
one borrowing under the AXEL Commitments. Amounts borrowed under this
subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed.
(ii) Revolving Loans. Each Lender severally agrees, subject to the
limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Borrower from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
and the aggregate original amount of the Revolving Loan Commitments is
$25,000,000; provided that the Revolving Loan Commitments of Lenders shall
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and provided, further that the
amount of the Revolving Loan Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to subsections
2.4B(ii) and 2.4B(iii). Each Lender's Revolving Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all Revolving
Loans and all other amounts owed hereunder with respect to the Revolving
Loans and the Revolving Loan Commitments shall be paid in full no later
than that date; provided that each Lender's Revolving Loan Commitment
shall expire immediately and without further action on November 15, 1996
if the AXELs are not made on or before that date. Amounts borrowed under
this subsection 2.1A(ii) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments
shall be subject to the limitations that (i) in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect and (ii) no Revolving Loans shall be made
on the Closing Date.
(iii) Swing Line Loans. Swing Line Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum amount of
Swing Line Loans permitted to be outstanding from time to time, to make a
portion of the Revolving
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Loan Commitments available to Borrower from time to time during the period
from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date by making Swing Line Loans to Borrower in an aggregate
amount not exceeding the amount of the Swing Line Loan Commitment to be
used for the purposes identified in subsection 2.5B, notwithstanding the
fact that such Swing Line Loans, when aggregated with Swing Line Lender's
outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the
Letter of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $5,000,000; provided that any reduction of the Revolving
Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which
reduces the aggregate Revolving Loan Commitments to an amount less than
the then current amount of the Swing Line Loan Commitment shall result in
an automatic corresponding reduction of the Swing Line Loan Commitment to
the amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Borrower, Administrative Agent or Swing Line
Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Swing Line Loans and all other amounts
owed hereunder with respect to the Swing Line Loans shall be paid in full
no later than that date; provided that the Swing Line Loan Commitment
shall expire immediately and without further action on November 15, 1996
if the AXELs are not made on or before that date. Amounts borrowed under
this subsection 2.1A(iii) may be repaid and reborrowed to but excluding
the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment
shall be subject to the limitations that (i) in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect and (ii) no Swing Line Loans shall be made
on the Closing Date.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Borrower pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Borrower), no later than 10:00 A.M. (New York City
time) on the first Business Day in advance of the proposed Funding Date, a
notice requesting Lenders to make Revolving Loans that are Base Rate Loans
on such Funding Date in an amount equal to the amount of such Swing Line
Loans (the "Refunded Swing Line Loans") outstanding on the date such
notice is given which Swing Line Lender requests Lenders to prepay (which
request shall be deemed to have also been made by Borrower). Anything
contained in this Agreement to the contrary notwithstanding, (i) the
proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing
Line Lender (and not to Borrower) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be
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deemed to be paid with the proceeds of a Revolving Loan made by Swing Line
Lender, and such portion of the Swing Line Loans deemed to be so paid
shall no longer be outstanding as Swing Line Loans and shall no longer be
due under the Swing Line Note of Swing Line Lender but shall instead
constitute part of Swing Line Lender's outstanding Revolving Loans and
shall be due under the Revolving Note of Swing Line Lender. Borrower
hereby authorizes Administrative Agent and Swing Line Lender to charge
Borrower's accounts with Administrative Agent and Swing Line Lender (up to
the amount available in each such account) one Business Day after
requesting Borrower to repay the Refunded Swing Line Loans in order to pay
Swing Line Lender the amount of the Refunded Swing Line Loans to the
extent the proceeds of such Revolving Loans made by Lenders, including the
Revolving Loan deemed to be made by Swing Line Lender, are not sufficient
to repay in full the Refunded Swing Line Loans. If any portion of any such
amount paid (or deemed to be paid) to Swing Line Lender should be
recovered by or on behalf of Borrower from Swing Line Lender in
bankruptcy, by assignment for the benefit of creditors or otherwise, the
loss of the amount so recovered shall be ratably shared among all Lenders
in the manner contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the request
of Swing Line Lender as provided in the immediately preceding paragraph in
an amount sufficient to repay any amounts owed to Swing Line Lender in
respect of any outstanding Swing Line Loans or (b) the Revolving Loan
Commitments are terminated at a time when any Swing Line Loans are
outstanding, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans in an
amount equal to its Pro Rata Share (calculated, in the case of the
foregoing clause (b), immediately prior to such termination of the
Revolving Loan Commitments) of the unpaid amount of such Swing Line Loans
together with accrued interest thereon. Upon one Business Day's notice
from Swing Line Lender, each Lender shall deliver to Swing Line Lender an
amount equal to its respective participation in same day funds at the
Funding and Payment Office. In order to further evidence such
participation (and without prejudice to the effectiveness of the
participation provisions set forth above), each Lender agrees to enter
into a separate participation agreement at the request of Swing Line
Lender in form and substance reasonably satisfactory to Swing Line Lender.
In the event any Lender fails to make available to Swing Line Lender the
amount of such Lender's participation as provided in this paragraph, Swing
Line Lender shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the rate customarily used by
Swing Line Lender for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. In the event Swing Line
Lender receives a payment of any amount in which other Lenders have
purchased participations as provided in this paragraph, Swing Line Lender
shall promptly distribute to each such other Lender its Pro Rata Share of
such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying
any Refunded Swing
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Line Loans pursuant to the second preceding paragraph and each Lender's
obligation to purchase a participation in any unpaid Swing Line Loans
pursuant to the immediately preceding paragraph shall be absolute and
unconditional and shall not be affected by any circumstance, including (a)
any set-off, counterclaim, recoupment, defense or other right which such
Lender may have against Swing Line Lender, Borrower or any other Person
for any reason whatsoever; (b) the occurrence or continuation of an Event
of Default or a Potential Event of Default; (c) any adverse change in the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of Borrower or any of its Subsidiaries; (d) any
breach of this Agreement or any other Loan Document by any party thereto;
or (e) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing; provided that such obligations of
each Lender are subject to the condition that (1) Swing Line Lender
believed in good faith that all conditions under Section 4 to the making
of the applicable Refunded Swing Line Loans or other unpaid Swing Line
Loans, as the case may be, were satisfied at the time such Refunded Swing
Line Loans or unpaid Swing Line Loans were made or (2) the satisfaction of
any such condition not satisfied had been waived in accordance with
subsection 10.6 prior to or at the time such Refunded Swing Line Loans or
other unpaid Swing Line Loans were made.
B. Borrowing Mechanics. AXELs or Revolving Loans made on any Funding Date
(other than Revolving Loans made pursuant to a request by Swing Line Lender
pursuant to subsection 2.1A(iii) for the purpose of repaying any Refunded Swing
Line Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose
of reimbursing Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it) shall be in an aggregate minimum amount of $1,000,000.
Swing Line Loans made on any Funding Date shall be in an aggregate minimum
amount of $100,000. Whenever Borrower desires that Lenders make AXELs or
Revolving Loans it shall deliver to Administrative Agent a Notice of Borrowing
no later than 10:00 A.M. (New York City time) at least three Business Days in
advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or
at least one Business Day in advance of the proposed Funding Date (in the case
of a Base Rate Loan). Whenever Borrower desires that Swing Line Lender make a
Swing Line Loan, it shall deliver to Administrative Agent a Notice of Borrowing
no later than 12:00 Noon (New York City time) on the proposed Funding Date. The
Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be
a Business Day), (ii) the amount and type of Loans requested, (iii) in the case
of Swing Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case
of AXELs and Revolving Loans, whether such Loans shall be Base Rate Loans or
Eurodollar Rate Loans, and (v) in the case of any Loans requested to be made as
Eurodollar Rate Loans, the initial Interest Period requested therefor. AXELs and
Revolving Loans may be continued as or converted into Base Rate Loans and
Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of
delivering the above-described Notice of Borrowing, Borrower may give
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
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Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected Loans hereunder.
Borrower shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Borrower has certified in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Borrower of the proceeds of any
Loans shall constitute a re-certification by Borrower, as of the applicable
Funding Date, as to the matters to which Borrower is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B and 2.6C, a Notice of
Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Borrower shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All AXELs and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing. Each Lender shall make
the amount of its Loan available to Administrative Agent not later than 12:00
Noon (New York City time) on the applicable Funding Date, and Swing Line Lender
shall make the amount of its Swing Line Loan available to Administrative Agent
not later than 12:00 Noon (New York City time) on the applicable Funding Date,
in each case in same day funds in Dollars, at the Funding and Payment Office.
Except as provided in subsection 2.1A(iii) or subsection 3.3B with respect to
Revolving Loans used to repay Refunded Swing Line Loans or to reimburse Issuing
Lender for the amount of a drawing under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections 4.1
(in the case of Loans made on the Closing Date) and 4.2 (in the case of all
Loans), Administrative Agent shall make the proceeds of such Loans available to
Borrower on the applicable Funding Date by causing an amount of same day funds
in Dollars equal to the proceeds of all such Loans received by Administrative
Agent from Lenders or Swing Line Lender, as the case may be, to be credited to
the account of Borrower at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior
to the Funding Date for any Loans that such Lender does not intend to make
available to
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Administrative Agent the amount of such Lender's Loan requested on such Funding
Date, Administrative Agent may assume that such Lender has made such amount
available to Administrative Agent on such Funding Date and Administrative Agent
may, in its sole discretion, but shall not be obligated to, make available to
Borrower a corresponding amount on such Funding Date. If such corresponding
amount is not in fact made available to Administrative Agent by such Lender,
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
customary rate set by Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. If such Lender
does not pay such corresponding amount forthwith upon Administrative Agent's
demand therefor, Administrative Agent shall promptly notify Borrower and
Borrower shall immediately pay such corresponding amount to Administrative Agent
together with interest thereon, for each day from such Funding Date until the
date such amount is paid to Administrative Agent, at the rate payable under this
Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed
to relieve any Lender from its obligation to fulfill its Commitments hereunder
or to prejudice any rights that Borrower may have against any Lender as a result
of any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for
inspection by Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the AXEL
Commitment and Revolving Loan Commitment and the AXEL and Revolving Loans
from time to time of each Lender, the Swing Line Loan Commitment and the
Swing Line Loans from time to time of Swing Line Lender, and each
repayment or prepayment in respect of the principal amount of the AXEL or
Revolving Loans of each Lender or the Swing Line Loans of Swing Line
Lender. Any such recordation shall be conclusive and binding on Borrower
and each Lender, absent demonstrable error; provided that failure to make
any such recordation, or any error in such recordation, shall not affect
any Lender's Commitments or Borrower's Obligations in respect of any
applicable Loans.
(iii) Each Lender shall record on its internal records (including
the Notes held by such Lender) the amount of the AXEL and each Revolving
Loan made by it and each payment in respect thereof. Any such recordation
shall be conclusive and binding on Borrower, absent demonstrable error;
provided that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or Borrower's
Obligations in respect of any applicable Loans; and
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provided, further that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register shall
govern.
(iv) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Borrower hereby designates Administrative Agent to serve as
Borrower's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Borrower hereby agrees that, to the
extent Administrative Agent serves in such capacity, Administrative Agent
and its officers, directors, employees, agents and affiliates shall
constitute Indemnitees for all purposes under subsection 10.3.
E. Notes. Borrower shall execute and deliver on the Closing Date (i) to
each Lender (or to Administrative Agent for that Lender) (a) an AXEL Note
substantially in the form of Exhibit IV annexed hereto to evidence that Lender's
AXEL, in the principal amount of that Lender's AXEL and with other appropriate
insertions, and (b) a Revolving Note substantially in the form of Exhibit V
annexed hereto to evidence that Lender's Revolving Loans, in the principal
amount of that Lender's Revolving Loan Commitment and with other appropriate
insertions, and (ii) to Swing Line Lender (or to Administrative Agent for Swing
Line Lender) a Swing Line Note substantially in the form of Exhibit VI annexed
hereto to evidence Swing Line Lender's Swing Line Loans, in the principal amount
of the Swing Line Loan Commitment and with other appropriate insertions.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7,
each AXEL and each Revolving Loan shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the Adjusted
Eurodollar Rate. Subject to the provisions of subsection 2.7, each Swing Line
Loan shall bear interest on the unpaid principal amount thereof from the date
made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate. The applicable basis for determining
the rate of interest with respect to any AXEL or any Revolving Loan shall be
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selected by Borrower initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B. The basis for determining the
interest rate with respect to any AXEL or any Revolving Loan may be changed from
time to time pursuant to subsection 2.2D. If on any day an AXEL or Revolving
Loan is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the AXELs
and the Revolving Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
the Applicable Margin in effect from time to time, or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin in effect from time to
time; and
(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate plus 1.75% per annum plus the Pricing Premium, if any, less the
Pricing Reduction, if any.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Borrower may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Borrower's option, either a one-, two-, three- or six-month period or, if
deposits in the interbank Eurodollar market are generally available for such
period (as determined by each Lender making, converting to or continuing such
Eurodollar Rate Loan), a nine- or twelve-month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
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(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) there shall be no more than six Interest Periods outstanding at
any time;
(vi) in the event Borrower fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice
of Conversion/Continuation, Borrower shall be deemed to have selected an
Interest Period of one month; and
(vii) Borrower may not select an Interest Period in excess of one
month with respect to any Eurodollar Rate Loan until the earlier of (a)
the date the Arranging Agent advises Borrower that the AXELs have been
fully syndicated or any earlier date agreed to by Arranging Agent and (b)
the date which is 60 days after the Closing Date.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Borrower shall have the option (i) to convert at any time all or any part
of its outstanding AXELs or Revolving Loans equal to at least $1,000,000 from
Loans bearing interest at a rate determined by reference to one basis to Loans
bearing interest at a rate determined by reference to an alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate
Loan, to continue all or any portion of such Loan equal to at least $1,000,000
as a Eurodollar Rate Loan.
Borrower shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 10:00 A.M. (New York City time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation and (iv) in the case of
a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period. In lieu of
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delivering the above-described Notice of Conversion/Continuation, Borrower may
give Administrative Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.
Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to any
such telephonic notice Borrower shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B and 2.6C, a Notice of
Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate
Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after
the related Interest Rate Determination Date, and Borrower shall be bound to
effect a conversion or continuation in accordance therewith.
E. Post-Maturity Interest. Any principal payments on the Loans not paid
when due and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due, in
each case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand at a rate which is 2% per annum in excess of the interest rate
otherwise payable under this Agreement with respect to the applicable Loans (or,
in the case of any such fees and other amounts, at a rate which is 2% per annum
in excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective, such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans. Payment or acceptance of the increased rates
of interest provided for in this subsection 2.2E is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed (i) in
the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a
360-day year, in each case for
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the actual number of days elapsed in the period during which it accrues. In
computing interest on any Loan, the date of the making of such Loan or the first
day of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of
such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Borrower agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the sum of (i) the
aggregate principal amount of outstanding Revolving Loans (but not any
outstanding Swing Line Loans) plus (ii) the Letter of Credit Usage multiplied by
1/2 of 1% per annum, such commitment fees to be calculated on the basis of a
365- or 366-day year and the actual number of days elapsed and to be payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of each year,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date.
B. Other Fees. Borrower agrees to pay to Arranging Agent and
Administrative Agent such other fees in the amounts and at the times separately
agreed upon between Borrower, Arranging Agent and Administrative Agent.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments; Application of Proceeds of
Collateral and Payments Under Guaranties.
A. Scheduled Payments of AXELs.
(i) Scheduled Payments of AXELs. Borrower shall make principal
payments on the AXELs in installments on the dates and in the amounts set
forth below:
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==========================================================
(A) | (B)
| Scheduled
Payment | Repayment of
Date | AXELs
==========================================================
|
February 1, 1997 | $500,000
----------------------------------------------------------
August 1, 1997 | $500,000
----------------------------------------------------------
February 1, 1998 | $500,000
----------------------------------------------------------
August 1, 1998 | $500,000
----------------------------------------------------------
February 1, 1999 | $500,000
----------------------------------------------------------
August 1, 1999 | $500,000
----------------------------------------------------------
February 1, 2000 | $2,000,000
----------------------------------------------------------
August 1, 2000 | $2,000,000
----------------------------------------------------------
February 1, 2001 | $4,500,000
----------------------------------------------------------
August 1, 2001 | $4,500,000
----------------------------------------------------------
February 1, 2002 | $6,250,000
----------------------------------------------------------
August 1, 2002 | $6,250,000
----------------------------------------------------------
February 1, 2003 | $30,750,000
----------------------------------------------------------
August 1, 2003 | $30,750,000
----------------------------------------------------------
TOTAL | $90,000,000
==========================================================
; provided that the scheduled installments of principal of the AXELs set
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the AXELs in accordance with subsection 2.4B(iv); and
provided, further that the AXELs and all other amounts owed hereunder with
respect to the AXELs shall be paid in full no later than August 1, 2003,
and the final installment payable by Borrower in respect of the AXELs on
such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by Borrower under
this Agreement with respect to the AXELs.
B. Prepayments and Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments.
(a) Notice of Prepayment. Borrower may, upon written or
telephonic notice to Administrative Agent on or prior to 12:00 Noon
(New
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York City time) on the date of prepayment, which notice, if
telephonic, shall be promptly confirmed in writing, at any time and
from time to time prepay any Swing Line Loan on any Business Day in
whole or in part in an aggregate minimum amount of $100,000.
Borrower may, upon not less than one Business Day's prior written or
telephonic notice, in the case of Base Rate Loans, and three
Business Days' prior written or telephonic notice, in the case of
Eurodollar Rate Loans, in each case given to Administrative Agent by
12:00 Noon (New York City time) on the date required and, if given
by telephone, promptly confirmed in writing to Administrative Agent
(which original written or telephonic notice Administrative Agent
will promptly transmit by telefacsimile or telephone to each
Lender), at any time and from time to time prepay any AXELs or
Revolving Loans on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000; provided, however, that with
respect to any Eurodollar Rate Loan not prepaid on the expiration of
the Interest Period applicable thereto, Borrower shall pay any
amounts payable pursuant to subsection 2.6D. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment
shall be applied as specified in subsection 2.4B(iv).
(b) Prepayment Fees. If any portion of the AXELs is prepaid
for any reason other than (1) pursuant to subsection 2.4A, (2)
pursuant to subsection 2.4B(iii), or (3) pursuant to an acceleration
other than an acceleration upon the occurrence of an Event of
Default under subsection 8.11, on or prior to the second anniversary
of the Closing Date, Borrower shall pay to Administrative Agent, for
distribution to Lenders having AXELs so prepaid in accordance with
their Pro Rata Shares, a fee equal to (x) 2.75% of the principal
amount of AXELs so prepaid during the period commencing on the
Closing Date and ending on the day prior to the first anniversary of
the Closing Date and (y) 1.75% of the principal amount of AXELs so
prepaid during the period commencing on the first anniversary of the
Closing Date and ending on the second anniversary of the Closing
Date.
(ii) Voluntary Reductions of Revolving Loan Commitments. Borrower
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit
by telefacsimile or telephone to each Lender), at any time and from time
to time terminate in whole or permanently reduce in part, without premium
or penalty, the Revolving Loan Commitments in an amount up to the amount
by which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; provided that any such partial reduction of the Revolving Loan
Commitments shall be in an aggregate minimum amount of $1,000,000.
Borrower's notice to Administrative Agent shall designate the date (which
shall be
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a Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Borrower's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
Loan Commitments. The Loans shall be prepaid and/or the Revolving Loan
Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments be applied as set
forth below or as more specifically provided in subsection 2.4B(iv):
(a) Prepayments and Reductions From Net Asset Sale Proceeds.
No later than the first Business Day following the date of receipt
by Holdings or any of its Subsidiaries of any Net Asset Sale
Proceeds in respect of any Asset Sale, Borrower shall prepay the
Loans and/or the Revolving Loan Commitments shall be permanently
reduced in an aggregate amount equal to such Net Asset Sale
Proceeds. Notwithstanding the foregoing, Borrower shall not be
required to make a mandatory prepayment pursuant to this subsection
2.4B(iii)(a) if the Net Asset Sale Proceeds are reinvested in assets
of substantially equivalent value within 365 days of the receipt
thereof; provided, however, that the total Net Asset Sale Proceeds
which may be so reinvested shall not exceed $10,000,000 in the
aggregate. If upon any Asset Sale, Borrower elects to reinvest the
Net Asset Sale Proceeds as permitted under this subsection
2.4B(iii)(a), (1) no later than the First Business Day following the
consummation of such Asset Sale, Borrower shall deliver an Officers'
Certificate to Administrative Agent indicating Borrower's election
to reinvest the Net Asset Sale Proceeds and (2) upon the expiration
of 365 days after the date of receipt of the Net Asset Sale Proceeds
of such Asset Sale, Borrower shall deliver to Administrative Agent
an Officers' Certificate indicating the amount of Net Asset Sale
Proceeds reinvested as of such date, the assets in which such Net
Asset Sale Proceeds have been reinvested, and the amount of any
remaining Net Asset Sale Proceeds which shall be applied to prepay
the Loans and/or reduce the Revolving Loan Commitments as set forth
in this subsection 2.4B(iii)(a).
(b) Prepayments and Reductions from Net Insurance/Condemnation
Proceeds. No later than the first Business Day following the date of
receipt by Administrative Agent or by Holdings or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds that are
required to be applied to prepay the Loans and/or reduce the
Revolving Loan Commitments pursuant to the provisions of subsection
6.4C, Borrower shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount
equal to the amount of such Net Insurance/Condemnation Proceeds.
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(c) Prepayments and Reductions Due to Reversion of Surplus
Assets of Pension Plans. No later than the first Business Day
following date of return to Holdings or any of its Subsidiaries of
any surplus assets of any pension plan of Borrower or any of its
Subsidiaries, Borrower shall prepay the Loans and/or the Revolving
Loan Commitments shall be permanently reduced in an aggregate amount
(such amount being the "Net Pension Proceeds") equal to 100% of such
returned surplus assets, net of transaction costs and expenses
incurred in obtaining such return, including incremental taxes
payable as a result thereof.
(d) Prepayments and Reductions from Consolidated Excess Cash
Flow. In the event that there shall be Consolidated Excess Cash Flow
for any Fiscal Year (commencing with Fiscal Year 1997) in amount
greater than $5,000,000, Borrower shall, no later than 90 days after
the end of such Fiscal Year, prepay the Loans and/or the Revolving
Loan Commitments shall be permanently reduced in an aggregate amount
equal to 50% of such Consolidated Excess Cash Flow in excess of
$5,000,000.
(e) Prepayments Upon Receipt of Capital Contributions from
Holdings. Upon receipt by Borrower of any capital contribution from
Holdings of the Cash proceeds (any such proceeds, net of
underwriting discounts and commissions and other reasonable costs
and expenses associated therewith, including reasonable legal fees
and expenses, being "Net Contribution Proceeds") from the issuance
of any equity Securities of Holdings (other than any Permitted Cure
Securities or any such equity Securities the proceeds of which are
contributed to Borrower to fund a Permitted Acquisition), Borrower
shall prepay the Loans and/or the Revolving Loan Commitments shall
be permanently reduced in an aggregate amount equal to 50% of such
Net Contribution Proceeds.
(f) Prepayments Due to Reductions or Restrictions of Revolving
Loan Commitments. Borrower shall from time to time prepay first the
Swing Line Loans and second the Revolving Loans to the extent
necessary so that the Total Utilization of Revolving Loan
Commitments shall not at any time exceed the Revolving Loan
Commitments then in effect.
(g) Calculations of Net Proceeds Amounts; Additional
Prepayments and Reductions Based on Subsequent Calculations.
Concurrently with any prepayment of the Loans and/or reduction of
the Revolving Loan Commitments pursuant to subsections
2.4B(iii)(a)-(e), Borrower shall deliver to Administrative Agent an
Officers' Certificate demonstrating the calculation of the amount
(the "Net Proceeds Amount") of the applicable Net Asset Sale
Proceeds or Net Insurance/Condemnation Proceeds, the applicable Net
Pension Proceeds or Net Contribution Proceeds (as such terms are
defined in subsections 2.4B(iii)(c) and (e), respectively) or the
applicable Consolidated
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Excess Cash Flow, as the case may be, that gave rise to such
prepayment and/or reduction. In the event that Borrower shall
subsequently determine that the actual Net Proceeds Amount was
greater than the amount set forth in such Officers' Certificate,
Borrower shall promptly make an additional prepayment of the Loans
(and/or, if applicable, the Revolving Loan Commitments shall be
permanently reduced) in an amount equal to the amount of such
excess, and Borrower shall concurrently therewith deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the additional Net Proceeds Amount resulting in such
excess.
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and
Order of Maturity. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied as specified by Borrower in the applicable
notice of prepayment; provided that in the event Borrower fails to
specify the Loans to which any such prepayment shall be applied,
such prepayment shall be applied first to repay outstanding Swing
Line Loans to the full extent thereof, second to repay outstanding
Revolving Loans to the full extent thereof, and third to repay
outstanding AXELs to the full extent thereof. Any voluntary
prepayments of the AXELs pursuant to subsection 2.4B(i) shall be
applied to reduce the scheduled installments of principal of the
AXELs set forth in subsections 2.4A(i) on a pro rata basis.
(b) Application of Mandatory Prepayments by Type of Loans. Any
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(e) shall be
applied first to prepay the AXELs to the full extent thereof,
second, to the extent of any remaining portion of the Applied
Amount, to prepay the Swing Line Loans to the full extent thereof
and to permanently reduce the Revolving Loan Commitments by the
amount of such prepayment, third, to the extent of any remaining
portion of the Applied Amount, to prepay the Revolving Loans to the
full extent thereof and to further permanently reduce the Revolving
Loan Commitments by the amount of such prepayment, and fourth, to
the extent of any remaining portion of the Applied Amount, to
further permanently reduce the Revolving Loan Commitments to the
full extent thereof.
(c) Application of Mandatory Prepayments of AXELs to the
Scheduled Installments of Principal Thereof. Any mandatory
prepayments of the AXELs pursuant to subsection 2.4B(iii) shall be
applied to each scheduled installment of principal of the AXELs, set
forth in subsection 2.4A(i) on a pro rata basis.
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(d) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Considering AXELs and Revolving Loans being
prepaid separately, any prepayment thereof shall be applied first to
Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Borrower pursuant to
subsection 2.6D.
(e) Prepayment of Certain Eurodollar Rate Loans. In the event
the amount of any prepayment required to be made above shall exceed
the aggregate principal amount of the Base Rate Loans outstanding
required to be prepaid (the amount of any such excess being called
the "Excess Amount"), Borrower shall have the right, in lieu of
making such prepayment in full, to prepay all the outstanding
applicable Base Rate Loans and to deposit an amount equal to the
Excess Amount with Administrative Agent in the Collateral Account.
Any amounts so deposited shall be held by Administrative Agent as
collateral for the Obligations and applied to the prepayment of the
applicable Eurodollar Rate Loans at the end of the current Interest
Periods applicable thereto.
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrower of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 1:00 P.M. (New York City time) on the
date due at the Funding and Payment Office for the account of Lenders;
funds received by Administrative Agent after that time on such due date
shall be deemed to have been paid by Borrower on the next succeeding
Business Day. Borrower hereby authorizes Administrative Agent to charge
its accounts with Administrative Agent in order to cause timely payment to
be made to Administrative Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in its
accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments shall be
applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of AXELs and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request, its Pro
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Rata Share of all such payments received by Administrative Agent and the
commitment fees of such Lender when received by Administrative Agent
pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of
its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent
shall give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Borrower hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
D. Application of Proceeds of Collateral and Payments Under Guaranties:
(i) Application of Proceeds of Collateral. Except as provided in
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral under any Collateral Document shall be applied by
Administrative Agent against the applicable Secured Obligations (used
hereinafter as defined in such Collateral Document) then due and owing in
the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation
to Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, and all amounts for
which Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
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(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
by Administrative Agent under any Guaranty shall be applied promptly from
time to time by Administrative Agent in the following order of priority:
(a) To the payment of the costs and expenses of any collection
or other realization under such Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to
the payment to Holdings or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
2.5 Use of Proceeds.
A. AXELs. The proceeds of the AXELs, together with a portion of the
proceeds of the issuance and sale of the Senior Subordinated Notes, shall be
applied by Borrower to repay Existing Indebtedness, to pay Transaction Costs,
and to prefund Consolidated Capital Expenditures in an amount not to exceed
$4,000,000.
B. Revolving Loans; Swing Line Loans. The proceeds of any Revolving Loans
and any Swing Line Loans shall be applied by Borrower for general corporate
purposes, which may include the making of Permitted Acquisitions.
C. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Borrower or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal
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Reserve System or to violate any other law, in each case as in effect on the
date or dates of such borrowing and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
10:00 A.M. (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent
demonstrable error, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Borrower and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Borrower and Lenders that the circumstances giving
rise to such notice no longer exist (which Administrative Agent agrees to do
promptly after such
circumstances cease to exist) and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by
Borrower.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Borrower and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the interbank Eurodollar market or the position
of such Lender in that market, then, and in any such event, such Lender shall be
an "Affected Lender" and it shall on that day give notice (by telefacsimile or
by telephone confirmed in writing) to Borrower and Administrative Agent of such
determination (which notice Administrative Agent shall
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promptly transmit to each other Lender). Thereafter (a) the obligation of the
Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans
shall be suspended until such notice shall be withdrawn by the Affected Lender
(which such Lender agrees to do promptly after such Lender ceases to be so
affected), (b) to the extent such determination by the Affected Lender relates
to a Eurodollar Rate Loan then being requested by Borrower pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall
make such Loan as (or convert such Loan to, as the case may be) a Base Rate
Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans (the "Affected Loans") shall be terminated at the earlier
to occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Borrower shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts and the
calculation thereof in reasonable detail), for all reasonable losses, expenses
and liabilities (including any interest paid by that Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by that Lender in connection with the liquidation or
re-employment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of any Eurodollar Rate
Loan does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i))
or other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Borrower, or (iv) as a
consequence of any other default by Borrower in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
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E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of
all amounts payable to a Lender under this subsection 2.6 and under subsection
2.7A may be made as though that Lender had actually funded each of its relevant
Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing
interest at the rate obtained pursuant to clause (i) of the definition of
Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall determine (which
determination shall, absent demonstrable error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
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(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Borrower shall within 10 days pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Borrower (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
Promptly after any Lender has determined, in its sole judgment, that it
will make a request for increased compensation pursuant to this Section 2.7A,
such Lender will notify Borrower thereof. Failure on the part of any Lender so
to notify Borrower or to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such Lender's right
to demand compensation with respect to such period or any other period; provided
that Borrower shall not be under any obligation to compensate any Lender with
respect to increased costs or reductions with respect to any period prior to the
date that is six months prior to such request if such Lender knew of the
circumstances giving rise to such increased costs or reductions and of the fact
that such circumstances would in fact result in a claim for increased
compensation by reason of such increased costs or reductions; and provided,
further, that the foregoing limitation shall not apply to any increased costs or
reductions arising out of the retroactive application of any law, regulation,
rule, guideline or directive as aforesaid within such six-month period.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrower
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on the
overall net income of any Lender) imposed, levied, collected, withheld or
assessed by or within the United States of America or any political
subdivision in or of the United States of America or any other
jurisdiction from or to which a payment is made by or on behalf of
Borrower or by any federation or organization of which the United States
of America or any such jurisdiction is a member at the time of payment.
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(ii) Grossing-up of Payments. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Borrower to Administrative Agent
or any Lender under any of the Loan Documents:
(a) Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as
Borrower becomes aware of it;
(b) Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability
to pay is imposed on Borrower) for its own account or (if that
liability is imposed on Administrative Agent or such Lender, as the
case may be) on behalf of and in the name of Administrative Agent or
such Lender;
(c) the sum payable by Borrower in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making
of that deduction, withholding or payment, Administrative Agent or
such Lender, as the case may be, receives on the due date a net sum
equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required
by clause (b) above to pay, Borrower shall deliver to Administrative
Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to
the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the signature
pages hereof) or after the date of the Assignment Agreement pursuant to
which such Lender became a Lender (in the case of each other Lender) in
any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date of this
Agreement or at the date of such Assignment Agreement, as the case may be,
in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Borrower, on or prior to the
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Closing Date (in the case of each Lender listed on the signature
pages hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Borrower or Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms),
properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other
amounts payable under any of the Loan Documents or (2) if such
Lender is not a "bank" or other Person described in Section
881(c)(3) of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (1)
above, a Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service Form W-8 (or any successor form),
properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of interest payable under any of the Loan
Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby
agrees, from time to time after the initial delivery by such Lender
of such forms, certificates or other evidence, whenever a lapse in
time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, that
such Lender shall promptly (1) deliver to Administrative Agent for
transmission to Borrower two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and
two original copies of Internal Revenue Service Form W-8, as the
case may be, properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to payments to such Lender under the Loan Documents
or (2) notify Administrative Agent and Borrower of its inability to
deliver any such forms, certificates or other evidence.
(c) Borrower shall not be required to pay any additional
amount to any Non-US Lender under clause (c) of subsection 2.7B(ii)
if such Lender shall have failed to satisfy the requirements of
clause (a) or (b)(1) of this subsection 2.7B(iii); provided that if
such Lender shall have satisfied the requirements of subsection
2.7B(iii)(a) on the Closing Date (in the case of
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each Lender listed on the signature pages hereof) or on the date of
the Assignment Agreement pursuant to which it became a Lender (in
the case of each other Lender), nothing in this subsection
2.7B(iii)(c) shall relieve Borrower of its obligation to pay any
additional amounts pursuant to clause (c) of subsection 2.7B(ii) in
the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in
the interpretation, administration or application thereof, such
Lender is no longer properly entitled to deliver forms, certificates
or other evidence at a subsequent date establishing the fact that
such Lender is not subject to withholding as described in subsection
2.7B(iii)(a).
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by the National Association of Insurance Commissioners, any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its applicable lending
office) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of the National Association of
Insurance Commissioners, any such governmental authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within ten Business
Days after receipt by Borrower from such Lender of the statement referred to in
the next sentence, Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Borrower (with
a copy to Administrative Agent) a written statement, setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent demonstrable
error.
D. Substitute Lenders. In the event Borrower is required under the
provisions of this subsection 2.7 or subsection 3.6 to make payments in a
material amount to any Lender or in the event any Lender fails to lend to
Borrower in accordance with this Agreement or if any Lender becomes an Affected
Lender, Borrower may, so long as no Event of Default or Potential Event of
Default shall have occurred and be continuing, elect to terminate such Lender as
a party to this Agreement; provided that, concurrently with such termination,
(i) Borrower shall pay that Lender all principal, interest and fees and other
amounts (including without limitation, amounts, if any, owed under this
subsection 2.7 or subsection 3.6) owed to such Lender through such date of
termination, (ii) another financial institution satisfactory to Borrower and
Administrative Agent (or if Administrative Agent
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is also the Lender to be terminated, the successor Administrative Agent) shall
agree, as of such date, to become a Lender for all purposes under this Agreement
(whether by assignment or amendment) and to assume all obligations of the Lender
to be terminated as of such date, and (iii) all documents and supporting
materials necessary, in the judgment of Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent), to evidence the substitution of such Lender shall have
been received and approved by Administrative Agent as of such date.
2.8 Obligation of Lenders and Issuing Lender to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Borrower agrees
to pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office as described
in clause (i) above. A certificate as to the amount of any such expenses payable
by Borrower pursuant to this subsection 2.8 (setting forth in reasonable detail
the basis for requesting such amount) submitted by such Lender or Issuing Lender
to Borrower (with a copy to Administrative Agent) shall be conclusive absent
demonstrable error.
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SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. In addition to Borrower requesting that Lenders make
Revolving Loans pursuant to subsection 2.1A(ii) and that Swing Line Lender make
Swing Line Loans pursuant to subsection 2.1A(iii), Borrower may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that Issuing Lender issue Letters of Credit for the account of
Borrower for the purposes specified in the definitions of Commercial Letters of
Credit and Standby Letters of Credit. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, Issuing Lender shall issue such Letters of Credit in
accordance with the provisions of this subsection 3.1; provided that Borrower
shall not request that Issuing Lender issue (and Lender shall not issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect; or
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $10,000,000; or
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Standby
Letter of Credit (other than the Standby Letters of Credit set forth on
Schedule 3.1 annexed hereto which shall have the expiration dates set
forth on Schedule 3.1); provided that the immediately preceding clause (b)
shall not prevent Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive periods
not to exceed one year each unless Issuing Lender elects not to extend for
any such additional period; and provided, further that Issuing Lender
shall elect not to extend such Standby Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing (and has
not been waived in accordance with subsection 10.6) at the time Issuing
Lender must elect whether or not to allow such extension; or
(iv) any Commercial Letter of Credit having an expiration date (a)
later than the earlier of (a) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (b) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to Issuing Lender in its reasonable
discretion; or
(v) any Letter of Credit denominated in a currency other than
Dollars.
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B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Borrower desires the issuance of a
Letter of Credit, it shall deliver to Issuing Lender a Notice of Issuance
of Letter of Credit substantially in the form of Exhibit III annexed
hereto no later than 12:00 Noon (New York City time) at least three
Business Days, or such shorter period as may be agreed to by Issuing
Lender in any particular instance, in advance of the proposed date of
issuance. The Notice of Issuance of Letter of Credit shall specify (a) the
proposed date of issuance (which shall be a Business Day), (b) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial
Letter of Credit, (c) the face amount of the Letter of Credit, (d) the
expiration date of the Letter of Credit, (e) the name and address of the
beneficiary, and (f) either the verbatim text of the proposed Letter of
Credit or the proposed terms and conditions thereof, including a precise
description of any documents to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of the Letter of
Credit, would require Issuing Lender to make payment under the Letter of
Credit; provided that Issuing Lender, in its reasonable discretion, may
require changes in the text of the proposed Letter of Credit or any such
documents; and provided, further that, unless otherwise agreed by the
Issuing Lender, no Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same business day (under the
laws of the jurisdiction in which the office of Issuing Lender to which
such draft is required to be presented is located) that such draft is
presented if such presentation is made after 10:00 A.M. (in the time zone
of such office of Issuing Lender) on such business day.
Borrower shall notify Issuing Lender (and Administrative Agent, if
Administrative Agent is not Issuing Lender) prior to the issuance of any
Letter of Credit in the event that any of the matters to which Borrower
has certified in the applicable Notice of Issuance of Letter of Credit is
no longer true and correct as of the proposed date of issuance of such
Letter of Credit, and upon the issuance of any Letter of Credit Borrower
shall be deemed to have re-certified, as of the date of such issuance, as
to the matters to which Borrower is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, Issuing Lender shall issue the requested Letter of Credit in
accordance with Issuing Lender's standard operating procedures.
(iii) Notification to Lenders. Upon the issuance of any Letter of
Credit Issuing Lender shall promptly notify Administrative Agent (if
Issuing Lender is not Administrative Agent) and each other Lender of such
issuance, which notice shall be accompanied by a copy of such Letter of
Credit. Promptly after receipt of such notice (or, if Administrative Agent
is Issuing Lender, together with such notice), Administrative Agent shall
notify each Lender of the amount of such Lender's
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respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
(iv) Reports to Lenders. Within 30 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, Issuing
Lender shall deliver to each other Lender a report setting forth for such
calendar quarter the daily aggregate amount available to be drawn under
the Letters of Credit issued by Issuing Lender that were outstanding
during such calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from Issuing Lender a participation
in such Letter of Credit and any drawings honored thereunder in an amount equal
to such Lender's Pro Rata Share of the maximum amount which is or at any time
may become available to be drawn thereunder.
3.2 Letter of Credit Fees.
Borrower agrees to pay the following amounts with respect to Letters of
Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to Issuing Lender for its own account, equal to the
greater of (1) $500 and (2) 0.25% per annum of the daily amount available
to be drawn under such Letter of Credit and (b) a letter of credit fee,
payable to Administrative Agent for the account of Lenders, equal to the
product of the Applicable Margin for Revolving Loans that are Eurodollar
Rate Loans and the daily amount available to be drawn under such Letter of
Credit, each such fronting fee or letter of credit fee to be payable in
arrears on and to (but excluding) each February 1, May 1, August 1 and
November 1 of each year and computed on the basis of a 365-day or 366-day
year, as the case may be, for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges payable directly to Issuing Lender for its own account
in accordance with Issuing Lender's standard schedule for such charges in
effect at the time of such issuance, amendment, transfer or payment, as
the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2, the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination. Promptly
upon receipt by Administrative Agent of any amount described in clause (i)(b) of
this subsection 3.2, Administrative Agent shall distribute to each Lender its
Pro Rata Share of such amount.
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3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Borrower of Amounts Paid Under Letters of Credit. In
the event Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, Issuing Lender shall immediately notify Borrower and
Administrative Agent, and Borrower shall reimburse Issuing Lender on or before
the Business Day immediately following the date on which such drawing is honored
(the "Reimbursement Date") in an amount in Dollars and in same day funds equal
to the amount of such honored drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless Borrower shall have
notified Administrative Agent and Issuing Lender prior to 10:00 A.M. (New York
City time) on the date such drawing is honored that Borrower intends to
reimburse Issuing Lender for the amount of such honored drawing with funds other
than the proceeds of Revolving Loans, Borrower shall be deemed to have given a
timely Notice of Borrowing to Administrative Agent requesting Lenders to make
Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount
in Dollars equal to the amount of such honored drawing and (ii) subject to
satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders
shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans
in the amount of such honored drawing, the proceeds of which shall be applied
directly by Administrative Agent to reimburse Issuing Lender for the amount of
such honored drawing; and provided, further that if for any reason proceeds of
Revolving Loans are not received by Issuing Lender on the Reimbursement Date in
an amount equal to the amount of such honored drawing, Borrower shall reimburse
Issuing Lender, on demand, in an amount in same day funds equal to the excess of
the amount of such honored drawing over the aggregate amount of such Revolving
Loans, if any, which are so received. Nothing in this subsection 3.3B shall be
deemed to relieve any Lender from its obligation to make Revolving Loans on the
terms and conditions set forth in this Agreement, and Borrower shall retain any
and all rights it may have against any Lender resulting from the failure of such
Lender to make such Revolving Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of
Credit.
(i) Payment by Lenders. In the event that Borrower shall fail for
any reason to reimburse Issuing Lender as provided in subsection 3.3B in
an amount equal to the amount of any drawing honored by Issuing Lender
under a Letter of Credit issued by it, Issuing Lender shall promptly
notify each other Lender of the unreimbursed amount of such honored
drawing and of such other Lender's respective participation therein based
on such Lender's Pro Rata Share. Each Lender shall make available to
Issuing Lender an amount equal to its respective participation, in
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Dollars and in same day funds, at the office of Issuing Lender specified
in such notice, not later than 12:00 Noon (New York City time) on the
first business day (under the laws of the jurisdiction in which such
office of Issuing Lender is located) after the date notified by Issuing
Lender. In the event that any Lender fails to make available to Issuing
Lender on such business day the amount of such Lender's participation in
such Letter of Credit as provided in this subsection 3.3C, Issuing Lender
shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the rate customarily used by Issuing
Lender for the correction of errors among banks for three Business Days
and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from Issuing Lender
any amounts made available by Lender to Issuing Lender pursuant to this
subsection 3.3C in the event that it is determined by the final judgment
of a court of competent jurisdiction that the payment with respect to a
Letter of Credit by Issuing Lender in respect of which payment was made by
Lender constituted gross negligence or willful misconduct on the part of
Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Borrower. In the event Issuing Lender shall have been reimbursed by other
Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by Issuing Lender under a Letter of Credit issued by it,
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such
honored drawing such other Lender's Pro Rata Share of all payments
subsequently received by Issuing Lender from Borrower in reimbursement of
such honored drawing when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Borrower. Borrower agrees to pay to
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by Issuing Lender in
respect of each such honored drawing from the date such drawing is honored
to but excluding the date such amount is reimbursed by Borrower (including
any such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date such
drawing is honored to but excluding the Reimbursement Date, the rate then
in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with
respect to Revolving Loans that are Base Rate Loans. Interest payable
pursuant to this subsection 3.3D(i) shall be computed on the basis of a
365-day or 366-day year, as the case may be, for the actual number of days
elapsed in the period during which it accrues and shall be payable on
demand or, if no demand is made, on the date on which the related drawing
under a Letter of Credit is reimbursed in full.
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(ii) Distribution of Interest Payments by Issuing Lender. Promptly
upon receipt by Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, (a) Issuing Lender shall distribute to each other
Lender, out of the interest received by Issuing Lender in respect of the
period from the date such drawing is honored to but excluding the date on
which Issuing Lender is reimbursed for the amount of such drawing
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such other Lender would have
been entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored under such
Letter of Credit, and (b) in the event Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any
portion of such honored drawing, Issuing Lender shall distribute to each
other Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such honored drawing such other Lender's Pro Rata
Share of any interest received by Issuing Lender in respect of that
portion of such honored drawing so reimbursed by other Lenders for the
period from the date on which Issuing Lender was so reimbursed by other
Lenders to but excluding the date on which such portion of such honored
drawing is reimbursed by Borrower. Any such distribution shall be made to
a Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request.
3.4 Obligations Absolute.
The obligation of Borrower to reimburse Issuing Lender for drawings
honored under the Letters of Credit issued by it and to repay any Revolving
Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders
under subsection 3.3C(i) shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Borrower or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Borrower, whether in
connection with this Agreement, the transactions contemplated herein or
any unrelated transaction (including any underlying transaction between
Borrower or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
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(iv) payment by Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not substantially
comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by Issuing Lender under the applicable
Letter of Credit shall not have constituted gross negligence, willful misconduct
or bad faith of Issuing Lender under the circumstances in question.
3.5 Indemnification; Nature of Issuing Lender's Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Borrower hereby agrees to protect, indemnify, pay and save
harmless Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by Issuing
Lender, other than as a result of (a) the gross negligence, willful misconduct
or bad faith of Issuing Lender or (b) subject to the following clause (ii), the
wrongful dishonor by Issuing Lender of a proper demand for payment made under
any Letter of Credit issued by it or (ii) the failure of Issuing Lender to honor
a drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
B. Nature of Issuing Lender's Duties. As between Borrower and Issuing
Lender, Borrower assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, Issuing Lender shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the
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rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of any such Letter of Credit to comply fully with any conditions
required in order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuing Lender, including any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by Issuing Lender under or in connection with the Letters of
Credit issued by it or any documents and certificates delivered thereunder, if
taken or omitted in good faith, shall not put Issuing Lender under any resulting
liability to Borrower.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Borrower shall retain any and all rights it may have against Issuing Lender for
any liability arising solely out of the gross negligence, willful misconduct or
bad faith of Issuing Lender.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to the matters covered thereby), in the event that Issuing Lender
or any Lender shall determine (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto) that any law,
treaty or governmental rule, regulation or order, or any change therein or in
the interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by Issuing Lender or any
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subjects Issuing Lender or such Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than any
Tax on the overall net income of Issuing Lender or such Lender) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being
imposed on or suffered by Issuing Lender;
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(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by Issuing Lender or participations
therein purchased by such Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to Issuing Lender
or such Lender of agreeing to issue, issuing or maintaining any Letter of Credit
or agreeing to purchase, purchasing or maintaining any participation therein or
to reduce any amount received or receivable by Issuing Lender or such Lender (or
its applicable lending or letter of credit office) with respect thereto; then,
in any case, Borrower shall promptly pay to Issuing Lender or such Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts as may be necessary to compensate Issuing Lender or such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Issuing Lender or such Lender shall deliver to Borrower a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to Issuing Lender or such Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent demonstrable error. Promptly after Issuing Lender or any Lender
has determined, in its sole judgment, that it will make a request for increased
compensation pursuant to this subsection 3.6, Issuing Lender or such Lender, as
the case may be, will notify Borrower thereof. Failure on the part of Issuing
Lender or such Lender, as the case may be, so to notify Borrower or to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of Issuing Lender's or such Lender's right to demand
compensation with respect to such period or any other period; provided that
Borrower shall not be under any obligation to compensate Issuing Lender or any
Lender with respect to increased costs or reductions with respect to any period
prior to the date that is six months prior to such request if Issuing Lender or
such Lender knew of the circumstances giving rise to such increased costs or
reductions and of the fact that such circumstances would in fact result in a
claim for increased compensation by reason of such increased costs or
reductions; provided, further, that the foregoing limitation shall not apply to
any increased costs or reductions arising out of the retroactive application of
any law, regulation, rule, guideline or directive as aforesaid within such
six-month period.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to the satisfaction of the following conditions.
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4.1 Conditions to AXELs and Initial Revolving Loans and Swing Line Loans.
The obligations of Lenders to make the AXELs to be made on the Closing
Date are, in addition to the conditions precedent specified in subsection 4.2,
subject to prior or concurrent satisfaction of the following conditions:
A. Loan Party Documents. On or before the Closing Date, Borrower shall,
and shall cause each other Loan Party to, deliver to Lenders (or to
Administrative Agent for Lenders with sufficient originally executed copies,
where appropriate, for each Lender and its counsel) the following with respect
to Borrower or such Loan Party, as the case may be, each, unless otherwise
noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation and each other
state in which such Person is qualified as a foreign corporation to do
business and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Loan
Documents and Related Agreements to which it is a party, certified as of
the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party; and
(v) Executed originals of the Loan Documents to which such Person is
a party.
B. No Material Adverse Change. Except as set forth on Schedule 5.4, since
December 31, 1995, no event, change or development has occurred which has a
Material Adverse Effect.
C. Senior Subordinated Notes. On or prior to the Closing Date, Borrower
shall have issued and sold the Senior Subordinated Notes and received gross
proceeds of not less than $100,000,000. The Senior Subordinated Notes shall be
unsecured and shall have terms, including without limitation, maturity, interest
rates, covenants and subordination provisions in form and substance as set forth
in the Indenture dated August 15, 1996, with such changes thereto, if any, that
have been approved by Administrative Agent and Requisite
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Lenders or that would otherwise have been permitted to be made pursuant to
subsection 7.13A if the Subordinated Notes were issued and outstanding at the
time of any such change. Borrower shall deliver to Arranging Agent and
Administrative Agent true and complete copies of the all documentation relating
to the Senior Subordinated Notes, all of which shall be in form and substance
satisfactory to Arranging Agent and Administrative Agent. In no event shall the
maturity or the first scheduled repayment date on the Senior Subordinated Notes
be earlier than August 1, 2003.
D. Holdings Common Stock and Holdings Preferred Stock. On or prior to the
Closing Date, Holdings shall have (i) issued and sold $130,000,000 in the
aggregate of Holdings Common Stock and Holdings Preferred Stock to Loewen and
the Blackstone Investors and (ii) all of the foregoing, including the terms and
conditions thereof and all documentation executed therewith, shall be in form
and substance satisfactory to Arranging Agent and Administrative Agent.
E. Related Agreements. (i) Administrative Agent and Arranging Agent shall
have received executed or conformed copies of each of the Related Agreements and
any amendments thereto on or before the Closing Date, the terms are conditions
of which shall be in all respects satisfactory to Administrative Agent and
Arranging Agent, (ii) the Related Agreements shall be in full force and effect
and no term or condition thereof shall have been amended, modified or waived
after the execution thereof, except as provided in a written amendment thereto
delivered to and approved by Administrative Agent and Arranging Agent, (iii) no
Loan Party shall have failed in any material respect to perform any material
obligation or covenant required by the Related Agreement to be performed with or
complied with by it on or before the Closing Date and (iv) Administrative Agent
and Arranging Agent shall have received an Officers' Certificate from Holdings
and Borrower in form and substance satisfactory to Administrative Agent and
Arranging Agent to the effects set forth in clauses (i), (ii) and (iii) above.
F. Matters Relating to Existing Indebtedness. On the Closing Date,
Borrower and its Subsidiaries shall have (i) repaid in full all Existing
Indebtedness outstanding or defeased such Existing Indebtedness pursuant to
escrow agreements or other arrangements which shall be in form and substance
satisfactory to Arranging Agent and Administrative Agent, (ii) terminated any
commitments to lend or make other extensions of credit under the documentation
governing the Existing Indebtedness, (iii) deposited in the Collateral Account
amounts sufficient to repay in full or defease all Remaining Existing
Indebtedness, and (iv) delivered to Arranging Agent and Administrative Agent all
documents or instruments necessary (including termination statements and
discharges and releases of mortgages) to release all Liens securing the Existing
Indebtedness and release letters in form and substance satisfactory to Arranging
Agent and Administrative Agent from the holders of the Existing Indebtedness
releasing their claims and giving further assurances as to any other actions or
documents necessary to release all Liens securing such Existing Indebtedness.
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G. Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Holdings and Borrower shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Acquisition the other transactions
contemplated by the Loan Documents and the Related Agreements, and the continued
operation of the business conducted by Holdings and its Subsidiaries in
substantially the same manner as conducted prior to the consummation of the
Acquisition and each of the foregoing shall be in full force and effect, in each
case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. All applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the
Acquisition or the financing thereof. Except with respect to any protest or
objection of any Person to the decision of the Florida Cemetery Board approving
the Acquisition, no action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable agency to take action to set aside its
consent on its own motion shall have expired.
H. Consummation of Acquisition and Reorganization.
(i) All conditions to the Acquisition set forth in the Acquisition
Agreement shall have been satisfied or the fulfillment of any such
conditions which shall not have been satisfied shall have been waived with
the consent of Arranging Agent, Administrative Agent and Requisite
Lenders;
(ii) Arranging Agent and Administrative Agent shall have received
evidence reasonably satisfactory to Arranging Agent and Administrative
Agent that (a) the Acquisition shall become effective before or
concurrently with the making of the Initial Loans and (b) all of the
transactions contemplated in connection with the Reorganization shall
become effective before or concurrently with the making of the Initial
Loans and such transactions and the documentation entered into in
connection therewith shall be in form and substance reasonably
satisfactory to Arranging Agent and Administrative Agent;
(iii) the aggregate Cash proceeds from the issuance of the equity of
Holdings to Loewen and the Blackstone Investors contemplated by subsection
4.1D above, plus the Cash proceeds of the Senior Subordinated Notes, plus
the amount of the AXELs made on the Closing Date will equal or exceed the
sum of (a) the aggregate Cash consideration paid to the Existing
Stockholders in connection with the Acquisition, (b) the Transaction Costs
and (c) the amounts required to repay or defease the Existing Indebtedness
as required by subsection 4.1F; and
(iv) Arranging Agent and Administrative Agent shall have received an
Officers' Certificate of Borrower to the effect set forth in clauses
(i)-(iii) above.
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I. Security Interests in Personal Property. Each of Arranging Agent and
Administrative Agent shall have received evidence satisfactory to it that each
Loan Party shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii) and (iv)
below) that may be necessary or, in the opinion of Arranging Agent and
Administrative Agent, desirable in order to create in favor of Administrative
Agent, for the benefit of Lenders, a valid and (upon such filing and recording)
perfected First Priority security interest in the Collateral. Such actions shall
include the following:
(i) Schedules to Collateral Documents. Delivery to Administrative
Agent of accurate and complete schedules to all of the applicable
Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to Administrative
Agent of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Administrative Agent) representing
all capital stock pledged pursuant to the Holdings Pledge Agreement, the
Borrower Pledge Agreement and the Subsidiary Pledge Agreement and (b) all
promissory notes or other instruments (duly endorsed, where appropriate,
in a manner satisfactory to Administrative Agent) evidencing any
Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery to
Arranging Agent and Administrative Agent of (a) the results of a recent
search, by a Person satisfactory to Arranging Agent and Administrative
Agent, of all effective UCC financing statements and fixture filings and
all tax lien filings which may have been made with respect to any personal
or mixed property of any Loan Party, together with copies of all such
filings requested by Administrative Agent disclosed by such search, and
(b) UCC termination statements duly executed by all applicable Persons for
filing in all applicable jurisdictions as may be necessary to terminate
any effective UCC financing statements or fixture filings disclosed in
such search (other than any such financing statements or fixture filings
in respect of Liens permitted to remain outstanding pursuant to the terms
of this Agreement); and
(iv) UCC Financing Statements. Delivery to Administrative Agent of
UCC financing statements duly executed by each applicable Loan Party with
respect to all personal property Collateral of such Loan Party, for filing
in all jurisdictions as may be necessary or, in the opinion of Arranging
Agent and Administrative Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral Documents.
J. Financial Statements; Pro Forma Balance Sheet. On or before the Closing
Date, Lenders shall have received from Borrower (i) audited and restated
financial statements of Holdings and its Subsidiaries for Fiscal Year 1995,
consisting of a balance
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sheet and the related consolidated statements of income, stockholders' equity
and cash flows for such Fiscal Year, (ii) unaudited financial statements of
Holdings and its Subsidiaries for the Fiscal Quarter ended March 31, 1996 and
for the monthly periods ended April 30, 1996 and May 31, 1996 consisting of a
balance sheet and the related consolidated statements of income, stockholders'
equity and cash flows for such periods, all in reasonable detail and certified
by the chief financial officer of Holdings that they fairly present the
financial condition of Holdings and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (iii) a pro forma consolidated balance sheet of Holdings and
its Subsidiaries for the date 55 days prior to the Closing Date, prepared in
accordance with GAAP and reflecting the consummation of the Acquisition and
Reorganization, the related financings and the other transactions contemplated
by the Loan Documents and the Related Agreements, which pro forma financial
statements shall be in form and substance consistent with the pro forma
financial statements contained in the Confidential Information Memorandum and
otherwise satisfactory to Lenders.
K. Solvency Opinion. On the Closing Date, Arranging Agent, Administrative
Agent and Lenders shall have received a letter from Murray, Devine & Co., dated
the Closing Date and addressed to Arranging Agent, Administrative Agent and
Lenders, in form and substance reasonably satisfactory to Arranging Agent and
Administrative Agent, demonstrating that, after giving effect to the
consummation of the Acquisition, the Reorganization, the related financings and
the other transactions contemplated by the Loan Documents and the Related
Agreements, Holdings and its Subsidiaries on a consolidated basis and Borrower
will be Solvent.
L. Evidence of Insurance. Arranging Agent and Administrative Agent shall
have received a certificate from Borrower's insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to
subsection 6.4 is in full force and effect and that Administrative Agent on
behalf of Lenders has been named as additional insured and/or loss payee
thereunder to the extent required under subsection 6.4.
M. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Simpson Thacher & Bartlett, counsel for Loan
Parties, dated as of the Closing Date and substantially in the form of Exhibit
VIII annexed hereto and as to such other matters as Administrative Agent or
Arranging Agent and acting on behalf of Lenders may reasonably request and (ii)
evidence satisfactory to Arranging Agent and Administrative Agent that Borrower
has requested such counsel to deliver such opinions to Lenders.
N. Opinions of Agents' Counsel. Lenders shall have received originally
executed copies of one or more favorable written opinions of O'Melveny & Myers
LLP, counsel to Agents, dated as of the Closing Date, substantially in the form
of Exhibit IX annexed hereto and as to such other matters as Arranging Agent may
reasonably request.
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O. Opinions of Counsel Delivered Under Related Agreements. Administrative
Agent and Arranging Agent and its counsel shall have received copies of each of
the opinions of counsel delivered to the parties under the Acquisition Agreement
and the purchase or subscription agreements relating to the Senior Subordinated
Notes and the Holdings Common Stock and Holdings Preferred Stock, together, to
the extent agreed to by such law firm, with a letter from each such counsel
authorizing Lenders to rely upon such opinion to the same extent as though it
were addressed to Lenders.
P. Fees. Borrower shall have paid to Arranging Agent and Administrative
Agent, for distribution (as appropriate) to Arranging Agent, Administrative
Agent and Lenders, the fees payable on the Closing Date referred to in
subsection 2.3 and all other compensation, fees, costs and expenses (including
fees and expenses of counsel to Arranging Agent and Administrative Agent) and
payable hereunder or in connection herewith to Arranging Agent and
Administrative Agent on or prior to the Closing Date.
Q. Administrative Agreement. Administration Agent and Arranging Agent
shall have received duly executed copies of the Administrative Agreement, which
shall be in form and substance reasonably satisfactory to Arranging Agent and
Administrative Agent.
R. Representations and Warranties; Performance of Agreements. Holdings and
Borrower shall have delivered to Arranging Agent and Administrative Agent an
Officers' Certificate, in form and substance satisfactory to Arranging Agent and
Administrative Agent, to the effect that the representations and warranties in
Section 5 hereof are true and correct in all material respects on and as of the
Closing Date to the same extent as though made on and as of that date (or, to
the extent such representations and warranties specifically relate to an earlier
date, that such representations and warranties were true and correct in all
material respects on and as of such earlier date) and that each of Holdings and
Borrower shall have performed in all material respects all agreements and
satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Closing Date except as otherwise disclosed to
and agreed to in writing by Arranging Agent, Administrative Agent and Requisite
Lenders.
S. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, or Arranging Agent and its counsel shall be
satisfactory in form and substance to Administrative Agent and Arranging Agent
and such counsel, and Administrative Agent, Arranging Agent and such counsel
shall have received all such counterpart originals or certified copies of such
documents as Administrative Agent or Arranging Agent may reasonably request.
Notwithstanding anything herein to the contrary, it is understood and
agreed that documents, certificates and other items set forth on Schedule 6.12
annexed hereto shall be delivered after the Closing Date in accordance with
subsection 6.12.
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Each Lender by delivering its signature page to this Agreement and funding
its AXEL Commitment on the Closing Date shall be deemed to have acknowledged
receipt of, and consented to and approved (as long as substantially in the form
delivered to Lenders including any changed pages thereto delivered to Lenders),
each Loan Document and each other document required to be approved by Requisite
Lenders or Lenders, as applicable.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing, in each case signed by the chief executive officer, the president,
the chief financial officer or the treasurer of Borrower or by any executive
officer of Borrower designated by any of the above-described officers on behalf
of Borrower in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects
on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement provides
shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including Regulation G, Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Borrower,
threatened, any action, suit, proceeding, governmental investigation or
arbitration
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against or affecting Holdings or any of its Subsidiaries or any property
of Holdings or any of its Subsidiaries that has not been disclosed by
Borrower in writing pursuant to subsection 5.6 or 6.1(viii) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred
no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Administrative Agent or of Requisite Lenders,
could reasonably be expected to have a Material Adverse Effect; and no
injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or proceeding
seeking to enjoin or otherwise prevent the consummation of, or to recover
any damages or obtain relief as a result of, the transactions contemplated
by this Agreement or the making of Loans hereunder.
4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not Issuing
Lender is obligated to issue such Letter of Credit) is subject to the following
conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the
provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the chief executive
officer, the president, the chief financial officer or the treasurer of
Borrower or by any executive officer of Borrower designated by any of the
above-described officers on behalf of Borrower in a writing delivered to
Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as Issuing
Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same
extent as if the issuance of such Letter of Credit were the making of a
Loan and the date of issuance of such Letter of Credit were a Funding
Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lender to issue Letters of Credit and to induce other
Lenders to purchase participations therein, Holdings and Borrower each represent
and warrant to each Lender,
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on the date of this Agreement, on each Funding Date and on the date of issuance
of each Letter of Credit, that the following statements are true, correct and
complete:
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto,
except, in the case of any Loan Party other than Holdings or Borrower, where
failure to be in good standing has not had and could not reasonably be expected
to have a Material Adverse Effect. Each Loan Party has all requisite corporate
power and authority to own and operate its properties, to carry on its business
as now conducted and as proposed to be conducted, to enter into the Loan
Documents and Related Agreements to which it is a party and to carry out the
transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and could not reasonably be expected to have a Material Adverse Effect.
C. Conduct of Business. Loan Parties are engaged only in the businesses
permitted to be engaged in pursuant to subsection 7.14.
D. Subsidiaries. All of the Subsidiaries of Holdings as of the Closing
Date are identified in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be
supplemented from time to time pursuant to the provisions of subsection
6.1(xiv). The capital stock of each of the Subsidiaries of Holdings identified
in Schedule 5.1 annexed hereto (as so supplemented) is duly authorized, validly
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Schedule 5.1 annexed hereto (as so supplemented) correctly sets
forth the ownership interest of Borrower and each of its Subsidiaries in each of
the Subsidiaries of Borrower identified therein.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents and the Related Agreements have been duly authorized by all
necessary corporate action on the part of each Loan Party that is a party
thereto.
B. No Conflict. The execution, delivery and performance by Loan Parties of
the Loan Documents and the Related Agreements to which they are parties and the
consummation of the transactions contemplated by the Loan Documents and such
Related Agreements do not and will not (i) violate any provision of (a) any law
or any governmental rule or regulation applicable to any Loan Party or any of
its Subsidiaries except for such violations which could not reasonably be
expected to have a Material Adverse Effect, (b)
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the Certificate or Articles of Incorporation or Bylaws of any Loan Party or any
of its Subsidiaries or (c) any order, judgment or decree of any court or other
agency of government binding on any Loan Party or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of any Loan Party or
any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect, (iii) result in or require the creation or imposition of any
material Lien upon any of the properties or assets of any Loan Party or any of
its Subsidiaries (other than Permitted Encumbrances or any Liens created under
any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party or any
of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Closing Date and disclosed in writing to Lenders or
which could not reasonably be expected to have a Material Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by Loan
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except as provided in subsection 5.16B with respect to the Collateral
Documents and as set forth in subsection 4.1G and except to the extent the
absence thereof could not reasonably be expected to have a Material Adverse
Effect.
D. Binding Obligation. Each of the Loan Documents and Related Agreements
has been duly executed and delivered by each Loan Party that is a party thereto
and is the legally valid and binding obligation of such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
E. Valid Issuance of Holdings Common Stock, Holdings Preferred Stock and
Senior Subordinated Notes.
(i) Holdings Common Stock and Holdings Preferred Stock. The Holdings
Common Stock and Holdings Preferred Stock to be sold on or before the
Closing Date, when issued and delivered, will be duly and validly issued,
fully paid and non-assessable. The issuance and sale of such Holdings
Common Stock and Holdings Preferred Stock, upon such issuance and sale,
will either (a) have been registered or qualified under applicable federal
and state securities laws or (b) be exempt therefrom.
(ii) Senior Subordinated Notes. Borrower has the corporate power and
authority to issue the Senior Subordinated Notes. The Senior Subordinated
Notes
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when issued and paid for, will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). The
subordination provisions of the Senior Subordinated Notes will be
enforceable against the holders thereof and the Loans and all other
monetary Obligations hereunder are and will be within the definition of
"Senior Indebtedness" included in such provisions. The Senior Subordinated
Notes, when issued and sold, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be
exempt therefrom.
5.3 Financial Condition.
Borrower has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited and restated
consolidated balance sheet of Holdings and its Subsidiaries as at December 31,
1995 and the related consolidated statements of income, stockholders' equity and
cash flows of Holdings and its Subsidiaries for the Fiscal Year then ended and
(ii) the unaudited consolidated balance sheet of Holdings and its Subsidiaries
as at March 31, 1996 and the related unaudited consolidated statements of
income, stockholders' equity and cash flows of Holdings and its Subsidiaries for
the three months then ended. All such statements were prepared in conformity
with GAAP and fairly present, in all material respects, the financial position
(on a consolidated basis) of the entities described in such financial statements
as at the respective dates thereof and the results of operations and cash flows
(on a consolidated basis) of the entities described therein for each of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.
Except as set forth on Schedule 5.3, as of the Closing Date, Borrower does not
(and will not following the funding of the initial Loans) have any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the foregoing
financial statements or the notes thereto and which in any such case is material
in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Borrower or any of its Subsidiaries.
5.4 No Material Adverse Change; No Restricted Junior Payments.
Except as set forth on Schedule 5.4, since December 31, 1995, no event or
change has occurred that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made, or set
apart any sum or property for, any Restricted Junior Payment or agreed to do so
except as permitted by subsection 7.5.
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5.5 Title to Properties; Liens.
Loan Parties have (i) good, sufficient and legal title to (in the case of
fee interests in real property), (ii) valid leasehold interests in (in the case
of leasehold interests in real or personal property), or (iii) good title to (in
the case of all other personal property), all of their respective properties and
assets reflected in the financial statements referred to in subsection 5.3 or in
the most recent financial statements delivered pursuant to subsection 6.1, in
each case except for Permitted Encumbrances and assets disposed of since the
date of such financial statements in the ordinary course of business or as
otherwise permitted under subsection 7.7. Except as permitted by this Agreement,
all such properties and assets are free and clear of Liens.
5.6 Litigation; Adverse Facts.
Except as set forth in Schedule 5.6 annexed hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of any Loan Party or any of its Subsidiaries) at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (including any Environmental Claims) that are pending or, to the
knowledge of Holdings or Borrower, threatened against or affecting any Loan
Party or any of its Subsidiaries or any property of any Loan Party or any of its
Subsidiaries and that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. No Loan Party nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, or (ii) is subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all income tax returns
and reports of Holdings and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes shown on such tax returns to be due and
payable and all assessments, fees and other governmental charges upon Holdings
and its Subsidiaries and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. No Loan Party knows of any proposed tax assessment against any Loan
Party or any of its Subsidiaries which is not being actively contested by such
Loan Party or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, as shall be
required in conformity with GAAP shall have been made or provided therefor.
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5.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.
A. No Loan Party nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, could not reasonably be expected to have a
Material Adverse Effect.
B. No Loan Party nor any of its Subsidiaries is a party to or is otherwise
subject to any agreements or instruments or any charter or other internal
restrictions which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all the
Material Contracts in effect on the Closing Date. Except as described on
Schedule 5.8, all such Material Contracts are in full force and effect and no
material defaults currently exist thereunder.
5.9 Governmental Regulation.
No Loan Party nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation (other than usury laws, Regulation X and
other similar laws) which may limit its ability to incur Indebtedness or which
may otherwise render all or any portion of the Obligations unenforceable.
5.10 Securities Activities.
A. No Loan Party nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than 25%
of the value of the assets (either of Borrower only or of Borrower and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Borrower and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 Employee Benefit Plans.
A. Each Loan Party and each of their respective ERISA Affiliates are in
material compliance with all applicable provisions and requirements of ERISA and
the regulations
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and published interpretations thereunder with respect to each Employee Benefit
Plan, and have performed all obligations under each Employee Benefit Plan which
could reasonably be expected to result in a material liability. Each Employee
Benefit Plan which is intended to qualify under Section 401(a) of the Internal
Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code or except as set forth in Schedule 5.11 annexed hereto, no Employee
Benefit Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of any Loan Party or
any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the amount
of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA),
individually or in the aggregate for all Pension Plans (excluding for purposes
of such computation any Pension Plans with respect to which assets exceed
benefit liabilities), does not exceed $1,000,000.
E. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Loan Parties
and their respective ERISA Affiliates for a complete withdrawal from such
Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221(e)
of ERISA, does not exceed $1,000,000.
5.12 Certain Fees.
Except to the extent included in Transaction Costs, no broker's or
finder's fee or commission will be payable by Holdings or any of its
Subsidiaries with respect to this Agreement or any of the transactions
contemplated hereby, and Holdings and Borrower hereby, jointly and severally,
indemnify Lenders against, and agrees that it will hold Lenders harmless from,
any claim, demand or liability for any such broker's or finder's fees alleged to
have been incurred in connection herewith or therewith and any expenses
(including reasonable fees, expenses and disbursements of counsel) arising in
connection with any such claim, demand or liability.
5.13 Environmental Protection.
Except as set forth in Schedule 5.13 annexed hereto,
(i) No Loan Party nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to
(a) any Environmental Law, (b) any Environmental Claim, or (c) any
Hazardous Materials Activity;
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(ii) No Loan Party nor any of its Subsidiaries has received any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss.
9604) or any comparable state law;
(iii) There are and, to Holdings' and Borrower's knowledge have
been, no conditions, occurrences, or Hazardous Materials Activities which
could reasonably be expected to form the basis of an Environmental Claim
against any Loan Party or any of its Subsidiaries that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect;
(iv) Except as could not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect, (a) no Loan Party
nor any of its Subsidiaries nor, to Holdings' or Borrower's knowledge, any
predecessor of any Loan Party or any of its Subsidiaries has filed any
notice under any Environmental Law indicating past or present treatment of
Hazardous Materials at any Facility, and (b) no Loan Party's or any of its
Subsidiaries' operations involve the transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or
any state equivalent; and
(v) Compliance with all current or, to the best knowledge of each
Loan Party and its Subsidiaries, future requirements pursuant to or under
Environmental Laws could not, individually or in the aggregate, reasonably
be expected to give rise to a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the contrary, no event
or condition has occurred or is occurring with respect to any Loan Party
relating to any Environmental Law, any Release of Hazardous Materials, or any
Hazardous Materials Activity, including any matter disclosed on Schedule 5.13
annexed hereto, which individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
5.14 Employee Matters.
Except as set forth on Schedule 5.14 annexed hereto, no Loan Party nor any
of its Subsidiaries is party to any collective bargaining agreement and, to the
knowledge of Holdings and Borrower, no union representation question exists with
respect to the employees of any Loan Party or any of its Subsidiaries. There is
no strike, work stoppage, slow down, lockout or other labor dispute pending, or
to the knowledge of Holdings and Borrower, threatened, involving any Loan Party
or any of its Subsidiaries that singly or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
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5.15 Solvency.
Each Loan Party is and, upon the incurrence of any Obligations by such
Loan Party on any date on which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and delivery
of the Collateral Documents by Loan Parties, together with (i) the actions taken
on or prior to the date hereof pursuant to subsections 4.1I and 6.8 and (ii) the
delivery to Administrative Agent of any Pledged Collateral not delivered to
Administrative Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered) are
effective to create in favor of Administrative Agent for the benefit of Lenders,
as security for the respective Secured Obligations (as defined in the applicable
Collateral Document in respect of any Collateral), a valid and perfected First
Priority Lien on all of the Collateral, and all filings and other actions
necessary or desirable to perfect and maintain the perfection and First Priority
status of such Liens have been duly made or taken and remain in full force and
effect, other than the filing of any UCC financing statements delivered to
Administrative Agent for filing (but not yet filed) and the periodic filing of
UCC continuation statements in respect of UCC financing statements filed by or
on behalf of Administrative Agent.
B. Governmental Authorizations. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge or grant by any Loan Party of the
Liens purported to be created in favor of Administrative Agent pursuant to any
of the Collateral Documents or (ii) the exercise by Administrative Agent of any
rights or remedies in respect of any Collateral (whether specifically granted or
created pursuant to any of the Collateral Documents or created or provided for
by applicable law), except for filings or recordings contemplated by subsection
5.16A and except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of
securities.
C. Absence of Third-Party Filings. Except such as may have been filed in
favor of Administrative Agent as contemplated by subsection 5.16A and in respect
of Liens permitted under subsection 7.2 hereof, following the filing of the UCC
termination statements delivered to Administrative Agent pursuant to subsection
4.1I(iii), no effective UCC financing statement, fixture filing or other
instrument similar in effect covering all or any part of the Collateral is on
file in any filing or recording office.
D. Margin Regulations. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to
Administrative Agent by or on behalf of any Loan Party with respect to any of
the Collateral (in each case
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taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
5.17 Representations and Warranties in Acquisition Agreement.
Except to the extent otherwise set forth herein or in the Schedules
hereto, each of the representations and warranties in the Acquisition Agreement
is true and correct in all material respects as of the date hereof (or as of any
earlier date to which such representation and warranty specifically relates) and
will be true and correct in all material respects as of the Closing Date, or as
of such earlier date (as the case may be), in each case subject to the
qualifications set forth in the schedules to the Acquisition Agreement.
5.18 Disclosure.
No representation or warranty of any Loan Party contained in the
Confidential Information Memorandum or in any Loan Document or in any other
document, certificate or written statement furnished to Lenders by any Loan
Party for use in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact (known to Holdings or Borrower, in the case of any document not furnished
by it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Holdings and
Borrower to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections will
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Holdings or Borrower
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed herein or in such other documents, certificates
and statements furnished to Lenders for use in connection with the transactions
contemplated hereby.
SECTION 6.
AFFIRMATIVE COVENANTS
Each of Holdings and Borrower covenants and agrees that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, each of Holdings and Borrower shall perform, and shall cause each of
its Subsidiaries to perform, all covenants in this Section 6.
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6.1 Financial Statements and Other Reports.
Holdings will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Borrower will deliver to Administrative Agent and Lenders:
(i) Quarterly Financials: as soon as available and in any event
within 45 days (or, in the case of the Fiscal Quarter ending September 30,
1996, 90 days) after the end of each Fiscal Quarter, (a) the consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such
Fiscal Quarter and the related consolidated statements of income,
stockholders' equity and cash flows of Holdings and its Subsidiaries for
such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter and, commencing
March 31, 1997, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the Financial Plan for the current
Fiscal Year, all in reasonable detail and certified by the chief financial
officer of Holdings that they fairly present, in all material respects,
the financial condition of Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustments, and (b) a narrative report describing the operations
of Holdings and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter; provided that delivery of Borrower's Form 10-Q for such Fiscal
Quarter shall be deemed to satisfy the requirements of this clause (b);
(ii) Year-End Financials: as soon as available and in any event
within 90 days (or, in the case of the Fiscal Year ending December 31,
1996, 120 days) after the end of each Fiscal Year, (a) the consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of income,
stockholders' equity and cash flows of Holdings and its Subsidiaries for
such Fiscal Year, setting forth in each case in comparative form the
corresponding figures for the previous Fiscal Year and the corresponding
figures from the Financial Plan for the Fiscal Year covered by such
financial statements, all in reasonable detail and certified by the chief
financial officer of Holdings that they fairly present, in all material
respects, the financial condition of Holdings and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated, (b) a narrative report describing the
operations of Holdings and its Subsidiaries in the form prepared for
presentation to senior management for such Fiscal Year; provided that
delivery of Borrower's Form 10-K for such Fiscal Year shall be deemed to
satisfy the requirements of this clause (b), and (c) in the case of such
consolidated financial statements, a report thereon of KPMG Peat Marwick
LLP or other independent certified public accountants of recognized
national standing selected by Holdings and satisfactory to Administrative
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Agent, which report shall be unqualified, shall express no doubts about
the ability of Holdings and its Subsidiaries to continue as a going
concern, and shall state that such consolidated financial statements
fairly present, in all material respects, the consolidated financial
position of Holdings and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial statements) and
that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of Holdings and its Subsidiaries pursuant
to subdivisions (i) and (ii) above, (a) an Officers' Certificate of
Holdings stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of Holdings
and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do
not have knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Holdings has taken, is taking and proposes to take with
respect thereto; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
accounting periods with the restrictions contained in Section 7, in each
case to the extent compliance with such restrictions is required to be
tested at the end of the applicable accounting period;
(iv) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Holdings and its Subsidiaries
delivered pursuant to subdivisions (i), (ii) or (xi) of this subsection
6.1 will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions
had no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii) or (xi) of this subsection 6.1 following such change
to the extent Borrower is required to prepare such pro forma financial
statements under the Securities Act or the Exchange Act or the rules and
regulations thereunder, consolidated financial statements of Holdings and
its Subsidiaries for (1) the current Fiscal Year to the effective date of
such change and (2) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (i), (ii) or (xi) of this subsection 6.1 following such
change, a written statement of the chief accounting officer or chief
financial officer of Holdings setting forth the material differences
(including any
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differences that would affect any calculations relating to the financial
covenants set forth in subsection 7.6) which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(v) Accountants' Certification: concurrently with any delivery of
financial statements under subdivision (ii) above, a certificate of the
accounting firm opining on or certifying such statements on behalf of
Borrower (which certificate may be limited to accounting matters and may
disclaim responsibility for legal interpretations) certifying that no
Event of Default or Potential Event of Default has occurred or, if such an
Event of Default or Potential Event of Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed
to be taken with respect thereto;
(vi) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Holdings to its
security holders or by any Subsidiary of Holdings to its security holders
other than Holdings or another Subsidiary of Holdings, (b) all regular and
periodic reports and all registration statements (other than on Form S-8
or a similar form) and prospectuses, if any, filed by Holdings or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission, and (c) all press releases and other statements made
available generally by Holdings or any of its Subsidiaries to the public
concerning material developments in the business of Holdings or any of its
Subsidiaries;
(vii) Events of Default, etc.: promptly upon any officer of Holdings
or Borrower obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender has given any notice (other than to Administrative
Agent) or taken any other action with respect to a claimed Event of
Default or Potential Event of Default, (b) that any Person has given any
notice to Holdings or Borrower or any of its Subsidiaries or taken any
other action with respect to a claimed default or event or condition of
the type referred to in subsection 8.2, (c) at any time when neither
Holdings nor Borrower is required to file such reports, of any condition
or event that would be required to be disclosed in a current report filed
by Holdings or Borrower with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Holdings or Borrower were required to file such reports under
the Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period
of existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition,
and what action Holdings has taken, is taking and proposes to take with
respect thereto;
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(viii) Litigation or Other Proceedings: promptly upon any officer of
Holdings or Borrower obtaining knowledge of (a) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Holdings or any of its Subsidiaries or
any property of Holdings or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by Holdings to Lenders
or (b) any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Holdings to enable Lenders and their counsel to
evaluate such matters;
(ix) ERISA Events: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action Holdings, any of its Subsidiaries or any
of their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened
by the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto;
(x) ERISA Notices: with reasonable promptness, copies of (a) if
requested by Administrative Agent each Schedule B (Actuarial Information)
to the annual report (Form 5500 Series) filed by Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan; (b) all notices
received by Holdings, any of its Subsidiaries or any of their respective
ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA
Event; and (c) copies of such other documents or governmental reports or
filings relating to any Employee Benefit Plan as Administrative Agent
shall reasonably request;
(xi) Financial Plans: as soon as practicable and in any event no
later than 60 days after the beginning of each Fiscal Year, a consolidated
plan and financial forecast for such Fiscal Year (the "Financial Plan" for
such Fiscal Year), including (a) a forecasted consolidated balance sheet
and forecasted consolidated statements of income and cash flows of
Holdings and its Subsidiaries for each such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based, (b)
forecasted consolidated statements of income and cash flows of Holdings
and its Subsidiaries for each month of the first such Fiscal Year,
together with an explanation of the assumptions on which such forecasts
are based, and (c) such other information and projections as any Lender
may reasonably request;
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(xii) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Holdings and its Subsidiaries and all
material insurance coverage planned to be maintained by Holdings and its
Subsidiaries in the immediately succeeding Fiscal Year;
(xiii) Board of Directors: with reasonable promptness, written
notice of any change in the Board of Directors of Holdings or Borrower;
(xiv) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Holdings, a written notice setting forth with respect to
such Person (a) the date on which such Person became a Subsidiary of
Holdings and (b) all of the data required to be set forth in Schedule 5.1
annexed hereto with respect to all Subsidiaries of Holdings (it being
understood that such written notice shall be deemed to supplement Schedule
5.1 annexed hereto for all purposes of this Agreement);
(xv) Material Contracts: promptly, and in any event within ten
Business Days after any Material Contract of Holdings or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Holdings or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto;
(xvi) Administrative Agreement: As promptly as practicable, and in
any event within ten Business Days prior to such termination, a written
notice of any pending termination of any Administrative Agreement;
(xvii) UCC Search Report: As promptly as practicable after the date
of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.1I(iv) or 6.8A, copies
of completed UCC searches evidencing the proper filing, recording and
indexing of all such UCC financing statement and listing all other
effective financing statements that name such Loan Party as debtor,
together with copies of all such other financing statements not previously
delivered to Administrative Agent by or on behalf of Holdings or such Loan
Party; and
(xviii) Other Information: with reasonable promptness, such other
information and data with respect to Holdings or any of its Subsidiaries
as from time to time may be reasonably requested by any Lender.
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6.2 Corporate Existence, etc.
Except as permitted under subsection 7.7, Holdings will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect (i) its corporate existence and (ii) all rights and franchises the loss
of which could reasonably be expected to have a Material Adverse Effect;
provided, however that neither Holdings nor any of its Subsidiaries shall be
required to preserve any such right or franchise if the Board of Directors of
Holdings or such Subsidiary shall determine that the preservation thereof is no
longer desirable in the conduct of the business of Holdings or such Subsidiary,
as the case may be, and that the loss thereof is not disadvantageous in any
material respect to Holdings, such Subsidiary or Lenders.
6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Holdings will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided that no such charge or claim need be paid if it is
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as (i) such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor and (ii) in the case of a charge or claim which has or may become
a Lien against any of the Collateral, such contest proceedings conclusively
operate to stay the sale of any portion of the Collateral to satisfy such charge
or claim.
B. Holdings will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Holdings or any of its Subsidiaries).
6.4 Maintenance of Properties; Insurance; Application of Net Insurance/
Condemnation Proceeds.
A. Maintenance of Properties. Holdings will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all properties used or
useful in the business of Holdings and its Subsidiaries (including all
Intellectual Property) that are material to Holdings and its Subsidiaries, taken
as a whole, and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof.
B. Insurance. Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities,
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losses or damage in respect of the assets, properties and businesses of Borrower
and its Subsidiaries as may customarily be carried or maintained under similar
circumstances by corporations of established reputation engaged in similar
businesses, in each case in such amounts (giving effect to self-insurance), with
such deductibles, covering such risks and otherwise on such terms and conditions
as shall be customary for corporations similarly situated in the industry.
Without limiting the generality of the foregoing, Borrower will maintain or
cause to be maintained replacement value casualty insurance on the Collateral
constituting tangible personal property under such policies of insurance, with
such insurance companies, in such amounts, with such deductibles, and covering
such risks as are at all times satisfactory to Administrative Agent in its
commercially reasonable judgment. Each such policy of insurance shall (i) name
Administrative Agent for the benefit of Lenders as an additional insured
thereunder as its interests may appear and (ii) in the case of each business
interruption and casualty insurance policy, contain a loss payable clause or
endorsement, satisfactory in form and substance to Administrative Agent, that
names Administrative Agent for the benefit of Lenders as the loss payee
thereunder for any covered loss in excess of $250,000 and provides for at least
30 days prior written notice to Administrative Agent of any modification or
cancellation of such policy.
C. Application of Net Insurance/Condemnation Proceeds.
(i) Business Interruption Insurance. Upon receipt by Borrower or any
of its Subsidiaries of any business interruption insurance proceeds
constituting Net Insurance/Condemnation Proceeds, (a) so long as no Event
of Default or Potential Event of Default shall have occurred and be
continuing, Borrower or such Subsidiary may retain and apply such Net
Insurance/Condemnation Proceeds for working capital purposes, and (b) if
an Event of Default or Potential Event of Default shall have occurred and
be continuing and Administrative Agent shall so request, Borrower shall
apply an amount equal to such Net Insurance/Condemnation Proceeds to
prepay the Loans (and/or the Revolving Loan Commitments shall be reduced)
as provided in subsection 2.4B(iii)(b);
(ii) Casualty Insurance/Condemnation Proceeds. Upon receipt by
Borrower or any of its Subsidiaries of any Net Insurance/Condemnation
Proceeds other than from business interruption insurance, (a) so long as
no Event of Default or Potential Event of Default shall have occurred and
be continuing, Borrower shall, or shall cause one or more of its
Subsidiaries to, promptly and diligently apply such Net
Insurance/Condemnation Proceeds to pay or reimburse the costs of
repairing, restoring or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received or, to the extent not so
applied, to prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) as provided in subsection 2.4B(iii)(b), and (b) if an Event of
Default or Potential Event of Default shall have occurred and be
continuing and Administrative Agent shall so request, Borrower shall apply
an amount equal to such Net Insurance/Condemnation Proceeds to prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) as provided
in subsection 2.4B(iii)(b).
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(iii) Net Insurance/Condemnation Proceeds Received by Administrative
Agent. Upon receipt by Administrative Agent of any Net
Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent
Borrower would have been required to apply such Net Insurance/Condemnation
Proceeds (if it had received them directly) to prepay the Loans and/or
reduce the Revolving Loan Commitments, Administrative Agent shall, and
Borrower hereby authorizes Administrative Agent to, apply such Net
Insurance/Condemnation Proceeds to prepay the Loans (and/or the Revolving
Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b),
and (b) to the extent the foregoing clause (a) does not apply and, and
Borrower shall deliver written notice to Administrative Agent that it has
elected to apply such Net Insurance/Condemnation Proceeds to the costs of
repairing, restoring, or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received, Administrative Agent shall
deliver to Borrower and Borrower shall, or shall cause one or more of its
Subsidiaries to, promptly apply such Net Insurance/Condemnation Proceeds
to the costs of repairing, restoring or replacing the assets in respect of
which such Net Insurance/Condemnation Proceeds were received.
6.5 Inspection Rights.
Holdings shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect the
headquarters of Holdings or Borrower, to inspect its and their financial and
accounting records, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants (provided that
Holdings or Borrower may, if it so chooses, be present at or participate in any
such discussion), all upon reasonable notice and at such reasonable times during
normal business hours and as often as may reasonably be requested.
6.6 Compliance with Laws, etc.
Holdings shall comply, and shall cause each of its Subsidiaries and all
other Persons occupying any Facilities to comply, with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority
(including all applicable current and future Environmental Laws and all laws,
rules, regulations and orders relating to prearranged funeral products and
services and the maintenance of trust accounts in respect thereof),
noncompliance with which could reasonably be expected to cause, individually or
in the aggregate, a Material Adverse Effect.
6.7 Environmental Review and Investigation, Disclosure, Etc.; Borrower's
Actions Regarding Hazardous Materials Activities, Environmental Claims and
Violations of Environmental Laws.
A. Environmental Review and Investigation. Borrower agrees that
Administrative Agent may, from time to time and in its reasonable discretion,
(i) retain, at Borrower's reasonable expense, an independent professional
consultant to review any environmental
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audits, investigations, analyses and reports relating to Hazardous Materials
prepared by or for Borrower and provided to Administrative Agent pursuant to
subsection 6.7B(i) and (ii) in the event (a) an Event of Default occurs as a
result of a breach of subsection 5.6 (to the extent relating to Environmental
Laws or Environmental Claims), 5.13, 6.6 (to the extent resulting from
noncompliance with Environmental Laws) or 6.7 and is continuing, or (b) the
Loans and all other Obligations shall (automatically or by declaration) have
become immediately due and payable pursuant to Section 8, conduct its own
investigation of reasonable scope and at reasonable expense; provided that,
Borrower shall only be obligated to use commercially reasonable efforts to
obtain permission for Administrative Agent's professional consultant to conduct
an investigation of any Facility which is the basis of such Event of Default or
such acceleration of the Loans and Obligations that is (x) no longer owned,
leased, operated or used by Borrower or any of its Subsidiaries, or (y)
currently used by Borrower (but not owned, leased, or operated by Borrower) and
with respect to which Borrower has no right or authority to permit
Administrative Agent's professional consultant to conduct an investigation
thereon. For purposes of conducting such a review and/or investigation,
Borrower, to the extent that it has the power and authority to do so, hereby
grants to Administrative Agent and its agents, employees, consultants and
contractors the right to enter into or onto any Facilities currently owned,
leased, operated or used by Borrower or any of its Subsidiaries and to perform
such tests on such property (including taking samples of soil, groundwater and
suspected asbestos-containing materials) as are reasonably necessary in
connection therewith. Any such investigation of any Facility shall be conducted,
unless otherwise agreed to by Borrower and Administrative Agent, during normal
business hours and, to the extent reasonably practicable, shall be conducted so
as not to interfere with the ongoing operations at such Facility or to cause any
damage or loss to any property at such Facility. To the extent reasonably
practicable, Administrative Agent shall restore any property damaged by such
investigation to its condition immediately prior to such investigation. Borrower
and Administrative Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Administrative Agent pursuant to this
subsection 6.7A will be obtained and shall be used by Administrative Agent and
Lenders for the purposes of Lenders' internal credit decisions, to monitor and
police the Loans and to protect Lenders' security interests, if any, created by
the Loan Documents. Administrative Agent agrees to deliver a copy of any such
report to Borrower with the understanding that Borrower acknowledges and agrees
that (1) it will indemnify and hold harmless Administrative Agent and each
Lender from any costs, losses or liabilities relating to Borrower's use of or
reliance on such report, (2) neither Administrative Agent nor any Lender makes
any representation or warranty with respect to such report, and (3) by
delivering such report to Borrower, neither Administrative Agent nor any Lender
is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. Environmental Disclosure. Borrower will deliver to Administrative Agent
and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all material and non-privileged
environmental audits,
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investigations, analyses and reports of any kind or character, whether
prepared by personnel of Borrower or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to environmental matters at any Facility which, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect or with respect to any Environmental Claims which,
individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly
upon the occurrence thereof, written notice describing in reasonable
detail (a) any Release required to be reported to any federal, state or
local governmental or regulatory agency under any applicable Environmental
Laws that could reasonably be expected to have a Material Adverse Effect,
(b) any remedial action taken by Borrower or any other Person in response
to (1) any Hazardous Materials Activities the existence of which could
reasonably be expected to result in one or more Environmental Claims
having, individually or in the aggregate, a Material Adverse Effect, or
(2) any Environmental Claims that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and (c)
Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that could cause such
Facility or any part thereof to be subject to any material restrictions on
the ownership, occupancy, transferability or use thereof under any
Environmental Laws which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
Releases, Etc. As soon as practicable following the sending or receipt
thereof by Borrower or any of its Subsidiaries, a copy of any and all
material and non-privileged written communications with respect to (a) any
Environmental Claims that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) any Release
required to be reported to any federal, state or local governmental or
regulatory agency that could reasonably be expected to have a Material
Adverse Effect, and (c) any request for information from any governmental
agency that suggests such agency is investigating whether Borrower or any
of its Subsidiaries may be potentially responsible for any Hazardous
Materials Activity that could reasonably be expected to have a Material
Adverse Effect.
(iv) Notice of Certain Proposed Actions Having Environmental Impact.
Prompt written notice describing in reasonable detail (a) any proposed
acquisition of stock, assets, or property by Borrower or any of its
Subsidiaries that could reasonably be expected to (1) expose Borrower or
any of its Subsidiaries to, or result in, Environmental Claims that could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (2) affect the ability of Borrower or any of
its Subsidiaries to maintain in full force and effect all Governmental
Authorizations required under any Environmental Laws for their respective
operations, except to the extent the failure to maintain such Governmental
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Authorizations could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, and (b) any proposed action
to be taken by Borrower or any of its Subsidiaries to commence
manufacturing or other industrial operations or to modify current
operations in a manner that could reasonably be expected to subject
Borrower or any of its Subsidiaries to any additional obligations or
requirements under any Environmental Laws which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(v) Other Information. With reasonable promptness, such other
material and non-privileged documents and information as from time to time
may be reasonably requested by Administrative Agent in relation to any
matters disclosed pursuant to this subsection 6.7.
C. Borrower's Actions Regarding Hazardous Materials Activities,
Environmental Claims and Violations of Environmental Laws.
(i) Remedial Actions Relating to Hazardous Materials Activities.
Borrower shall promptly undertake, and shall cause each of its
Subsidiaries promptly to undertake, any and all investigations, studies,
sampling, testing, abatement, cleanup, removal, remediation or other
response actions necessary to remove, remediate, clean up or abate any
Hazardous Materials Activity on, under or about any Facility that is in
violation of any Environmental Laws or that presents a risk of giving rise
to an Environmental Claim, in each case that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. In
the event Borrower or any of its Subsidiaries undertakes any such action
with respect to any Hazardous Materials, Borrower or such Subsidiary shall
conduct and complete such action in all material respects in compliance
with all applicable Environmental Laws and in accordance with the
policies, orders and directives of all relevant federal, state and local
governmental authorities except when, and only to the extent that,
Borrower's or such Subsidiary's liability with respect to such Hazardous
Materials Activity is being contested in good faith by Borrower or such
Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations of
Environmental Laws. Borrower shall promptly take, and shall cause each of
its Subsidiaries promptly to take, any and all actions necessary to (i)
cure any material violation of applicable Environmental Laws by Borrower
or its Subsidiaries where failure to do so could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and (ii)
make an appropriate response to any Environmental Claim against Borrower
or any of its Subsidiaries and discharge any obligations it may have to
any Person thereunder where failure to do so could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
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6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries.
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Subsidiary of Borrower after
the date hereof, Borrower will promptly notify Administrative Agent of that fact
and cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty if such Subsidiary is a domestic
Subsidiary, the Subsidiary Pledge Agreement and the Subsidiary Security
Agreement and to take all such further actions and execute all such further
documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4.1I) as may be necessary or, in the
opinion of Administrative Agent, desirable to create in favor of Administrative
Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on
all of the personal assets of such Subsidiary described in the applicable forms
of Collateral Documents.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Borrower shall
deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority of
each of such jurisdictions, each to be dated a recent date prior to their
delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the fact that the attached resolutions of the Board of Directors of such
Subsidiary approving and authorizing the execution, delivery and performance of
such Loan Documents are in full force and effect and have not been modified or
amended and (b) the incumbency and signatures of the officers of such Subsidiary
executing such Loan Documents, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Administrative Agent and its
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Loan Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including matters relating to the creation
and perfection of Liens in any Collateral pursuant to such Loan Documents) as
Administrative Agent may reasonably request, all of the foregoing to be
satisfactory in form and substance to Administrative Agent and its counsel.
6.9 Interest Rate Protection.
Within 45 days after the Closing Date, Borrower shall obtain and maintain
in effect one or more Interest Rate Agreements with respect to the Loans, in an
aggregate notional principal amount of not less than $45,000,000, which Interest
Rate Agreements shall have the effect of establishing a fixed interest rate or
capping the interest rate in a manner
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satisfactory to Administrative Agent and Arranging Agent with respect to such
notional principal amount, each such Interest Rate Agreement to be in form and
substance satisfactory to Administrative Agent and with a term of not less than
two years after the Closing Date.
6.10 Future Capital Contributions.
Upon receipt by Holdings of any Cash proceeds (any such proceeds net of
underwriting discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable legal fees and expenses) from the
issuance of any equity Securities of Holdings or any other contributions to the
capital of Holdings, Holdings shall contribute such net Cash proceeds to
Borrower as a contribution to capital (provided that if Holdings receives any
capital stock of Borrower as a result of such contribution it shall be common
stock) to be used by Borrower in accordance with subsection 2.4B(iii)(e).
6.11 Delivery of Certain Pledged Shares.
As of the date of this Agreement, the capital stock of the Subsidiaries
set forth on Schedule 6.11 annexed hereto is pledged to secure certain Remaining
Existing Indebtedness (the "Encumbered Subsidiary Shares"). Within 10 Business
Days after the repayment or defeasance of any Remaining Existing Indebtedness
secured by any Encumbered Subsidiary Shares, Borrower shall, or Borrower shall
cause the appropriate Loan Party, to deliver to Administrative Agent, a Pledge
Amendment (as defined in the Borrower Pledge Agreement or Subsidiary Pledge
Agreement, as applicable) pursuant to which such Loan Party shall pledge such
Encumbered Subsidiary Shares to Administrative Agent, for the benefit of
Lenders, pursuant to the terms of the Borrower Pledge Agreement or Subsidiary
Pledge Agreement, as applicable, together with certificates (which certificates
shall be accompanied by irrevocable undated stock powers, duly endorsed in blank
and otherwise in form and substance satisfactory to Administrative Agent)
representing such Encumbered Subsidiary Stock.
6.12 Post Closing Deliveries.
Borrower shall cause (i) any actions set forth on Schedule 6.12 annexed
hereto to be taken and (ii) each document, certificate or other item set forth
on Schedule 6.12 to be delivered, in each case within the time period specified
on Schedule 6.12 and in form and substance reasonably satisfactory to
Administrative Agent and Arranging Agent.
SECTION 7.
NEGATIVE COVENANTS
Each of Holdings and Borrower covenants and agrees that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless
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Requisite Lenders shall otherwise give prior written consent, each of Holdings
and Borrower shall perform, and shall cause each of its Subsidiaries to perform,
all covenants in this Section 7.
7.1 Indebtedness.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Borrower may become and remain liable with respect to the
Obligations;
(ii) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iii) Borrower or a Subsidiary of Borrower may become and remain
liable with respect to Indebtedness that represents the assumption by
Borrower or such Subsidiary of Indebtedness of a Wholly Owned Subsidiary
in connection with the permitted merger of such Wholly Owned Subsidiary
with or into the Person assuming such Indebtedness or in connection with
the permitted purchase of all or substantially all the assets of such
Wholly Owned Subsidiary by Borrower or a Subsidiary of Borrower; provided
that such Indebtedness was not incurred pursuant to subsection 7.1(v);
(iv) Borrower and its Subsidiaries may become and remain liable with
respect to Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided
that such Indebtedness is extinguished within two Business Days of its
incurrence;
(v) a Subsidiary of Borrower acquired after the date hereof in a
Permitted Acquisition may remain liable with respect to Indebtedness of
such Subsidiary incurred prior to such Permitted Acquisition, and a
Subsidiary of Borrower formed after the date hereof for the purpose of
acquiring assets (whether by merger, consolidation or otherwise) in a
Permitted Acquisition may become and remain liable with respect to
Indebtedness assumed in such Permitted Acquisition, which Indebtedness in
each case exists at the time of such Permitted Acquisition and was not
created in contemplation of such Permitted Acquisition; provided that the
aggregate principal amount of Indebtedness with respect to which
Subsidiaries of Borrower may become and remain liable pursuant to this
subsection 7.1(v) with maturities, amortization payments or other required
payments of principal prior to August 1, 2003 shall not exceed at any time
$5,000,000;
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(vi) Borrower and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases and purchase money
Indebtedness, in each case which is incurred in respect of Consolidated
Adjusted Capital Expenditures permitted by subsection 7.8; provided that
any such purchase money Indebtedness or Indebtedness in respect of Capital
Leases is incurred by Borrower or any of its Subsidiaries prior to or
within 270 days after the applicable Consolidated Adjusted Capital
Expenditure;
(vii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness under Capital Leases of automobiles to be
used by employees and directors of Borrower and its Subsidiaries entered
into in the ordinary course of business;
(viii) Borrower may become and remain liable with respect to
Indebtedness to any of its Wholly Owned Subsidiaries, and any domestic
Wholly Owned Subsidiary of Borrower may become and remain liable with
respect to Indebtedness to Borrower or any other domestic Wholly Owned
Subsidiary of Borrower; provided that (a) all such intercompany
Indebtedness shall be evidenced by Intercompany Notes which shall be
pledged to Administrative Agent to secure the Obligations, (b) all such
intercompany Indebtedness shall be subordinated in right of payment to the
payment in full of the Obligations pursuant to the terms of the applicable
Intercompany Notes, and (c) any payment by any Subsidiary of Borrower
under any guaranty of the Obligations shall result in a pro tanto
reduction of the amount of any intercompany Indebtedness owed by such
Subsidiary to Borrower or to any of its Subsidiaries for whose benefit
such payment is made;
(ix) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto;
provided, however, that all Remaining Existing Indebtedness reflected on
such Schedule in excess of $1,000,000 shall have been repaid in full and
Holdings and its Subsidiaries shall have delivered to Administrative Agent
release letters or other evidence satisfactory to Administrative Agent
from the holders of the Remaining Existing Indebtedness releasing all of
their claims, in each case on or prior to January 31, 1997;
(x) Borrower may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Notes and any
refinancing Indebtedness in respect thereof; provided that the
subordination provisions, maturity, amortization, interest rates, events
of default, covenants and all other terms and conditions of such
refinancing Indebtedness are at least as favorable to Lenders and to
Borrower and its Subsidiaries as the Senior Subordinated Notes; and
provided, further that no Potential Event of Default or Event of Default
shall have occurred and be continuing at the time of any such refinancing;
and
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(xi) Borrower and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Holdings shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 7.2A annexed hereto; provided,
however, that all Liens securing Remaining Existing Indebtedness shall
have been released and Holdings and its Subsidiaries shall have delivered
to Administrative Agent all documents or instruments reasonably requested
by Administrative Agent to release such Liens on or prior to January 31,
1997.
(iv) Liens securing Indebtedness permitted pursuant to subsection
7.1(xi) provided that such Liens relate solely to the assets financed with
such Indebtedness;
(v) any Lien securing Indebtedness permitted by subsection 7.1(v)
existing on any property or asset which is the subject of a Permitted
Acquisition; provided that (i) such Lien was not created in contemplation
of or in connection with such Permitted Acquisition and (ii) such Lien
does not apply to any other property or asset of Borrower or any of its
Subsidiaries; and provided, further, that the aggregate principal amount
of Indebtedness secured by such Liens shall not exceed $5,000,000 at any
time;
(vi) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in the case of
improvements, constructed) by Borrower or any of its Subsidiaries
(including the interests of vendors and lessors under conditional sale and
title retention agreements), provided that (a) such security interests
secure Indebtedness permitted by Section 7.1(vi), (b) such security
interests are created, and the Indebtedness secured thereby is incurred,
within 270 days after such acquisition (or construction), (c) the
Indebtedness secured thereby does not exceed 100% of the cost of such real
property, improvements or equipment at the time of such acquisition (or
construction), and (d) such security
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interests do not encumber any other property or assets of Borrower or any
Subsidiary (other than accessions to such real property, improvements or
equipment and provided that individual financings of equipment provided by
a single lender may be cross-collateralized to other financings of
equipment provided solely by such lender);
(vii) the replacement, extension or renewal of any Lien permitted by
clause (v) or (vi) above, provided that such replacement, extension or
renewal Lien shall not encumber any property other than the property that
was subject to such Lien prior to such replacement, extension or renewal;
and provided, further, that the Indebtedness and other obligations secured
by such replacement, extension or renewal Lien are permitted by subsection
7.1; and
(viii) Liens arising by operation of law pursuant to Section 107(1)
of the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9607(1), or pursuant to analogous state law, (a) for
costs or damages which are not yet due (by virtue of a written demand of
payment by a governmental authority), or (b) which are being actively
contested in good faith by appropriate proceedings, or (c) on property
that Borrower and its Subsidiaries have determined to abandon if the sole
recourse for such costs or damages is to such property; provided, however,
that the liability of Holdings and its Subsidiaries with respect to the
matters giving rise to all Liens described in this subsection 7.2A(viii)
shall not, in the reasonable estimation of Borrower, exceed $1,000,000.
B. Equitable Lien in Favor of Lenders. If Holdings or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Holdings nor any
of its Subsidiaries shall enter into any agreement (other than the Senior
Subordinated Note Indenture) prohibiting the creation or assumption of any Lien
upon any of its properties or assets, whether now owned or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Borrower or Other
Subsidiaries. Except as provided herein and in the Senior Subordinated Note
Indenture or as set forth on Schedule 7.2D, Borrower will not, and will not
permit any of its Subsidiaries to, create or otherwise cause or suffer to exist
or become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Borrower or any
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other Subsidiary of Borrower, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Borrower or any other Subsidiary of Borrower, (iii) make loans or
advances to Borrower or any other Subsidiary of Borrower, or (iv) transfer any
of its property or assets to Borrower or any other Subsidiary of Borrower,
except encumbrances or restrictions contained in agreements relating to
Indebtedness of Subsidiaries acquired after the date hereof in a Permitted
Acquisition; provided that such Indebtedness is permitted pursuant to subsection
7.1(v) and such encumbrances or restrictions relate solely to the property or
assets of such Subsidiary.
7.3 Investments; Joint Ventures.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Borrower and its Subsidiaries may make and own Investments in
Cash and Cash Equivalents;
(ii) Borrower and its Subsidiaries may make and own Investments in
Persons that are, at the time of such Investments, domestic Subsidiaries
of Borrower;
(iii) Borrower and its Subsidiaries may make intercompany loans to
the extent permitted under subsection 7.1(viii);
(iv) Borrower and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto;
(v) Holdings may continue to own the Investment owned by it as of
the Closing Date in Borrower;
(vi) Borrower may make and own Investments which constitute
Permitted Acquisitions permitted under subsection 7.7(v);
(vii) Borrower and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $1,000,000;
(viii) Borrower and its Subsidiaries may make and own Investments
arising out of the receipt by Borrower or any of its Subsidiaries of
non-cash consideration for any sale of assets permitted under subsection
7.7; provided that such consideration (if the stated amount or value
thereof is in excess of $200,000) is pledged upon receipt to
Administrative Agent;
(ix) Borrower and its Subsidiaries may make loans and advances to
employees of Borrower or its Subsidiaries not to exceed $1,500,000 in the
aggregate at any time outstanding; and
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(x) Borrower and its Subsidiaries may make and own Investments in
respect of (a) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss and (b)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of Borrower and its
Subsidiaries.
7.4 Contingent Obligations.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Holdings and any Subsidiaries of Borrower may become and remain
liable with respect to Contingent Obligations in respect of the Holdings
Guaranty and the Subsidiary Guaranty, respectively;
(ii) Borrower may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit, and Borrower and
its Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of other Commercial Letters of Credit and Standby
Letters of Credit in an aggregate amount not to exceed at any time
$5,000,000;
(iii) Borrower may become and remain liable with respect to
Contingent Obligations under Hedge Agreements;
(iv) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with
Asset Sales or other sales of assets;
(v) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of any Indebtedness of
Borrower or any of its Subsidiaries permitted by subsection 7.1 (other
than subsection 7.1(v));
(vi) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto; and
(vii) Borrower and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Borrower and its
Subsidiaries in respect of all such Contingent Obligations shall at no
time exceed $1,000,000.
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7.5 Restricted Junior Payments.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that
(i) Borrower may make regularly scheduled payments of interest in
respect of the Senior Subordinated Notes in accordance with the terms of,
and only to the extent required by, and subject to the subordination
provisions contained in, the Senior Subordinated Note Indenture;
(ii) so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or shall be caused thereby, Borrower
may make Restricted Junior Payments to Holdings (a) to the extent
necessary to permit Holdings to pay general administrative costs and
expenses then due and payable in the ordinary course of business of
Holdings and (b) to the extent necessary to permit Holdings to discharge
the consolidated tax liabilities of Holdings and its Subsidiaries, in each
case so long as Holdings applies the amount of any such Restricted Junior
Payment for such purpose;
(iii) Borrower may make the Borrower Distribution; and
(iv) Borrower may make Restricted Junior Payments to enable Holdings
to satisfy liabilities assumed by Borrower in the Reorganization to the
extent that such liabilities are then due and payable and to the extent
Holdings applies the proceeds of such Restricted Junior Payments, upon
receipt, to the satisfaction of such liabilities.
7.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. Holdings and Borrower shall not permit
the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Cash Interest
Expense for any four-Fiscal Quarter period ending during any of the periods set
forth below to be less than the correlative ratio indicated:
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======================================================
Minimum
Interest Coverage
Period Ratio
======================================================
03/31/97 through 09/30/97 1.10:1.00
------------------------------------------------------
10/01/97 through 03/31/98 1.15:1.00
------------------------------------------------------
04/01/98 through 03/31/99 1.30:1.00
------------------------------------------------------
04/01/99 through 03/31/00 1.40:1.00
------------------------------------------------------
04/01/00 through 03/31/01 1.50:1.00
------------------------------------------------------
04/01/01 and thereafter 1.60:1.00
======================================================
B. Minimum Fixed Charge Coverage Ratio. Holdings and Borrower shall not
permit the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed
Charges for any four-Fiscal Quarter period ending during any of the periods set
forth below to be less than the correlative ratio indicated:
=======================================================
Minimum
Period Fixed Charge
Coverage Ratio
=======================================================
03/31/97 through 09/30/97 1.00:1.00
-------------------------------------------------------
10/01/97 through 09/30/98 1.10:1.00
-------------------------------------------------------
10/01/98 through 09/30/99 1.20:1.00
-------------------------------------------------------
10/01/99 through 09/30/00 1.25:1.00
-------------------------------------------------------
10/01/00 through 09/30/01 1.15:1.00
-------------------------------------------------------
10/01/01 and thereafter 1.00:1.00
=======================================================
C. Maximum Total Senior Debt Leverage Ratio. Holdings and Borrower shall
not permit the ratio of (i) Total Senior Debt as of the last day of any Fiscal
Quarter to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period
then ended, during any of the periods set forth below to exceed the correlative
ratio indicated:
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=======================================================
Maximum Total
Period Senior Debt
Leverage Ratio
=======================================================
03/31/97 through 09/30/97 4.50:1.00
-------------------------------------------------------
10/01/97 through 09/30/98 4.00:1.00
-------------------------------------------------------
10/01/98 through 09/30/99 3.60:1.00
-------------------------------------------------------
10/01/99 through 09/30/00 3.30:1.00
-------------------------------------------------------
10/01/00 through 09/30/01 3.00:1.00
-------------------------------------------------------
10/01/01 and thereafter 2.75:1.00
=======================================================
D. Minimum Cumulative Consolidated Adjusted EBITDA. Holdings and Borrower
shall not permit Cumulative Consolidated Adjusted EBITDA as at any of the dates
set forth below to be less than the correlative amount indicated:
=======================================================
Minimum
Date Cumulative Consolidated
Adjusted EBITDA
=======================================================
09/30/98 $25,000,000
-------------------------------------------------------
09/30/99 $50,000,000
-------------------------------------------------------
09/30/00 $80,000,000
-------------------------------------------------------
09/30/01 $110,000,000
-------------------------------------------------------
09/30/02 $140,000,000
-------------------------------------------------------
09/30/03 $170,000,000
-------------------------------------------------------
09/30/04 $200,000,000
=======================================================
E. Certain Calculations.
(i) With respect to calculations of Consolidated Adjusted EBITDA and
Consolidated Cash Interest Expense for any four-Fiscal Quarter period
including the Closing Date, such calculations shall be made on a pro forma
basis assuming, in each case, that the Closing Date, the Acquisition, the
issuance and sale of the Holdings Common Stock and the Holdings Preferred
Stock, and the related borrowings by Borrower pursuant to this Agreement
and the Senior Subordinated Note Indenture all occurred on the first day
of the applicable four-Fiscal Quarter period and assuming further, for
purposes of calculation of the pro forma interest accrued on
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Loans during any such periods prior to the Closing Date, that all Loans
outstanding were Eurodollar Rate Loans and that the applicable reference
interest rates were the average effective Adjusted Eurodollar Rates on the
Loans for the period from the Closing Date through the date of
determination, all such calculations to be in form and substance
satisfactory to Arranging Agent and Administrative Agent.
(ii) With respect to calculations of Consolidated Adjusted EBITDA
(other than for purposes of calculating Consolidated Excess Cash Flow) and
Consolidated Cash Interest Expense for any four-Fiscal Quarter period
during which any Permitted Acquisition was consummated, such calculations
shall be made on a pro forma basis assuming, in each case, that such
Permitted Acquisition was consummated on the first day of the applicable
four-Fiscal Quarter period. All such calculations shall be in form and
substance satisfactory to Arranging Agent and Administrative Agent.
(iii) With respect to calculations of Consolidated Adjusted EBITDA
(other than for purposes of calculating Consolidated Excess Cash Flow) for
any four-Fiscal Quarter Period including the Closing Date, such
calculations shall give effect to the Pro Forma EBITDA Adjustment.
F. Borrower's Right to Cure.
(i) Financial Performance Covenants. In the event that Holdings and
Borrower fail to comply with the requirements of any Financial Performance
Covenant, until the expiration of the 10th day subsequent to the date the
Compliance Certificate calculating such Financial Performance Covenant is
required to be delivered pursuant to subsection 6.1(iv), Holdings shall
have the right to issue Permitted Cure Securities for Cash or otherwise
receive Cash contributions to the capital of Holdings and to contribute
any such Cash to the capital of Borrower (collectively, the "Cure Right"),
and upon the receipt by Borrower of such Cash pursuant to the exercise by
Holdings of such Cure Right such Financial Performance Covenant shall be
recalculated giving effect to the following pro forma adjustments:
"Consolidated Adjusted EBITDA" shall be increased, solely for
the purpose of measuring the Financial Performance Covenants and not
for any other purpose under this Agreement, by an amount equal to
the Cure Amount.
If, after giving effect to the foregoing recalculations, Holdings
and Borrower shall then be in compliance with the requirements of all
Financial Performance Covenants, Holdings and Borrower shall be deemed to
have satisfied the requirements of the Financial Performance Covenants as
of the relevant date of determination with the same effect as though there
had been no failure to comply therewith at such date, and the applicable
breach or default of the Financial Performance Covenants which had
occurred shall be deemed cured for all purposes of this Agreement.
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(ii) Limitation on Exercise of Cure Right. Notwithstanding anything
herein to the contrary, (a) in no event shall Holdings be entitled to
exercise the Cure Right in more than three consecutive Fiscal Quarters,
and (b) in any ten Fiscal Quarter period, there must be a period of at
least four consecutive Fiscal Quarters during which Holdings has not
exercised its Cure Right.
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
Holdings shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Holdings or any of its
Subsidiaries, or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor),
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, or make any Business Acquisition, except:
(i) any Subsidiary of Borrower (other than a Subsidiary which has
become liable for Indebtedness permitted under subsection 7.1(v)) may be
merged with or into Borrower or any Wholly Owned Subsidiary Guarantor, or
be liquidated, wound up or dissolved, or all or any part of its business,
property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to Borrower
or any Wholly Owned Subsidiary Guarantor; provided that, in the case of
such a merger, Borrower or such Wholly Owned Subsidiary Guarantor shall be
the continuing or surviving corporation;
(ii) Borrower and its Subsidiaries may dispose of obsolete, worn out
or surplus property in the ordinary course of business;
(iii) Borrower and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof as determined by Borrower in good
faith;
(iv) subject to subsection 7.11, Borrower and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of
$5,000,000 in any Fiscal Year or $15,000,000 in the aggregate; provided
that (a) the consideration received for such assets shall be in an amount
at least equal to the fair market value thereof as determined by Borrower
in good faith; (b) at least 85% of the consideration received shall be
Cash, Cash Equivalents or the assumption of Indebtedness; and (c) the
proceeds of such Asset Sales shall be applied as required by subsection
2.4B(iii)(a);
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(v) so long as no Potential Event of Default or Event of Default
shall have occurred and be continuing or would result therefrom and
Borrower delivers an Officers' Certificate to Administrative Agent and
Lenders, in form and substance reasonably satisfactory to Administrative
Agent, confirming that it will be in compliance, on a pro forma basis
after giving effect to such Permitted Acquisition as if it had occurred at
the beginning of the period specified in the applicable covenant, with all
covenants set forth in subsection 7.6 hereof, Borrower and its
Subsidiaries may make Permitted Acquisitions in an amount not to exceed in
the aggregate $5,000,000 (the "Permitted Acquisition Amount") in any
Fiscal Year; provided that Borrower and it Subsidiaries may make Permitted
Acquisitions in excess of the Permitted Acquisition Amount in any Fiscal
Year to the extent the amount of such Permitted Acquisition does not
exceed the Available Excess Consolidated Capital Expenditure Amount at the
time of such Permitted Acquisition;
(vi) Holdings may make the Acquisition on the Closing Date and
Holdings and Company may consummate the transactions contemplated by the
Reorganization; and
(vii) Borrower and its Subsidiaries may discount or otherwise
transfer defaulted receivables in connection with the collection thereof
in the ordinary course of business.
7.8 Consolidated Adjusted Capital Expenditures.
Holdings shall not, and shall not permit its Subsidiaries to, make or
incur Consolidated Adjusted Capital Expenditures in any period indicated below
in an aggregate amount in excess of the corresponding amount (the "Maximum
Consolidated Capital Expenditures Amount") set forth below opposite such period;
provided that the Maximum Consolidated Capital Expenditures Amount for any
period shall be increased by an amount equal to 100% of the excess, if any, of
the Maximum Consolidated Capital Expenditures Amount for the previous period set
forth in the table below (as adjusted in accordance with this proviso) over the
actual amount of Consolidated Adjusted Capital Expenditures for such previous
period; and provided further that Borrower and its Subsidiaries may make
Consolidated Adjusted Capital Expenditures in excess of the Maximum Consolidated
Capital Expenditures Amount for any period set forth below to the extent the
Consolidated Adjusted Capital Expenditure does not exceed the Available Excess
Consolidated Capital Expenditure Amount at the time of such expenditure:
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==============================================================
Maximum Consolidated
Period Capital Expenditures
Amount
==============================================================
Closing Date through 12/31/97 $7,500,000
--------------------------------------------------------------
Fiscal Year ending 12/31/98 $4,000,000
--------------------------------------------------------------
Fiscal Year ending 12/31/99 $4,000,000
--------------------------------------------------------------
Fiscal Year ending 12/31/00 $4,000,000
--------------------------------------------------------------
Each Fiscal Year thereafter $4,500,000
==============================================================
7.9 Sales and Lease-Backs.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any Operating Lease of any property (whether real,
personal or mixed), whether now owned or hereafter acquired, (i) which Borrower
or any of its Subsidiaries has sold or transferred or is to sell or transfer to
any other Person (other than Borrower or any of its Subsidiaries) or (ii) which
Borrower or any of its Subsidiaries intends to use for substantially the same
purpose as any other property which has been or is to be sold or transferred by
Borrower or any of its Subsidiaries to any Person (other than Borrower or any of
its Subsidiaries) in connection with such lease; provided, however, that
Borrower and its Subsidiaries may become and remain liable with respect to
Operating Leases so long as the product of (a) eight times (b) consolidated
annual rental payments thereunder shall not exceed $500,000 at any time.
7.10 Transactions with Shareholders and Affiliates.
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of
Holdings or with any Affiliate of Holdings or of any such holder, on terms that
are less favorable to Holdings or that Subsidiary, as the case may be, than
those that might be obtained at the time from Persons who are not such a holder
or Affiliate; provided that the foregoing restriction shall not apply to (i) any
transaction between Holdings and any of its Wholly Owned Subsidiaries or between
any of its Wholly Owned Subsidiaries (ii) the transactions contemplated by the
Administrative Agreement, (iii) reasonable and customary fees paid to members of
the Boards of Directors of Holdings and its Subsidiaries or (iv) so long as no
Event of Default or Potential Event of Default has occurred and is continuing or
would be caused thereby, payment of Management Fees.
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7.11 Disposal of Subsidiary Stock.
Except as permitted pursuant to subsection 7.7(i), (iii) or (iv), neither
Holdings nor any of its Subsidiaries shall:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors or
funeral directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Borrower, another domestic Wholly Owned
Subsidiary of Borrower, or to qualify directors or funeral directors if
required by applicable law.
7.12 Conduct of Business.
(i) From and after the Closing Date, Borrower shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than
(i) the businesses engaged in by Borrower and its Subsidiaries on the
Closing Date and similar or related businesses and (ii) such other lines
of business as may be consented to by Requisite Lenders.
(ii) Holdings shall engage in no business and have no assets or
liabilities other than (a) owning the stock of Borrower, (b) the
performance of its obligations under the Loan Documents, (c) liabilities
associated with the maintenance of its corporate existence and with
respect to consolidated tax liabilities of Holdings and its Subsidiaries,
(d) the receipt of Cash dividends or Cash distributions from Borrower in
accordance with the provisions of subsection 7.5, (e) the activities
related to the maintenance of Permitted Cure Securities and (f) any
residual liabilities relating to liabilities existing on the Closing Date
and assumed by the Borrower in the Reorganization.
7.13 Amendments or Waivers of Certain Related Agreements; Designation of
"Senior Indebtedness".
A. Amendments or Waivers of Certain Related Agreements. Neither Holdings
nor any of its Subsidiaries shall agree to any material amendment to, request
any material waiver of (other than a waiver for which no fee is paid and no
other concessions or consideration are granted by Holdings or Borrower), or
waive any of their respective rights under, any of the Related Agreements (other
than any amendment or waiver described in the next succeeding sentence) without
in each case obtaining the prior written consent of Administrative Agent and
Requisite Lenders (and giving notice to Arranging Agent) to such amendment,
request or waiver. Notwithstanding the foregoing, Holdings and its Subsidiaries
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may agree to amend or waive any provisions of the Related Agreements (i) to cure
any ambiguity, to correct or supplement any provision therein which may be
defective or inconsistent with any other provision therein, or (ii) to comply
with the Trust Indenture Act of 1939, as amended, or (iii) to make modifications
of a technical or clarifying nature or which are no less favorable to the
Lenders, in the reasonable opinion of Administrative Agent and Requisite
Lenders, than the provisions of the Related Agreements as in effect on the
Closing (for the purposes of this subsection 7.13, any amendment, modification
or change which would extend the maturity or reduce the amount of any payment of
principal on the Senior Subordinated Notes or which would reduce the rate or
extend the date for payment of interest thereon, provided that no fee is payable
in connection therewith, shall be deemed to be an amendment, modification or
change that is no less favorable to the Lenders).
B. Designation of "Senior Indebtedness". Borrower shall not designate any
Indebtedness as "Designated Senior Indebtedness" (as defined in the Senior
Subordinated Note Indenture) for purposes of the Senior Subordinated Note
Indenture without the prior written consent of Requisite Lenders.
7.14 Fiscal Year
Holdings shall not change its Fiscal Year-end from December 31.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
8.1 Failure to Make Payments When Due.
Failure by Borrower to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Borrower to pay
when due any amount payable to Issuing Lender in reimbursement of any drawing
under a Letter of Credit; or failure by Borrower to pay any interest on any Loan
or any fee or any other amount due under this Agreement within five days after
the date due; or
8.2 Default in Other Agreements.
(i) Failure of Holdings or any of its Subsidiaries to pay when due any
principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Contingent Obligations in an individual principal amount of $1,000,000
or more or with an aggregate principal amount of $2,000,000 or more, in each
case beyond the end of any grace period provided therefor; or (ii) breach or
default by Holdings or any of its Subsidiaries with respect to any other
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material term of (a) one or more items of Indebtedness or Contingent Obligations
in the individual or aggregate principal amounts referred to in clause (i) above
or (b) any loan agreement, mortgage, indenture or other agreement relating to
such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such
breach or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder
or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or
be declared due and payable prior to its stated maturity or the stated maturity
of any underlying obligation, as the case may be (upon the giving or receiving
of notice, lapse of time, both, or otherwise); or
8.3 Breach of Certain Covenants.
Failure of Holdings or its Subsidiaries to perform or comply with any term
or condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement;
or
8.4 Breach of Warranty.
Any representation, warranty, certification or other statement made by any
Loan Party or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by any Loan Party or any of its Subsidiaries in
writing pursuant hereto or thereto or in connection herewith or therewith shall
be false in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Borrower or such Loan Party becoming aware of such default
or (ii) receipt by Borrower and such Loan Party of notice from Administrative
Agent or any Lender of such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Holdings or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Holdings or any of its Subsidiaries under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Holdings or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim
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receiver, trustee or other custodian of Holdings or any of its Subsidiaries for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process shall have been issued against any substantial part of the
property of Holdings or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Holdings or any of its Subsidiaries shall have an order for relief
entered with respect to it or commence a voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Holdings or any of its Subsidiaries shall make any
assignment for the benefit of creditors; or (ii) Holdings or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Holdings or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process
involving in the aggregate at any time an amount in excess of $2,000,000 (in
either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against Holdings or any of its Subsidiaries or any of their respective
assets and shall remain undischarged, unvacated, unbonded or unstayed for a
period of 60 days (or in any event later than five days prior to the date of any
proposed sale thereunder); or
8.9 Dissolution.
Any order, judgment or decree shall be entered against Holdings or any of
its Subsidiaries decreeing the dissolution or split up of Holdings or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $1,000,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which
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assets exceed benefit liabilities), which exceeds $1,000,000, and the minimum
funding standards of Section 412 of the Internal Revenue Code (whether or not
waived in accordance with Section 412(d) of the Internal Revenue Code) have not
been met with respect to any Pension Plan; or
8.11 Change in Control.
(i) The Blackstone Investors and Loewen Group and its Affiliates,
collectively, or Loewen Group and its Affiliates, individually, shall cease to
beneficially own and control 95% of the issued and outstanding shares of capital
stock of Holdings entitled (without regard to the occurrence of any contingency)
to vote for the election of members of the Board of Directors of Borrower; (ii)
Holdings shall cease to own 100% of the outstanding capital stock of Borrower;
or (iii) a "Change of Control" under the Senior Subordinated Note Indenture
shall occur; or
8.12 Invalidity of Guaranties; Failure of Security; Repudiation of Obligations.
At any time after the execution and delivery thereof, (i) any Guaranty for
any reason, other than the satisfaction in full of all Obligations, shall cease
to be in full force and effect (other than in accordance with its terms) or
shall be declared to be null and void, (ii) any Collateral Document shall cease
to be in full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof, the satisfaction in
full of the Obligations or any other termination of such Collateral Document in
accordance with the terms hereof or thereof) or shall be declared null and void,
or Administrative Agent shall not have or shall cease to have a valid and
perfected First Priority Lien in any Collateral purported to be covered thereby,
in each case for any reason other than the failure of Administrative Agent or
any Lender to take any action within its control, or (iii) any Loan Party shall
contest the validity or enforceability of any Loan Document in writing or deny
in writing that it has any further liability, including with respect to future
advances by Lenders, under any Loan Document to which it is a party; or
8.13 Subordinated Indebtedness.
Borrower shall fail to comply with the subordination provisions contained
in the Senior Subordinated Note Indenture or any other agreement governing any
other Subordinated Indebtedness;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7 with respect to Borrower, each of (a) the unpaid principal amount of and
accrued interest on the Loans, (b) an amount equal to the maximum amount that
may at any time be drawn under all Letters of Credit then outstanding (whether
or not any beneficiary under any such Letter of Credit shall have presented, or
shall be entitled at such time to present, the drafts or other documents or
certificates required to draw under such Letter of Credit), and (c) all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby
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expressly waived by Borrower, and the obligation of each Lender to make any
Loan, the obligation of Administrative Agent to issue any Letter of Credit and
the right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, Administrative Agent shall, upon the written request or with
the written consent of Requisite Lenders, by written notice to Borrower, declare
all or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iii).
Any amounts described in clause (b) above, when received by Administrative
Agent, shall be held by Administrative Agent pursuant to the terms of the
Collateral Account Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph, if
at any time within 60 days after an acceleration of the Loans pursuant to clause
(ii) of such paragraph Borrower shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than
non-payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Borrower, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended,
directly or indirectly, to benefit Borrower, and such provisions shall not at
any time be construed so as to grant Borrower the right to require Lenders to
rescind or annul any acceleration hereunder or to preclude Administrative Agent
or Lenders from exercising any of the rights or remedies available to them under
any of the Loan Documents, even if the conditions set forth in this paragraph
are met.
SECTION 9.
AGENTS
9.1 Appointment.
A. Appointment of Agents. Goldman, Sachs & Co. is hereby appointed
Syndication Agent and Arranging Agent hereunder, and each Lender hereby
authorizes Arranging Agent and Syndication Agent to act as its agent in
accordance with the terms of
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this Agreement and the other Loan Documents. Scotiabank is hereby appointed
Administrative Agent hereunder and under the other Loan Documents and each
Lender hereby authorizes Administrative Agent to act as its agent in accordance
with the terms of this Agreement and the other Loan Documents. Each Agent hereby
agrees to act upon the express conditions contained in this Agreement and the
other Loan Documents, as applicable. The provisions of this Section 9 are solely
for the benefit of Agents and Lenders and Borrower shall have no rights as a
third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, each Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrower or
any of its Subsidiaries. Each of Arranging Agent and Syndication Agent, without
consent of or notice to any party hereto, may assign any and all of its rights
or obligations hereunder to any of its Affiliates. As of the Closing Date, all
obligations of Arranging Agent and Syndication Agent hereunder shall terminate.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case Administrative Agent deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral co-agent (any such additional individual or
institution being referred to herein individually as a "Supplemental Collateral
Agent" and collectively as "Supplemental Collateral Agents").
In the event that Administrative Agent appoints a Supplemental Collateral
Agent with respect to any Collateral, (i) each and every right, power, privilege
or duty expressed or intended by this Agreement or any of the other Loan
Documents to be exercised by or vested in or conveyed to Administrative Agent
with respect to such Collateral shall be exercisable by and vest in such
Supplemental Collateral Agent to the extent, and only to the extent, necessary
to enable such Supplemental Collateral Agent to exercise such rights, powers and
privileges with respect to such Collateral and to perform such duties with
respect to such Collateral, and every covenant and obligation contained in the
Loan Documents and necessary to the exercise or performance thereof by such
Supplemental Collateral Agent shall run to and be enforceable by either Agent or
such Supplemental Collateral Agent, and (ii) the provisions of this Section 9
and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure
to the benefit of such Supplemental Collateral Agent and all references therein
to Administrative Agent shall be deemed to be references to Administrative Agent
and/or such Supplemental Collateral Agent, as the context may require.
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Should any instrument in writing from Borrower or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Borrower shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments promptly
upon request by Administrative Agent. In case any Supplemental Collateral Agent,
or a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be exercised
by Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
9.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes each Agent
to take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof, together
with such powers, rights and remedies as are reasonably incidental thereto. Each
Agent shall have only those duties and responsibilities that are expressly
specified in this Agreement and the other Loan Documents. Each Agent may
exercise such powers, rights and remedies and perform such duties by or through
its agents or employees. No Agent shall have, by reason of this Agreement or any
of the other Loan Documents, a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon any Agent any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by any of Agent to Lenders or by or on behalf of
Borrower to any Agent or any Lender in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or business
affairs of Borrower or any other Person liable for the payment of any
Obligations, nor shall any Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Potential Event of Default. Anything contained in this Agreement
to the contrary notwithstanding, Administrative Agent shall not have any
liability arising from confirmations of the amount of outstanding Loans or the
Letter of Credit Usage or the component amounts thereof.
C. Exculpatory Provisions. None of Agents nor any of their respective
officers, partners, directors, employees or agents shall be liable to Lenders
for any action taken or
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omitted by any Agent under or in connection with any of the Loan Documents
except to the extent caused by such Agent's gross negligence or willful
misconduct. Each Agent shall be entitled to refrain from any act or the taking
of any action (including the failure to take an action) in connection with this
Agreement or any of the other Loan Documents or from the exercise of any power,
discretion or authority vested in it hereunder or thereunder unless and until
such Agent shall have received instructions in respect thereof from Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6) and, upon receipt of such instructions from Requisite
Lenders (or such other Lenders, as the case may be), such Agent shall be
entitled to act or (where so instructed) refrain from acting, or to exercise
such power, discretion or authority, in accordance with such instructions.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Borrower and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against any Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6).
D. Agent Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include each Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any of its Affiliates as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Borrower and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Borrower and its Subsidiaries. No Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with
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respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter, and no Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent, to the extent that Administrative Agent shall
not have been reimbursed by Borrower, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as Administrative Agent in any way relating to or arising out of this
Agreement or the other Loan Documents; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent's gross negligence or willful misconduct.
9.5 Successor Administrative Agent and Swing Line Lender.
A. Successor Administrative Agent. Administrative Agent may resign at any
time by giving 30 days' prior written notice thereof to Lenders and Borrower.
Upon any such notice of resignation, Requisite Lenders with Borrower's consent
(which may not be unreasonably withheld or delayed) shall have the right, upon
five Business Days' notice to Borrower, to appoint a successor Administrative
Agent. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
B. Successor Swing Line Lender. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Scotiabank or its successor as Swing Line Lender, and
any successor Administrative Agent appointed pursuant to subsection 9.5A shall,
upon its acceptance of such appointment, become the successor Swing Line Lender
for all purposes hereunder. In such event (i) Borrower shall prepay any
outstanding Swing Line Loans made by the retiring or removed Administrative
Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the
retiring or removed Administrative Agent and Swing Line Lender shall surrender
the Swing Line Note held by it to Borrower for cancellation, and (iii) Borrower
shall issue a new Swing Line Note to the successor Administrative Agent and
Swing Line
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Lender substantially in the form of Exhibit VI annexed hereto, in the principal
amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 Collateral Documents and Guaranties.
Each Lender hereby further authorizes Administrative Agent, on behalf of
and for the benefit of Lenders, to enter into each Collateral Document as
secured party and to be the agent for and representative of Lenders under each
Guaranty, and each Lender agrees to be bound by the terms of each Collateral
Document and Guaranty; provided that Administrative Agent shall not (i) enter
into or consent to any material amendment, modification, termination or waiver
of any provision contained in any Collateral Document or Guaranty or (ii)
release any Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior consent of Requisite Lenders (or, if required
pursuant to subsection 10.6, all Lenders); provided further, however, that,
without further written consent or authorization from Lenders, Administrative
Agent may execute any documents or instruments necessary to (a) release any Lien
encumbering any item of Collateral that is the subject of an Asset Sale or other
sale or disposition of assets permitted by this Agreement or to which Requisite
Lenders have otherwise consented in accordance with the provisions of this
subsection 9.6 or (b) release any Subsidiary Guarantor from the Subsidiary
Guaranty if all of the capital stock of such Subsidiary Guarantor is sold to any
Person (other than an Affiliate of Borrower) pursuant to an Asset Sale or other
disposition permitted hereunder or to which Requisite Lenders have otherwise
consented. In the event Collateral is sold in such an Asset Sale or other
transaction, Administrative Agent may, without further consent or authorization
from Lenders, release the Liens granted under the Collateral Documents on the
Collateral that is the subject of such Asset Sale or other transaction
concurrently with the consummation of such Asset Sale or other transaction;
provided that Administrative Agent shall have received (i) reasonable, and in
any event not less than 30 days', prior written notice of such Asset Sale or
such other transaction from Borrower; (ii) an Officers' Certificate (1)
certifying that no Event of Default or Potential Event of Default shall have
occurred and be continuing as of the date of such release of Collateral, (2)
setting forth a detailed description of the Collateral subject to such Asset
Sale or other transaction, and (3) certifying such Asset Sale or other
transaction is permitted under this Agreement and that all conditions precedent
to such Asset Sale or other transaction under this Agreement have been met; and
(iii) evidence satisfactory to it that Administrative Agent shall have received
all Net Cash Proceeds of such Asset Sale or other transaction, if any, required
to be applied to repay Secured Obligations under this Agreement. Upon payment in
full of all of the Obligations and termination of the Commitments,
Administrative Agent shall release the Liens on such Collateral granted pursuant
to the Collateral Documents. Upon any release of Collateral pursuant to the
foregoing, Administrative Agent shall, at Borrower's expense, execute and
deliver such documents (without recourse or representation or warranty) as
reasonably requested to evidence such release. Anything contained in any of the
Loan Documents to the contrary notwithstanding, Borrower, Administrative Agent
and each Lender hereby agree that (1) no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
or to enforce any Guaranty, it
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being understood and agreed that all powers, rights and remedies under the
Collateral Documents and the Guaranties may be exercised solely by
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof, and (2) in the event of a foreclosure by Administrative Agent on any of
the Collateral pursuant to a public or private sale, Administrative Agent or any
Lender may be the purchaser of any or all of such Collateral at any such sale
and Administrative Agent, as agent for and representative of Lenders (but not
any Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.
SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit.
A. General. Subject to subsection 10.1B, each Lender shall have the right
at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any Person in, all or any part of its Commitments or any
Loan or Loans made by it or its Letters of Credit or participations therein or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall require Borrower to
file a registration statement with the Securities and Exchange Commission or
apply to qualify such sale, assignment, transfer or participation under the
securities laws of any state; provided, further that no such sale, assignment or
transfer described in clause (i) above shall be effective unless and until an
Assignment Agreement effecting such sale, assignment or transfer shall have been
accepted by Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii); provided, further that no such sale, assignment, transfer
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation; and
provided, further that, anything contained herein to the contrary
notwithstanding, the Swing Line Loan Commitment and the Swing Line Loans of
Swing Line Lender may not be sold, assigned or transferred as described in
clause (i) above to any Person other than a successor Administrative Agent and
Swing Line Lender to the extent contemplated by subsection 9.5. Except as
otherwise provided in this subsection 10.1, no Lender shall, as between Borrower
and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitments or the Loans, the Letters of Credit or
participations therein, or the other Obligations owed to such Lender.
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B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
of Credit or participation therein, or other Obligation may (a) be
assigned in any amount to another Lender, or to an Affiliate of the
assigning Lender or another Lender, with the giving of notice to Borrower
and Administrative Agent or (b) be assigned in an aggregate amount of not
less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, Letters of Credit and
participations therein, and other Obligations of the assigning Lender) to
any other Eligible Assignee with the consent of Borrower and, in the case
of assignments by Lenders other than Goldman Sachs Credit Partners L.P.,
Administrative Agent (which consent of Borrower and Administrative Agent
shall not be unreasonably withheld or delayed). To the extent of any such
assignment in accordance with either clause (a) or (b) above, the
assigning Lender shall be relieved of its obligations with respect to its
Commitments, Loans, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement,
together with a processing and recordation fee of $3,000 and such forms,
certificates or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery,
acceptance and recordation, from and after the effective date specified in
such Assignment Agreement, (1) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and (2) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights (other than any rights which survive the termination of this
Agreement under subsection 10.9B) and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto; provided that, anything contained in any of the Loan Documents to
the contrary notwithstanding, if such Lender is Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue to
have all rights and obligations of Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters of
Credit and the reimbursement of any amounts drawn thereunder). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and/or to the assigning Lender, substantially in
the form of Exhibit IV or Exhibit V annexed hereto, as the
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case may be, with appropriate insertions, to reflect the new Commitments
and/or outstanding AXELs of the assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
Upon its receipt of an Assignment Agreement executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee,
together with the processing and recordation fee referred to in subsection
10.1B(i) and any forms, certificates or other evidence with respect to
United States federal income tax withholding matters that such assignee
may be required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a), Administrative Agent shall, if Administrative Agent and
Borrower have consented to the assignment evidenced thereby (in each case
to the extent such consent is required pursuant to subsection 10.1B(i)),
(a) accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof to
Borrower. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
and all amounts payable by Borrower hereunder (including amounts payable to such
Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such
Lender had not sold such participation. Borrower and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5,
(a) any participation will give rise to a direct obligation of Borrower to the
participant and (b) the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Borrower and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
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F. Representations of Lenders. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (i) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and in
accordance with all applicable laws). Each Lender that becomes a party hereto
pursuant to an Assignment Agreement shall be deemed to agree that the
representations and warranties of such Lender contained in Section 2(c) of such
Assignment Agreement are incorporated herein by this reference.
10.2 Expenses.
Whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to pay promptly (i) all the actual and reasonable costs and
expenses of Administrative Agent and Arranging Agent in connection with the
preparation of the Loan Documents and any consents, amendments, waivers or other
modifications thereto; (ii) all the costs of furnishing all opinions by counsel
for Borrower (including any opinions requested by Lenders as to any legal
matters arising hereunder) and of Borrower's performance of and compliance with
all agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including with respect to confirming
compliance with environmental, insurance and solvency requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Arranging Agent and
counsel to Administrative Agent in connection with the negotiation, preparation,
execution and administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and any other documents or matters
requested by Borrower; (iv) all the actual costs and reasonable expenses of
creating and perfecting Liens in favor of Administrative Agent on behalf of
Lenders pursuant to any Collateral Document, including filing and recording
fees, expenses and taxes, stamp or documentary taxes, search fees, and
reasonable fees, expenses and disbursements of counsel to Arranging Agent and
counsel to Administrative Agent and of counsel providing any opinions that
Arranging Agent, Administrative Agent or Requisite Lenders may request in
respect of the Collateral Documents or the Liens created pursuant thereto; (v)
all the actual costs and reasonable expenses (including the reasonable fees,
expenses and disbursements of any auditors, accountants, appraisers,
environmental consultants or any other consultants, advisors and agents employed
or retained by Administrative Agent and its counsel) in connection with the
valuation (upon the occurrence and during the continuance of an Event of
Default), custody or preservation of any of the Collateral; (vi) all other
actual and reasonable costs and expenses incurred by Syndication Agent,
Arranging Agent or Administrative Agent in connection with the syndication of
the Commitments and the negotiation, preparation and execution of the Loan
Documents and any consents, amendments, waivers or other modifications thereto
and the transactions contemplated thereby; and (vii) after the occurrence and
during the continuance of an Event of Default, all costs and expenses, including
reasonable attorneys' fees and costs of settlement, incurred by Arranging Agent,
Administrative Agent and Lenders in enforcing any Obligations of or in
collecting any payments due from any Loan Party hereunder or under the other
Loan Documents by reason of such Event of Default (including in connection with
the sale of, collection from,
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or other realization upon any of the Collateral or the enforcement of the
Guaranties) or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold harmless Agents and Lenders, and the
officers, partners, directors, trustees, employees, agents and affiliates of any
of Agents and Lenders (collectively called the "Indemnitees"), from and against
any and all Indemnified Liabilities (as hereinafter defined); provided that
Borrower shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence, willful misconduct or bad faith of that
Indemnitee.
As used herein, "Indemnified Liabilities" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including Environmental Claims),
costs (including the costs of any investigation, study, sampling, testing,
abatement, cleanup, removal, remediation or other response action necessary to
remove, remediate, clean up or abate any Hazardous Materials Activity), expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of (i) this Agreement or
the other Loan Documents or the Related Agreements or the transactions
contemplated hereby or thereby (including Lenders' agreement to make the Loans
hereunder or the use or intended use of the proceeds thereof or the issuance of
Letters of Credit hereunder or the use or intended use of any thereof, or any
enforcement of any of the Loan Documents (including any sale of, collection
from, or other realization upon any of the Collateral or the enforcement of the
Guaranties)), (ii) the statements contained in the commitment letter delivered
by any Lender to Borrower with respect thereto, or (iii) any Environmental Claim
or any Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or practice
of Borrower or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Borrower shall
contribute the maximum portion that
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it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.
10.4 Set-Off; Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Borrower at any time or
from time to time, without notice to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other Indebtedness at any time held or owing by that Lender to
or for the credit or the account of Borrower against and on account of the
obligations and liabilities of Borrower to that Lender under this Agreement, the
Letters of Credit and participations therein and the other Loan Documents,
including all claims of any nature or description arising out of or connected
with this Agreement, the Letters of Credit and participations therein or any
other Loan Document, irrespective of whether or not (i) that Lender shall have
made any demand hereunder or (ii) the principal of or the interest on the Loans
or any amounts in respect of the Letters of Credit or any other amounts due
hereunder shall have become due and payable pursuant to Section 8 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured.
10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether
by voluntary payment (other than a voluntary prepayment of Loans made and
applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as Cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of Borrower or otherwise,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender
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ratably to the extent of such recovery, but without interest. Borrower expressly
consents to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of banker's lien,
set-off or counterclaim with respect to any and all monies owing by Borrower to
that holder with respect thereto as fully as if that holder were owed the amount
of the participation held by that holder.
10.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; increases the maximum amount
of Letters of Credit; changes in any manner the definition of "Class" or the
definition of "Pro Rata Share" or the definition of "Requisite Class Lenders" or
the definition of "Requisite Lenders"; changes in any manner any provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of all Lenders; postpones the scheduled final maturity date; changes
any interim scheduled amortization payments on the AXELs; postpones the date on
which any interest or any fees are payable; decreases the interest rate borne by
any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any
fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; reduces the amount or postpones the due date of any amount
payable in respect of, or increases the maximum term hereunder of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; releases any Lien granted in
favor of Administrative Agent with respect to substantially all of the
Collateral; releases Holdings from its obligations under the Holdings Guaranty
or releases any Subsidiary Guarantor from its obligations under the Subsidiary
Guaranty, in each case other than in accordance with the terms of the Loan
Documents; or changes in any manner the provisions contained in subsection 8.1
or this subsection 10.6 shall be effective only if evidenced by a writing signed
by or on behalf of each Lender affected thereby. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 4 shall be effective only if evidenced by a writing signed by or on
behalf of Administrative Agent and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the Lender which is the holder of
that Note, (iii) no amendment, modification, termination or waiver of any
provision of subsection 2.1A(iii) or of any other provision of this Agreement
relating to the Swing Line Loan Commitment or the Swing Line Loans shall be
effective without the written concurrence of Swing Line Lender, (iv) no
amendment, modification, termination or waiver of any provision of Section 9 or
of any other provision of this Agreement which, by its terms, expressly requires
the approval or concurrence of any Agent shall be effective without the written
concurrence of such Agent and (v) no amendment, modification, termination or
waiver of any provision disproportionately and adversely affecting the
obligation of any Loan Party to make payments to the holders of any Class shall
be effective without the written
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concurrence of the applicable Requisite Class Lenders of such Class.
Administrative Agent may, but shall have no obligation to, with the concurrence
of any Lender, execute amendments, modifications, waivers or consents on behalf
of that Lender. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Borrower, on Borrower.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of subsection 10.6A, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Borrower may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Borrower shall pay that Lender all principal, interest and fees and other
amounts owed to such Lender through such date of termination, (ii) another
financial institution satisfactory to Borrower and Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent (or if Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent), to evidence the substitution of such Lender
shall have been received and approved by Administrative Agent as of such date.
10.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service or upon receipt if sent by telefacsimile or by the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of each party hereto shall be as set forth under such
party's name on the signature pages hereof or (i) as to Borrower and
Administrative Agent, such other address as shall be designated by such Person
in a written notice delivered to the
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other parties hereto and (ii) as to each other party, such other address as
shall be designated by such party in a written notice delivered to
Administrative Agent and Borrower.
10.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amounts drawn
thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 Marshalling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any obligation
to marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
10.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability
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of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither Holdings
nor Borrower's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Holdings or Borrower without the prior written consent
of all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDINGS OR BORROWER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
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DELIVERING THIS AGREEMENT, EACH OF HOLDINGS AND HOLDINGS OR BORROWER, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO HOLDINGS OR BORROWER AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8; (IV) AGREES THAT SERVICE AS
PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER HOLDINGS OR BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES
THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO BRING PROCEEDINGS AGAINST HOLDINGS OR BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
10.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
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10.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with prudent lending
or investing practices, it being understood and agreed by Borrower that in any
event a Lender shall be permitted to disclose such information (a) to Affiliates
of such Lender or disclosures reasonably required by any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of its Loan or any participations therein, (b) to such
of its respective officers, directors, employees, agents, affiliates and
representatives as need to know such information, (c) to the extent requested by
any regulatory authority, (d) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process or disclosures
required by the National Association of Insurance Commissioners, (e) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or under the other Loan Documents or (f) to the extent such
information (i) publicly available other than as a result of a breach of this
Section 10.19 or (ii) becomes available to an Agent or any Lender on a
nonconfidential basis from a source other than Borrower.
10.20 Maximum Amount.
A. It is the intention of Borrower and Lenders to conform strictly to the
usury and similar laws relating to interest from time to time in force, and all
agreements between Borrower, Administrative Agent and Lenders, whether now
existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid in
the aggregate to Lenders or to Administrative Agent on behalf of Lenders as
interest hereunder or under the other Loan Documents or in any other security
agreement given to secure the Obligations, or in any other document evidencing,
securing or pertaining to the Indebtedness evidenced hereby or thereby, exceed
the maximum amount permissible under applicable usury or such other laws (the
"Maximum Amount"). If under any circumstances whatsoever fulfillment of any
provision hereof, or of any of the other Loan Documents, at the time performance
of such provision shall be due, shall involve exceeding the Maximum Amount,
then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum
Amount. For the purposes of calculating the actual amount of interest paid
and/or payable hereunder in respect of laws pertaining to usury or such other
laws, all sums paid or agreed to be paid to Lenders for the use, forbearance or
detention of the Indebtedness of Borrower evidenced hereby, outstanding from
time to time shall, to the extent permitted by applicable law, be amortized, pro
rated, allocated and spread from the date of disbursement of the proceeds of the
Loans until payment in full of all of such Indebtedness, so that the actual rate
of interest on account of such Indebtedness is uniform throughout the term
hereof. The terms and provisions of this subsection shall control and supersede
every other provision of all agreements between Borrower, Administrative Agent
and Lenders.
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B. If under any circumstances Lenders shall receive an amount which would
exceed the Maximum Amount, such amount shall be deemed a payment in reduction of
the principal amount of the Loans and shall be treated as a voluntary prepayment
under subsection 2.4B(i), and shall be so applied in accordance with subsection
2.4B(iv) hereof, or if such amount exceeds the unpaid balance of the Loans and
any other Indebtedness of Borrower in favor of Lenders, the excess shall be
deemed to have been a payment made by mistake and shall be refunded to Borrower.
10.21 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Borrower and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
PRIME SUCCESSION ACQUISITION CORP.
(to be renamed Prime Succession, Inc.)
By: /s/ Gary L. Wright
------------------------------
Gary L. Wright
President
Notice Address:
prior to the earlier of October 31, 1996 or notice
from Borrower:
691 Tekulve Road
Batesville, Indiana 47006
Attention: Chief Executive Officers
Telephone: (812) 933-0222
Facsimile: (812) 934-4737
after October 31, 1996:
Olympic Corporate Center
Suite 300
3940 Olympic Boulevard
Erlanger, Kentucky 41018
Attention: Chief Executive Officer
Facsimile: (606) 283-2522
with a copy to each of the following:
The Blackstone Group
31st Floor
345 Park Avenue
New York, New York 10154
Attention: Howard A. Lipson
Telephone: (212) 836-9844
Facsimile: (212) 754-8725
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The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 3S8 Canada
Attention: Paul Wagler
Telephone: (604) 293-9277
Facsimile: (604) 473-7305
GUARANTOR:
PRIME SUCCESSION, INC.
(to be renamed Prime Succession Holdings, Inc.)
By: /s/ Gary L. Wright
------------------------------
Gary L. Wright
President
Notice Address:
prior to the earlier of October 31, 1996 or notice
from Borrower:
691 Tekulve Road
Batesville, Indiana 47006
Attention: Chief Executive Officer
Telephone: (812) 933-0222
Facsimile: (812) 934-4737
after October 31, 1996:
Olympic Corporate Center
Suite 300
3940 Olympic Boulevard
Erlanger, Kentucky 41018
Attention: Chief Executive Officer
Facsimile: (606) 283-2522
EXECUTION
S-2
<PAGE>
with a copy to each of the following:
The Blackstone Group
31st Floor
345 Park Avenue
New York, New York 10154
Attention: Howard A. Lipson
Telephone: (212) 836-9844
Facsimile: (212) 754-8725
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 3S8 Canada
Attention: Paul Wagler
Telephone: (604) 293-9277
Facsimile: (604) 473-7305
EXECUTION
S-3
<PAGE>
AGENTS AND LENDERS:
GOLDMAN, SACHS & CO.,
as Syndication Agent and as Arranging Agent
/s/ Goldman, Sachs & Co.
--------------------------------------------
Notice Address:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention:Kathy King
Jennifer Perry
Telephone: (212) 902-4425
Facsimile: (212) 902-3757
EXECUTION
S-4
<PAGE>
THE BANK OF NOVA SCOTIA,
individually and as Administrative Agent
By: /s/ M.D. Smith
--------------------------------
Name: M.D. Smith
Title: Agent
Notice Address:
The Bank of Nova Scotia
Atlanta Agency
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: George Wong
Telephone: (404) 877-1500
Facsimile: (404) 888-8998
with a copy to:
The Bank of Nova Scotia
Chicago Representative Office
Suite 3700
181 West Madison St.
Chicago, Illinois 60602
Attention: Keith Rauschenberger
Telephone: (312) 201-4100
Facsimile: (312) 201-4108
EXECUTION
S-5
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ Ed Frost
------------------------------
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Kathy King
Jennifer Perry
Telephone: (212) 902-4425
Facsimile: (212) 902-3757
EXECUTION
S-6
<PAGE>
KEYPORT LIFE INSURANCE COMPANY
By: /s/ Daniel T.H. Yin
-------------------------------
Title: Assistant Vice President
- Investment
Notice Address:
Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
27th Floor
New York, New York 10036
Attention: Stephen M. Alfieri
Telephone: (212) 278-9563
Facsimile: (212) 278-9619
EXECUTION
S-7
<PAGE>
MEDICAL LIABILITY MUTUAL INSURANCE
COMPANY
By: /s/ K. Wayne Kahle
-------------------------------
Title: Vice President and
Controller
Notice Address:
Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
27th Floor
New York, New York 10036
Attention: Stephen M. Alfieri
Telephone: (212) 278-9563
Facsimile: (212) 278-9619
EXECUTION
S-8
<PAGE>
PRIME INCOME TRUST
By: /s/ Rafael Scolari
--------------------------------
Name: Rafael Scolari
Title:
Notice Address:
Prime Income Trust
c/o Dean Witter InterCapital
2 World Trade Center - 72nd Floor
New York, New York 10048
Attention: April Chrysostomas
Telephone: (212) 392-5709
Facsimile: (212) 392-5345
EXECUTION
S-9
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Steven M. Benevento
-------------------------------
Name: Steven M. Benevento
Title: Assistant Vice President
Notice Address:
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
Attention: Investment Department
Private Finance Group
Room 206
Facsimile: (212) 447-4122
with a copy to:
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
Attention: Office of General Counsel
Investment Section, Room 10SB
Facsimile: (212) 576-8340
EXECUTION
S-10
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Anthony R. Clemente
--------------------------------
Name: ANTHONY R. CLEMENTE
Title: AUTHORIZED SIGNATORY
Notice Address:
Merrill Lynch Senior Floating Rate Fund, Inc.
800 Scudders Mill Road - Area 2C
Plainsboro, New Jersey 08536
Attention: Doug Henderson
Telephone: (609) 282-2059
Facsimile: (609) 282-2756
EXECUTION
S-11
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
August 1, 1996
Mr. Gary Wright
5211 Kirby Road
Lawrenceburg, IN 47025
U.S.A.
Dear Gary:
This letter is intended to outline our mutually agreed initial compensation
arrangements for you as President and Chief Executive Officer of Prime
Succession Acquisition Corp. (to be renamed Prime Succession Inc. ('Prime"))
(hereinafter collectively referred to as the "Company").
1. Salary. Employment will commence August 1, 1996 and your base
salary will be $225,000 per year, subject to annual review in
January of each year commencing January 1998, with annual
increases subject to the discretion of the Company's Board of
Directors.
2. Annual Bonus. You will be eligible for annual cash bonuses
based on the performance criteria detailed in the attached
Schedule A. As outlined in Schedule A. EBITDA targets for 1999
and later years will be set each year, by unanimous consent of
the Board of Directors, by February 1 of the bonus year.
3. Long Term Incentive. If and when there is a change of control
of Prime (following the acquisition of Prime by Loewen Group
International, Inc. and/or its affiliates (collectively
"LGII") and Blackstone Capital Partners II Merchant Banking
Fund L.P. and/or its affiliates (collectively "Blackstone"))
or LGII disposes of a majority of its holdings in Prime,
provided the performance criteria as detailed in the attached
Schedule B are attained, you will be paid a lump sum amount
of $500,000 or more as set forth in Schedule B.
4. Benefit Programs. During your employment we understand that
you will continue on the LGII Executive Benefit Programs until
you are enrolled in the Prime Executive Benefit Programs, to be
defined by the Board of Prime by December 31, 1996.
5. Stock Investment Program. You will be entitled to participate
in and invest, through a partnership, up to $100,000 in a
Management Stock Investment
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
Program under the same terms and conditions as Blackstone,
subject to the customary vesting and related provisions. The
Company or an affiliate of the Company will loan the amount
of such investment to you.
6. Formal Contract. This summary of compensation and related
employment arrangements will be reflected in a formal contract
to be entered into by December 31, 1996 at mutually acceptable
terms.
7. Currency. All dollar figures herein are U.S. currency.
8. Targets. The Board of the Company may, by unanimous vote,
lower any of the EBITDA targets set out in Schedules A or B.
Yours truly,
PRIME SUCCESSION ACQUISITION CORP.
Per: /s/ Chinh Chu
-------------------
All of the Above is Accepted and Agreed
Upon this day of August, 1996
/s/ Gary L. Wright
------------------------------
Gary L. Wright
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
SCHEDULE A
Annual Incentive Bonus Program
For the fiscal period ended December 31, 1996 the Board will consider a bonus;
such bonus shall require unanimous consent of the Board.
For the fiscal year ended December 31, 1997 and 1998, a bonus payment will be
made annually based on the audited EBITDA (as defined in the Put/Call
Agreement) in relation to the projected EBITDA as described below (plus
Budgeted EBITDA for subsequent acquisitions). EBITDA will be determined after
taking into account the accrual for these bonus payments.
Projected EBITDA for the years ended December 31, 1997 and 1998 is $35,000,000
and $37,700,000, respectively. EBITDA targets for 1999 and later years will be
set each year, by unanimous consent of the Board of Directors, by February 1 of
the bonus year.
The bonus realization matrix for the annual incentive bonus program will be:
Percent EBITDA Percent Salary
<90% 0%
90% 25.0%
91% 27.5%
92% 30.0%
93% 32.5%
94% 35.0%
95% 37.5%
96% 40.0%
97% 42.5%
98% 45.0%
99% 47.5%
100% 50.0%
101% 55.0%
102% 60.0%
103% 65.0%
104% 70.0%
105% 75.0%
106% 80.0%
107% 85.0%
108% 90.0%
109% 95.0%
110% 100.0%
>110% 100.0%
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
SCHEDULE B
FORECAST
Twelve months ended December 31, 1997 $35,000,000
Twelve months ended December 31, 1998 $37,700,000
Twelve months ended December 31, 1999 $40,400,000
Twelve months ended December 31, 2000 $43,200,000
Twelve months ended December 31, 2001 $46,300,000
Twelve months ended December 31, 2002 $49,100,000
Twelve months ended December 31, 2003 $52,000,000
Twelve months ended December 31, 2004 $55,000,000
Twelve months ended December 31, 2005 $58,100,000
Long Term Incentive Bonus
In order to earn the Long Term Incentive Bonus, Prime Succession Inc. must have
achieved through the Exit Relevant Period (as defined in the Put/Call
agreement) 95% of the accumulated EBITDA as computed from the Forecast. If the
Exit Relevant Period is not a calendar year, the EBITDA forecast will be
pro-rated based on the applicable period.
The above amount of Long Term Incentive Bonus is calculated as follows:
PERIOD IN WHICH CLOSING OCCURS AMOUNT
Prior to January 1, 2002 $500,000
January 01, 2002 to December 31, 2002 $600,000
January 01, 2003 to December 31, 2003 $700,000
January 01, 2004 to December 31, 2004 $800,000
January 01, 2005 or thereafter $900,000
The formal employment agreement referred to in Paragraph 6 will contain
provisions for vesting rights (assuming entitlement targets have been met) in
the Long Term Incentive Bonus over an eight year period.
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
August 1, 1996
Mr. Myles Cairns
826 Riverwatch Drive
Crescent Springs, KY 41017 U.S.A.
Dear Myles:
This letter is intended to outline our mutually agreed initial compensation
arrangements for you as Chief Financial Officer of Prime Succession Acquisition
Corp. (to be renamed Prime Succession Inc. ("Prime")) (hereinafter collectively
referred to as the "Company").
1. Salary. Employment will commence August 1, 1996 and your base
salary will be $225,000 per year, subject to annual review in
January of each year commencing January 1998, with annual
increases subject to the discretion of the Company's Board of
Directors.
2. Annual Bonus. You will be eligible for annual cash bonuses
based on the performance criteria detailed in the attached
Schedule A. As outlined in Schedule A. EBITDA targets for 1999
and later years will be set each year, by unanimous consent of
the Board of Directors, by February 1 of the bonus year.
3. Long Term Incentive. If and when there is a change of control
of Prime (following the acquisition of Prime by Loewen Group
International, Inc. and/or its affiliates (collectively
"LGII") and Blackstone Capital Partners II Merchant Banking
Fund L.P. and/or its affiliates (collectively "Blackstone"))
or LGII disposes of a majority of its holdings in Prime,
provided the performance criteria as detailed in the attached
Schedule B are attained, you will be paid a lump sum amount
of $500,000 or more as set forth in Schedule B.
4. Benefit Programs. During your employment we understand that
you will continue on the LGII Executive Benefit Programs until
you are enrolled in the Prime Executive Benefit Programs, to be
defined by the Board of Prime by December 31, 1996.
5. Stock Investment Program. You will be entitled to participate
in and invest, through a partnership, up to $100,000 in a
Management Stock Investment Program under the same terms and
conditions as Blackstone, subject to the
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
customary vesting and related provisions. The Company or an
affiliate of the Company will loan the amount of such
investment to you.
6. Formal Contract. This summary of compensation and related
employment arrangements will be reflected in a formal contract
to be entered into by December 31, 1996 at mutually acceptable
terms.
7. Housing Relocation Loan. Prime agrees to extend to you a
housing assistance loan in the amount of approximately
$50,000, with amount and terms similar to those included in
your current Housing Relocation Loan with Loewen, namely
interest rate of 6% interest payable annually; annual
principal payments of $10,000 for 5 years.
8. Currency. All dollar figures herein are U.S. currency.
9. Targets. The Board of the Company may, by unanimous vote,
lower any of the EBITDA targets set out in Schedules A or B.
Yours truly,
PRIME SUCCESSION ACQUISITION CORP.
Per: /s/ Chinh Chu
--------------------
All of the Above is Accepted and Agreed
Upon this day of August, 1996
/s/ Myles Cairns
-------------------------------
Myles Cairns
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
SCHEDULE A
Annual Incentive Bonus Program
For the fiscal period ended December 31, 1996 the Board will consider a bonus;
such bonus shall require unanimous consent of the Board.
For the fiscal year ended December 31, 1997 and 1998, a bonus payment will be
made annually based on the audited EBITDA (as defined in the Put/Call
Agreement) in relation to the projected EBITDA as described below (plus
Budgeted EBITDA for subsequent acquisitions). EBITDA will be determined after
taking into account the accrual for these bonus payments.
Projected EBITDA for the years ended December 31, 1997 and 1998 is $35,000,000
and $37,700,000, respectively. EBITDA targets for 1999 and later years will be
set each year, by unanimous consent of the Board of Directors, by February 1 of
the bonus year.
The bonus realization matrix for the annual incentive bonus program will be:
Percent EBITDA Percent Salary
<90% 0%
90% 25.0%
91% 27.5%
92% 30.0%
93% 32.5%
94% 35.0%
95% 37.5%
96% 40.0%
97% 42.5%
98% 45.0%
99% 47.5%
100% 50.0%
101% 55.0%
102% 60.0%
103% 65.0%
104% 70.0%
105% 75.0%
106% 80.0%
107% 85.0%
108% 90.0%
109% 95.0%
110% 100.0%
>110% 100.0%
<PAGE>
Prime Succession Acquisition Corp.
345 Park Avenue
New York, New York, 10154
SCHEDULE B
FORECAST
Twelve months ended December 31, 1997 $35,000,000
Twelve months ended December 31, 1998 $37,700,000
Twelve months ended December 31, 1999 $40,400,000
Twelve months ended December 31, 2000 $43,200,000
Twelve months ended December 31, 2001 $46,300,000
Twelve months ended December 31, 2002 $49,100,000
Twelve months ended December 31, 2003 $52,000,000
Twelve months ended December 31, 2004 $55,000,000
Twelve months ended December 31, 2005 $58,100,000
Long Term Incentive Bonus
In order to earn the Long Term Incentive Bonus, Prime Succession Inc. must have
achieved through the Exit Relevant Period (as defined in the Put/Call
agreement) 95% of the accumulated EBITDA as computed from the Forecast. If the
Exit Relevant Period is not a calendar year, the EBITDA forecast will be
pro-rated based on the applicable period.
The above amount of Long Term Incentive Bonus is calculated as follows:
PERIOD IN WHICH CLOSING OCCURS AMOUNT
Prior to January 1, 2002 $500,000
January 01, 2002 to December 31, 2002 $600,000
January 01, 2003 to December 31, 2003 $700,000
January 01, 2004 to December 31, 2004 $800,000
January 01, 2005 or thereafter $900,000
The formal employment agreement referred to in Paragraph 6 will contain
provisions for vesting rights (assuming entitlement targets have been met) in
the Long Term Incentive Bonus over an eight year period.
<PAGE>
Prime Succession, Inc.
Ratio of Earnings To Fixed Charges
(Dollars in Thousands)
<TABLE>
<CAPTION>
1992 1993 1994 1995 6/30/95 6/30/96
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings To Fixed Charges
Earnings:
Income (loss) before income taxes (1,923) (2,505) (4,656) (355) (883) (7,472)
Add: Fixed charges, net 847 6,650 13,128 16,224 7,971 8,083
Income (loss) before income
taxes and fixed charges, net (1,076) 4,145 8,472 15,869 7,088 611
Fixed Charges:
Total interest expense(1) 774 6,418 12,422 15,401 7,592 7,606
Interest factor in rents(2) 73 232 706 823 379 477
Total fixed charges 847 6,650 13,128 16,224 7,971 8,083
Ratio of earnings to fixed charges (1.3) 0.6 0.6 1.0 0.9 0.1
Coverage Deficiency(3) $1,923 $2,505 $4,656 $355 $883 $7,472
</TABLE>
(1) Total interest expense for each period includes amortization of loan costs.
(2) Interest factor in rents represents one-third of rent expense, which is
considered representative of the interest factor.
(3) The company's earnings are inadequate to cover fixed charges for all periods
indicated above. Coverage deficiency represents the excess of fixed charges over
income before income taxes and fixed charges, net.
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
State of
Company Name Incorporation
<S> <C>
Prime Succession of Alabama, Inc. Alabama
Prime Succession of Arizona, Inc. Delaware
Talisman Enterprises, Inc. Arizona
Whitney and Murphy Funeral Home, Arizona
Inc.
Whitney & Murphy Life Insurance Arizona
Agency, Inc.
Prime Succession of Arkansas, Inc. Delaware
Prime Succession of California, Inc. Delaware
McWane Family Funeral Home, Inc. California
Grotewold Simi Valley Mortuary, Inc. California
Prime Succession of Florida, Inc. Delaware
Cremation Society of America, Inc. Florida
Fred Hunter Memorial Services, Inc. Florida
Fraser Funeral Home, Inc. Florida
Clayton Frank & Sons Funeral Home, Florida
Inc.
Clary-Godwin Funeral Home, Inc. Florida
Prime Succession of Georgia, Inc. Delaware
<PAGE>
2
Prime Succession of Illinois, Inc. Delaware
Dawson & Wikoff, Ltd. Illinois
Prime Succession of Indiana, Inc. Delaware
Carlisle Funeral Home, Inc. Indiana
Welsheimer Funeral Home, Inc. Indiana
Prime Succession of Iowa, Inc. Delaware
Prime Succession of Kentucky, Inc. Delaware
Benton Funeral Home, Inc. Kentucky
Vankirk Funeral Home, Inc. Kentucky
Prime Succession of Michigan, Inc. Delaware
Kerley & Starks Funeral Homes, Inc. Michigan
Cemetery Development Corporation, Kentucky
Inc.
Prime Succession of Minnesota, Inc. Delaware
Prime Succession of Missouri, Inc. Delaware
Prime Succession of Nebraska, Inc. Delaware
Prime Succession of New York, Inc. Delaware
Pine Funeral Home, Inc. New York
<PAGE>
3
Pine Group, Inc. New York
Bury-Pine Funeral Home, Inc. New York
Hignell-Phelps-Pine Funeral Home, New York
Inc.
Pine Memorials, Inc. New York
Prime Succession of Ohio, Inc. Delaware
Prime Succession of South Carolina,
Inc. Delaware
Prime Succession of Tennessee, Inc. Delaware
Neal-Tarpley, Inc. Tennessee
Buckner-Rush Enterprises, Inc. Tennessee
Prime Succession of Texas, Inc. Delaware
Prime Succession of West Virginia, Inc. Delaware
Prime Succession of Wisconsin, Inc. Delaware
Prime Holdings of Arizona, Inc. Delaware
Prime Holdings of Florida, Inc. Delaware
Prime Holdings of Illinois, Inc. Delaware
<PAGE>
4
John A. Beck Company Illinois
Hertz-Thoma Chapel, Ltd. Illinois
Prime Holdings of Indiana, Inc. Delaware
Weigel Funeral Home, Inc. Indiana
Simpson-Meyer Corporation Indiana
Simpson Funeral Home, Inc. Indiana
Simpson-Volkman Corporation Indiana
Prime Holdings of Michigan, Inc. Delaware
Pifer-Smith Funeral Home, Inc. Michigan
SWEM Funeral Home, Inc. Michigan
Van Zantwick, Bartels And Michigan
Kammeraad Funeral Homes, Inc.
Prime Succession Enterprises, Inc. Delaware
Prime Holdings, Inc. Delaware
Prime Holdings of Arkansas, Inc. Delaware
Prime Holdings of California, Inc. Delaware
Prime Enterprises of California,
Inc. Delaware
Hughes Funeral Chapel California
Prime Holdings of Minnesota, Inc. Delaware
Prime Holdings of Nebraska, Inc. Delaware
<PAGE>
5
Prime Holdings of Ohio, Inc. Delaware
Prime Holdings of West Virginia,
Inc. Delaware
Lambert Corporation, Inc. West Virginia
J & W Inc. West Virginia
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Independent
Auditors," and "Selected Consolidated Financial Data" and to the use of our
report dated May 9, 1996 (except for Note 15, as to which the date is June 14,
1996) on the financial statements of Prime Succession, Inc. (Existing Prime) in
the Registration Statement (Form S-4 No. 333- ) and the related Prospectus of
Prime Succession, Inc. (New Prime) for the registration of $100,000,000 of Prime
Succession, Inc. 10.75% Senior Subordinated Notes due 2004.
/s/ Ernst & Young LLP
Indianapolis, Indiana
October 21, 1996
<PAGE>
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
Prime Succession, Inc.
(Exact name of obligor as specified in its charter)
Delaware 13-3904211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
691 Tekulve Road
Batesville, IN 47006
(Address of principal executive offices) (Zip Code)
------------------
10 3/4% Senior Subordinated Notes due 2004
(Title of the indenture securities)
==============================================
<PAGE>
- 2 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Prime Succession Inc. currently is not in default under any of its
outstanding securities for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General Instruction
B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15,
1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of October 2, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 2nd day
of October, 1996.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Christine C. Collins
----------------------------------
Christine C. Collins
Assistant Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1996
($ IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 77,810
Short-Term Investments 18,306
Securities, Available for Sale 867,513
Loans 1,333,282
Less: Allowance for Credit Losses 12,858
----------
Net Loans 1,320,424
Premises and Equipment 57,561
Other Assets 132,888
----------
Total Assets $2,474,502
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 469,797
Interest Bearing 1,545,026
----------
Total Deposits 2,014,823
Short-Term Credit Facilities 170,747
Accounts Payable and Accrued Liabilities 136,595
----------
Total Liabilities $2,322,165
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 96,902
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,954)
----------
Total Stockholder's Equity 152,337
----------
Total Liabilities and
Stockholder's Equity $2,474,502
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
September 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Prime Succession, Inc., for the year ended
December 31, 1995 and for the six month period ended June 30, 1996, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 766 3,429
<SECURITIES> 0 0
<RECEIVABLES> 12,335 12,549
<ALLOWANCES> 2,926 2,756
<INVENTORY> 3,564 3,709
<CURRENT-ASSETS> 18,038 18,122
<PP&E> 64,235 65,546
<DEPRECIATION> 6,160 7,434
<TOTAL-ASSETS> 196,118 194,096
<CURRENT-LIABILITIES> 124,458 129,524
<BONDS> 27,168 26,191
0 0
2,309 2,517
<COMMON> 0 0
<OTHER-SE> 31,903 31,695
<TOTAL-LIABILITY-AND-EQUITY> 196,118 194,096
<SALES> 81,515 43,787
<TOTAL-REVENUES> 81,515 43,787
<CGS> 10,240 6,966
<TOTAL-COSTS> 55,869 31,297
<OTHER-EXPENSES> 25,999 19,962
<LOSS-PROVISION> 974 36
<INTEREST-EXPENSE> 15,401 7,606
<INCOME-PRETAX> (355) (7,472)
<INCOME-TAX> 309 253
<INCOME-CONTINUING> (663) (7,726)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (663) (7,726)
<EPS-PRIMARY> 0.000 0.000
<EPS-DILUTED> 0.000 0.000
</TABLE>
<PAGE>
[CONFORMED COPY]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 15th day of August, 1996, by and between Prime Succession
Acquisition Corp., a Delaware corporation (the "Company") and Smith Barney Inc.
(the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement dated August 13,
1996, among the Company and the Initial Purchaser (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchaser of
$100,000,000 10 3/4% Senior Subordinated Notes due 2004 (the "Notes"). The Notes
are to be issued by the Company pursuant to the provisions of an Indenture dated
as of August 15, 1996 (as amended, supplemented or otherwise modified from time
to time, the "Indenture") between the Company and United States Trust Company of
New York, as trustee (the "Trustee").
In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchaser and its
direct and indirect transferees the registration rights with respect to the
Notes set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time to
time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
"Acquisition" shall mean the recapitalization of and related purchase by
Blackstone Capital Partners II Merchant Banking Fund L.P. and its affiliates and
Loewen Group International, Inc. of 100% of the capital stock of Prime
Succession, Inc., pursuant to the Stock Purchase Agreement.
"Closing Date" shall mean the later of the date of original issuance of
the Notes and the date on which the Acquisition is consummated.
<PAGE>
"Company" shall have the meaning set forth in the preamble and shall also
include the Company's successors.
"Escrow Agreement" shall mean the Escrow Agreement by and between the
Company and the Trustee dated as of August 15, 1996.
"Exchange Date" shall have the meaning set forth in Section 2(a)(ii).
"Exchange Notes" shall mean securities issued by the Company under an
indenture and containing terms identical to the Notes except that (i) interest
thereon shall accrue from the last date on which interest was paid on the Notes
or, if no such interest has been paid, from August 20, 1996 and (ii) the
Exchange Notes will not provide for an increase in the rate of interest and will
not contain terms with respect to transfer restrictions) and to be offered to
Holders of Notes in exchange for Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of Exchange
Notes for all Notes that are Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the 1933 Act
effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form) and all amendments and supplements to such registration statement, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Holder" shall mean the Initial Purchaser, for so long as it owns any
Registrable Notes, and each of its successors, assigns and direct and indirect
transferees who become registered owners of Registrable Notes under the
Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the
term "Holder" shall include Participating Broker-Dealers (as defined in Section
4(a)).
"Indenture" shall have the meaning set forth in the preamble.
"Initial Purchaser" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the aggregate
principal amount of outstanding Registrable Notes; provided that, for purposes
of Section 6(b), whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable Notes held by
the Company or any of its affiliates (as such term is defined in Rule 405 under
the 1933 Act) (other than the Initial Purchaser or subsequent Holders of
Registrable Notes if such subsequent Holders are deemed to be such affiliates
solely by reason of their holding
2
<PAGE>
of such Registrable Notes) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage or
amount.
"Offer Termination Date" shall have the meaning set forth in Section
2(a)(iv).
"Participating Broker-Dealer" shall have the meaning set forth in Section
4(a) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Notes" shall mean the Notes; provided, however, that the
Notes shall cease to be Registrable Notes (i) when a Registration Statement with
respect to such Notes shall have been declared effective under the 1933 Act and
such Notes shall have been disposed of or exchanged pursuant to such
Registration Statement, (ii) upon the expiration of the Exchange Offer period
with respect to any Exchange Offer Registration Statement if all Registrable
Notes validly tendered in connection with such Exchange Offer shall have been
exchanged for Exchange Notes, (iii) when such Notes have been sold or are
eligible for sale to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933 Act or (iv) when such
Notes shall have ceased to be outstanding; provided, however, that if an opinion
of counsel as described in Section 2(d)(i)(B) is delivered to the Company, then
Notes held by the Initial Purchaser shall not cease to be Registrable Notes
solely by reason of clause (ii) above.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws, (iii) all expenses of any Person in preparing or assisting in
preparing, word processing, printing and distributing, at the request of the
Company, any Registration Statement, any Prospectus, any amendments or
supplements thereto, (iv) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (v) the fees
and disbursements of the Trustee and its counsel, (vi) the fees and
disbursements of counsel for the Company and, in the case of a Shelf
Registration Statement, the
3
<PAGE>
fees and disbursements of one counsel for the Holders incurred on or before the
initial effectiveness of the Shelf Registration Statement, which counsel shall
be counsel for the Initial Purchaser or other counsel selected by the Company
and not objected to by the Majority Holders ("counsel for the Holders"), and
(vii) the fees and disbursements of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, but excluding
underwriting discounts, if any, and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2(b) of this Agreement
which covers all of the Registrable Notes on an appropriate form under Rule 415
under the 1933 Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated
as of June 14, 1996, by and among Prime Succession, Inc. ("Existing Prime"), a
Delaware corporation, the sellers listed on the signature pages thereto, and The
Loewen Group Inc., a corporation organized under the laws of the Province of
British Columbia and Blackhawk Acquisition Corp., a Delaware corporation.
"TIA" shall have the meaning set forth in Section 3(1) hereof.
"Trustee" shall have the meaning set forth in the preamble.
4
<PAGE>
2. Registration under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Company shall use its best efforts
to cause to be filed an Exchange Offer Registration Statement covering the offer
by the Company to the Holders to exchange all of the Registrable Notes for
Exchange Notes, to have such Registration Statement remain effective until the
closing of the Exchange Offer and to consummate the Exchange Offer on or prior
to the date that is 150 days after the Closing Date. The Company shall commence
the Exchange Offer promptly after the Exchange Offer Registration Statement has
been declared effective by the SEC and use its best efforts to have the Exchange
Offer consummated not later than 30 days after such effective date. For purposes
hereof, "consummate" shall mean that the Exchange Offer Registration Statement
shall have been declared effective, subject to Section 2(b), the period of the
Exchange Offer provided in accordance with clause (ii) below shall have expired
and all Registrable Notes validly tendered and not withdrawn in connection with
such Exchange Offer shall have been exchanged for Exchange Notes. The Company
shall commence the Exchange Offer by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in addition to
such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Notes validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period
of at least 20 days from the date such notice is mailed) (each such date
being an "Exchange Date");
(iii) that any Registrable Note not tendered will remain outstanding
and continues to accrue interest, but will not retain any rights under
this Agreement;
(iv) that Holders electing to have a Registrable Note exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Note, together with the enclosed letters of transmittal, to
the institution and at the address specified in the notice prior to the
close of business on the last Exchange Date (the "Offer Termination
Date"); and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the Offer Termination Date, by sending
to the institution and at the address specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered for exchange
and a statement that such Holder is withdrawing his election to have such
Registration Notes exchanged.
5
<PAGE>
As soon as practicable after the Offer Termination Date, the Company
shall:
(A) accept for exchange Registrable Notes or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer; and
(B) deliver, or cause to be delivered, to the Trustee for cancellation all
Registrable Notes or portions thereof so accepted for exchange by the Company
and issue, and cause the Trustee to promptly authenticate and mail to each
Holder, an Exchange Note equal in aggregate principal amount to the aggregate
principal amount of the Registrable Notes surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the staff of the SEC. The Company shall inform the
Initial Purchaser of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Initial Purchaser shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Notes in the Exchange Offer.
Each Holder participating in the Exchange Offer shall be required to
represent to the Company that at the time of the consummation of the Exchange
Offer (i) such Holder is not an "affiliate" of the Company within the meaning of
Rule 405 under the 1933 Act, (ii) the Exchange Notes being acquired by it
pursuant to the Exchange Offer are being obtained in the ordinary course of its
business and (iii) that it has no arrangement or understanding with any Person
to participate in the distribution of the Exchange Notes. If such Holder is a
Participating Broker-Dealer that will receive Exchange Notes for its own account
in exchange for the Registrable Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
(b) In the event that (i) the Company determines that the Exchange Offer
Registration provided for in Section 2(a) above is not available or may not be
consummated as soon as practicable after the Offer Termination Date because it
would violate applicable law or the applicable interpretations of the staff of
the SEC, (ii) the Exchange Offer is not for any other reason consummated within
150 days after the Closing Date or (iii) if the Initial Purchaser or any Holder
shall so request pursuant to the terms set forth in Section 2(d)(i)(B) below,
the Company shall use its best efforts to cause to be filed as soon as
practicable after such determination, date or notice is given to the Company, as
the case may be, a Shelf Registration Statement providing for the sale by the
Holders of all of the Registrable Notes and to have such Shelf Registration
Statement declared effective by the SEC; provided, however, that
6
<PAGE>
no Holder of Registrable Notes (other than the Initial Purchaser) shall be
entitled to have the Registrable Notes held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by all
the provisions of this Agreement applicable to such Holder. In the event the
Company is required to file a Shelf Registration Statement solely as a result of
the matters referred to in clause (iii) of the preceding sentence, the Company
shall file and have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section 2(a) with respect to all Registrable
Notes and a Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect to offers
and sales of Registrable Notes held by the Initial Purchaser after completion of
the Exchange Offer. The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective until 180 days from the effective
date thereof or such shorter period that will terminate when all of the
Registrable Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement. The Company further agrees to
supplement or amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any other
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use their best efforts to cause any such amendment to become effective and
such Shelf Registration Statement to become usable as soon as practicable
thereafter. The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection with the
registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all
underwriting discounts, if any, and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Exchange Offer Registration Statement or a Shelf Registration Statement,
as the case may be.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
offering of Registrable Notes pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such interference
until the offering of Registrable Notes pursuant to such Registration Statement
may legally resume. As provided herein, Additional Interest (in addition to the
interest otherwise due on the Notes after such date) shall be accrued on the
Notes as follows:
(i) (A) if an Exchange Offer Registration Statement or, in the event
that due to a change in current interpretations by the SEC the Company
7
<PAGE>
is not permitted to effect the Exchange Offer, a Shelf Registration
Statement is not filed within 60 days following the Closing Date or (B) in
the event that within 30 days after the consummation of the Exchange Offer
(the "Prescribed Time Period") any Holder or Holders of the Registrable
Notes shall notify the Company that such Holders (x) have received an
opinion of counsel to the effect that such Holder or Holders are
prohibited by applicable law or SEC policy from participating in the
Exchange Offer, (y) have received an opinion of counsel to the effect that
such Holder or Holders may not resell Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder or (z) are
broker-dealers and hold Registrable Notes acquired directly from the
Company or an "affiliate" of the Company, a Shelf Registration Statement
is not filed within 45 days after expiration of the Prescribed Time
Period, then, commencing on the 61st day after the Closing Date or the
46th day after the expiration of the Prescribed Time Period, as the case
may be, Additional Interest shall be accrued on the Notes over and above
the accrued interest at a rate of .50% per annum for the first 90 days
immediately following the 61st day after the Closing Date or the 46th day
after the expiration of the Prescribed Time Period, as the case may be,
such Additional Interest rate increasing by an additional .25% per annum
at the beginning of each subsequent 90-day period;
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to Section 2(d)(i) hereof and is
not declared effective within 120 days following the Closing Date or the
expiration of the Prescribed Time Period, as the case may be, then
commencing on the 121st day after the Closing Date or the expiration of
the Prescribed Time Period, as the case may be, Additional Interest shall
be accrued on the Registrable Notes over and above the accrued interest at
a rate of .50% per annum for the first 90 days immediately following the
121st date after the Closing Date or the expiration of the Prescribed Time
Period, as the case may be, such Additional Interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Company has not exchanged Exchange Notes for
all Registrable Notes validly tendered and not withdrawn in accordance
with the terms of the Exchange Offer on or prior to 30 days after the date
on which the Exchange Offer Registration Statement was declared effective,
or (B) if applicable, a Shelf Registration Statement has been declared
effective and such Shelf Registration Statement ceases to be effective
prior to 180 days from its original effective date, then, subject to
certain exceptions, Additional Interest shall be accrued on the
Registrable Notes over and above the accrued interest at a rate of .50%
per annum for the first 60 days immediately following the (x) 31st day
after such effective date, in the case of (A) above,
8
<PAGE>
or (y) the day such Shelf Registration Statement ceases to be effective in
the case of (B) above, such Additional Interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 60-day
period;
provided, however, that the Additional Interest rate on the Registrable Notes
may not exceed 1.5% per annum; and provided further that (i) upon the filing of
the Exchange Offer Registration Statement or a Shelf Registration Statement (in
the case of (d) (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of (d)
(ii) above), or (3) upon the exchange of Exchange Notes for all Registrable
Notes validly tendered in the Exchange Offer or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective prior to 180
days from its original effective date (in the case of (d) (iii) above),
Additional Interest on the Registrable Notes as a result of such clause (i),
(ii) or (iii) shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), or (ii) or
(iii) above will be payable in cash on the interest payment dates of the
Registrable Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year composed of twelve 30-day months),
and the denominator of which is 360.
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer provided that it has accepted all Registrable Notes
theretofore validly tendered in accordance with the terms of the Exchange Offer.
Registrable Notes not tendered in the Exchange Offer shall bear interest at the
same rate as in effect at the time of issuance of the Registrable Notes.
(e) Without limiting the remedies available to the Initial Purchaser and
the Holders, the Company acknowledges that any failure by the Company to comply
with its obligations under Section 2(a) and Section 2(b) hereof may result in
material irreparable injury to the Holders for which there is no adequate remedy
at law, that it will not be possible to measure damage for such injuries
precisely and that, in the event of any such failure, the Initial Purchaser or
any Holder may obtain such relief as may be required to specifically enforce the
Company's obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations, if any, of the Company with respect to
the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall reasonably promptly:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form shall (x) be selected by the
9
<PAGE>
Company, (y) in the case of a Shelf Registration, be available for the sale of
the Registrable Notes by the selling Holders thereof and (z) comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
use their best efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the 1933 Act; and keep each
Prospectus current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or dealers with
respect to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes to which such Shelf Registration Statement relates, to counsel
for the Initial Purchaser and to counsel for the Holders, without charge, one
copy of the Registration Statement and Exhibits thereto and as many copies of
each Prospectus, including each preliminary Prospectus and any amendment or
supplement thereto, requested to facilitate the public sale or other disposition
of the Registrable Notes; and the Company consents to the use of such Prospectus
and any amendment or supplement thereto in accordance with applicable law by
each of the selling Holders of Registrable Notes in connection with the offering
and sale of the Registrable Notes covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in accordance with applicable
law;
(d) use their best efforts (i) to register or qualify the Registrable
Notes under all applicable state securities or blue sky laws or such
jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC and (ii) to cooperate
with such Holders in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. and do any and all other acts
and things which may be reasonably necessary or advisable to enable such Holder
to consummate the disposition in each such jurisdiction of such Registrable
Notes owned by such Holder; provided, however, that the Company shall not be
required to (A) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where they would not otherwise be required to qualify but for
this Section 3(d), (B) file any general consent to service of process or (C)
subject themselves to taxation in any such jurisdiction if they are not so
subject;
(e) in the case of a Shelf Registration, notify each Holder of Registrable
Notes, counsel for the Holders and for the Initial Purchaser (or, if applicable,
separate counsel for the Holders) and, if requested by such Persons, confirm
such
10
<PAGE>
advice in writing, (i) when a Registration Statement has become effective and
when any post-effective amendment thereto has been filed and becomes effective,
(ii) of any request by the SEC or any state securities authority for amendments
and supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if the Company receives any notification
with respect to the suspension of the qualification of the Registrable Notes for
sale in any jurisdiction or the initiation of any proceeding for such purpose,
(v) of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or which
requires the making of any changes in such Registration Statement or Prospectus
in order to make the statements therein not misleading and (vi) of any
determination by the Company that a post-effective amendment to a Registration
Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends (unless required by applicable securities laws) and enable
such Registrable Notes to be in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the selling Holders
may reasonably request at least two business days prior to the closing of any
sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the occurrence of any event
contemplated by Section 3(e)(v) hereof, use their best efforts to prepare a
supplement or post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes, such Prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the Company agrees to notify the Holders to
suspend use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the
11
<PAGE>
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration Statement,
any Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchaser and its counsel (and, in the case of a Shelf Registration Statement,
counsel for the Holders) and make such of the representatives of the Company as
shall be reasonably requested by the Initial Purchaser or its counsel (and, in
the case of a Shelf Registration Statement, counsel for the Holders) available
for discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment of or
supplement to a Registration Statement or a Prospectus, of which the Initial
Purchaser and its counsel (and, in the case of a Shelf Registration Statement,
counsel for the Holders) shall not have previously been advised and furnished a
copy or to which the Initial Purchaser or its counsel (and, in the case of a
Shelf Registration Statement, counsel for the Holders) shall reasonably object
promptly in light of the circumstances;
(k) obtain a CUSIP number for all Exchange Notes or Registrable Notes (if
applicable), as the case may be, not later than the effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, cooperate with the
Trustees and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use their best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make reasonably available for
inspection by one representative of the Holders of the Registrable Notes,
counsel for the Holders and accountants designated by the Holders and reasonably
acceptable to the Company, at reasonable times and in a reasonable manner and
subject to the execution of customary confidentiality agreements, all financial
and other records, pertinent documents and properties of the Company, and cause
the respective officers, directors and employees of the Company to supply all
information reasonably requested, and as is customary for similar due diligence
examinations, by any such representative, attorney or accountant in connection
with a Shelf Registration Statement;
(n) if reasonably requested by any Holder of Registrable Notes covered by
a Registration Statement, (i) promptly include in a Prospectus supplement or
post-effective amendment such information with respect to such Holder as such
Holder
12
<PAGE>
reasonably requests to be included therein and (ii) make all required filing of
such Prospectus supplement or such post-effective amendment as soon as the
Company has received notification of the matters to be included in such filing;
and
(o) in the case of a Shelf Registration, if the Initial Purchaser on
behalf of the Holders shall so request, enter into such customary agreements and
take all such other reasonable actions in connection therewith (including, those
reasonably requested by counsel for the Holders) in order to expedite or
facilitate the disposition of such Registrable Notes and in such connection, (i)
to the extent possible, make such representations and warranties to the Holders
of such Registrable Notes with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) use their best efforts to obtain
opinions of counsel to the Company (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to counsel to the Holders)
addressed to each selling Holder of Registrable Notes, covering the matters
customarily covered in opinions requested in underwritten offerings, (iii) use
their best efforts to obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary of the Company, or any business
acquired by the Company for which financial statements and financial data are or
are required to be included in the Registration Statement) addressed to each
selling Holder of Registrable Notes, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by counsel for the Holders to
evidence the continued validity of the representations and warranties of the
Company made pursuant to clause (i) above and to evidence compliance with any
customary conditions in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Notes to promptly furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Notes as the Company may from time to time reasonably request
in writing and the Company may exclude from such registration the Registrable
Notes of any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(e)(ii) through (v) hereof, such Holder will
forthwith discontinue disposition of Registrable Notes pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than
13
<PAGE>
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
Each Holder agrees to indemnify the Company, the Initial Purchaser and the other
selling Holders and each of their respective officers and directors who sign the
Registration Statement and each person, if any, who controls any such person for
any losses, claims, damages and liabilities caused by the failure of such Holder
to discontinue disposition of Registrable Notes after receipt of the notice
referred to in the preceding sentence or the failure of such Holder to comply
with applicable prospectus delivery requirements with respect to any Prospectus
(including, but not limited to, any amended or supplemented Prospectus) provided
by the Company for such use.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Company understands that the staff of the SEC has taken the
position that any broker-dealer that receives Exchange Notes for its own account
in the Exchange Offer in exchange for Notes that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act in connection with any resale of such Exchange Notes
and, therefore, must deliver a prospectus meeting the requirements of the 1933
Act in connection with any resales of the Exchange Notes received by it in the
Exchange Offer.
The Company understands that it is the staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Notes, without naming
the Participating Broker-Dealers or specifying the amount of Exchange Notes
owned by them, such Prospectus may be delivered by Participating Broker-Dealers
to satisfy their prospectus delivery obligation under the 1933 Act in connection
with resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of this
Agreement, the Company agrees: to cause the Exchange Offer Registration
Statement to remain effective for a period 180 days after the Offer Termination
Date (or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all such Exchange Notes received in the Exchange Offer) and shall amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i) for such a period,
and Participating Broker-Dealers shall not be authorized by the Company to
deliver and shall not deliver such Prospectus after such period in connection
with the resales contemplated by this Section 4.
(c) The Initial Purchaser shall have no liability to the Company or any
Holder for costs and expenses of the Exchange Offer Registration with respect to
14
<PAGE>
any request that they make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) In the event of a Shelf Registration Statement or in connection with
any prospectus delivery pursuant to an Exchange Offer Registration Statement by
a Participating Broker-Dealer or the Initial Purchaser, as applicable, the
Company agrees to indemnify and hold harmless the Initial Purchaser, each Holder
and each Person, if any who controls the Initial Purchaser or any Holder within
the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto pursuant to which Exchange
Notes or Registrable Notes were registered under the 1933 Act, including all
documents incorporated therein by reference), or arising out of or based upon
any omissions or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or arising
out of or based upon any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to such Holder furnished in writing to the Company
by or on behalf of any Holder expressly for use in connection therewith
("Initial Purchaser's Information"); provided, however, that the indemnification
contained in this paragraph (a) with respect to such Registration Statement or
Prospectus shall not inure to the benefit of any Holder or any such controlling
person on account of any such loss, claim, damages or liabilities caused by the
failure of such person to discontinue disposition of Registrable Notes after
receipt of the notice referred to in the final paragraph of Section 3 hereof;
provided, further, that with respect to any such untrue statement or omission
made in any preliminary prospectus, the indemnity agreement contained in this
Section 5(a) shall not enure to the benefit of any indemnified person from whom
the person asserting any such loss, claim, damage or liability received
Registrable Notes or Exchange Notes if such persons did not receive a copy of
the final prospectus at or prior to the confirmation of the sale of such
Registrable Notes or Exchange Notes to such person in any case where such
delivery is required by the 1993 Act and the untrue statement or omission was
corrected in the final prospectus unless such failure to deliver the final
prospectus was a result of noncompliance by the Company with Sections 4(c) and
4(g).
15
<PAGE>
(b) If any action, suit or proceeding shall be brought against an Holder
or any person controlling any Holder in respect of which indemnity may be sought
against the Company, such Holder or such controlling person shall promptly
notify the Company in writing thereof, and the Company shall be entitled to
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses. If the Company so assumes the defense, such Holder shall
use all reasonable best efforts to cooperate with the Company in the defense of
such action, suit or proceeding. Such Holder or any such controlling person
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Holder or such controlling
person unless (i) the Company has agreed in writing to pay such fees and
expenses, (ii) the Company has failed to assume the defense and employ counsel
within a reasonable time after notice of the commencement of such action, suit
or proceeding is received, or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include both such Holder or such
controlling person and the Company and such Holder or such controlling person
shall have been advised by its counsel in writing that representation of such
indemnified party and the Company by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Initial Purchaser or holder or such controlling person). It is understood,
however, that the Company shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys at any time for all such Holders and controlling persons, which firm
shall be designated in writing by Smith Barney Inc. The Company shall not be
liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Holder and any
such controlling person from and against any loss, claim, damage, liability or
expense by reason of settlement or judgment, to the extent provided in the
preceding paragraph.
(c) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors and officers, and any person who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20(a) of the 1934 Act, to the same extent as the foregoing indemnity from the
Company to each Holder, but only with respect to the Initial Purchaser's
Information. If any action, suit or proceeding shall be brought against the
Company, any of its directors or officers, or any such controlling persons based
on any Registration Statement (or any amendment thereto) or any prospectus (or
any amendment or supplement thereto), and in respect of which indemnity may be
sought against any
16
<PAGE>
Holder pursuant to this paragraph (c), such Holder shall have the rights and
duties given to the Company by paragraph (b) above (except that if the Company
shall have assumed the defense thereof such Holder shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Holder's
expense), and the Company, its directors and officers, and any such controlling
persons shall have the rights and duties given to the Holders by paragraph (b)
above.
(d) If the indemnification provided for in this Section 5 is unavailable
to an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
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 Company on the one hand and
the Holders on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Holders on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the Holders
on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Notes were
sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 5 are several in proportion to the number of Notes purchased by such
Holder and not joint.
(f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or
17
<PAGE>
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability or claims that are the subject matter of such action,
suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses (including
counsel fees pursuant to paragraph (b) above) for which an indemnified party is
entitled to indemnification or contribution under this Section 5 shall be paid
by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 5 shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of any
Holder or any person controlling any Holder, the Company's directors or officers
or any person controlling the Company, (ii) acceptance of any Exchange Notes and
(iii) any sale of Registrable Notes pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into, and on
or after the date of this Agreement will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding Registrable Notes;
provided, however, that no departure from the provisions of Section 5 hereof
shall be effective as against any Holder of Registrable Notes unless consented
to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
18
<PAGE>
All such notices and communications shall be deemed to have been duly
given at the time delivered, if personally delivered; five business days after
being deposited in the mail, postage pre-paid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment or assumption, subsequent Holders; provided that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms of the Purchase Agreement. If any transferees of
any Holder shall acquire Registrable Notes, in any manner, whether by operation
of law or otherwise, such Registrable Notes, shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Notes such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof. The Initial Purchaser shall have no
liability or obligation to the Company with respect to any failure by a Holder
(other than the Initial Purchaser) to comply with, or any breach by any Holder
of, the obligations of such Holder under this Agreement.
(e) Third Party Beneficiary. The Holders (with the exception of the
Initial Purchaser) shall be third party beneficiaries to the agreements made
hereunder between the Company and the Initial Purchaser and shall have the right
to enforce such agreement directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by laws of the
State of New York.
(i) Severability. In the event that one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every
19
<PAGE>
other respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(j) Termination. This Agreement shall terminate upon the redemption of
the Notes pursuant to the terms of the Escrow Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PRIME SUCCESSION ACQUISITION CORP.
By:/s/ Myles Cairns
----------------
Title: Chief Financial Officer, Secretary, Treasurer
Confirmed and accepted as of
the date first above written:
SMITH BARNEY INC.
By:/s/ Michael Del Giudice
-----------------------
Title: Vice President
21
<PAGE>
LETTER OF TRANSMITTAL
for
10 3/4% Senior Subordinated Notes due 2004
of
PRIME SUCCESSION, INC.
(formerly known as Prime Succession Acquistion Corp.)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _________ __, 1996 (the "EXPIRATION DATE") UNLESS EXTENDED BY
PRIME SUCCESSION, INC.
EXCHANGE AGENT:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand: By Mail:
United States Trust Company of New York (insured or registered recommended)
111 Broadway--Lower Level United States Trust Company of New York
New York, New York 10006 P.O. Box 843
Attention: Corporate Trust Peter Cooper Station
New York, New York 10276
Attention: Corporate Trust
By Overnight Express:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services Window
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
By Telephone:
(800) 548-6565
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated _______
__, 1996 (the "Prospectus") of Prime Succession, Inc. (formerly known as Prime
Succession Acquistion Corp.) ("Prime"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe Prime's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its new 10 3/4% Senior
Subordinated Notes due 2004 (the "Exchange Notes") for each $1,000 in principal
amount of outstanding 10 3/4% Senior Subordinated Notes due 2004 (the "Notes").
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable by holders thereof (except as
provided herein or in the Prospectus) and are not subject to any covenant
regarding registration under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE>
List below the Notes to which this Letter of Transmittal relates. If the space
provided below is inadequate, the Certificate Numbers and Principal Amounts
should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF NOTES TENDERED HEREWITH
===============================================================================
| | Aggregate |
| |Principal Amount| Principal
Name(s) and Address(es) of Registered | Certificate| Represented | Amount
Holder(s) (Please fill in) | Number(s)*| by Notes* | Tendered**
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| | |
- -------------------------------------------------------------------------------
| Total | |
===============================================================================
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by such Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates of
Notes are to be forwarded herewith or if delivery of Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer--Tender Procedure" in the Prospectus. Delivery of documents to the
book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Holders whose Notes are not immediately available or who cannot
deliver their Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the caption
"The Exchange Offer--Tender Procedure."
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOKENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
/ / The Depository Trust Company
Account Number
Transaction Code Number
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Name of Eligible Institution that Guaranteed Delivery
Date of Execution of Notice of Guaranteed Delivery
<PAGE>
If Delivered by Book-Entry Transfer:
Account Number
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name
(Please Print)
Address
(Including Zip Code)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT
FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents
that (i) it is not an "affiliate" of Prime within the meaning of Rule 405 under
the Securities Act, (ii) Exchange Notes to be acquired by it in connection with
the Exchange Offer are being acquired by it in the ordinary course of its
business and (iii) it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to Prime the above-described principal amount of
the Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Notes tendered herewith, the undersigned hereby exchanges,
assigns and transfers to, or upon the order of, Prime all right, title and
interest in and to such Notes. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent acts as the
agent of Prime, in connection with the Exchange Offer) to cause the Notes to be
assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Notes and to acquire Exchange Notes issuable upon the exchange of such
tendered Notes, and that, when the same are accepted for exchange, Prime will
acquire good and unencumbered title to the tendered Notes, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or
Prime to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Notes or transfer ownership of such Notes on the account
books maintained by the book-entry transfer facility. The undersigned further
agrees that acceptance of any and all validly tendered Notes by Prime and the
issuance of Exchange Notes in exchange therefor shall constitute performance in
full by Prime of its obligations under the Registration Rights Agreement (as
defined in the Prospectus) and that Prime shall have no further obligations or
liabilities thereunder.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer--Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by Prime), as more
particularly set forth in the Prospectus, Prime may not be required to exchange
any of the Notes tendered hereby and, in such event, the Notes not exchanged
will be returned to the undersigned at the address shown above.
By tendering, the undersigned hereby represents to Prime that, among
other things, (i) it is not an "affiliate" of Prime within the meaning of Rule
405 under the Securities Act, (ii) Exchange Notes to be acquired by it in
connection with the Exchange Offer are being acquired by it in the ordinary
course of its business and (iii) it has no arrangement or understanding with
any person to participate in the distribution of the Exchange Notes. If the
undersigned is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Notes that were acquired as a result of market-making
activities or other trading activities, the undersigned hereby acknowledges
that it will deliver a prospectus in connection with any resale of such
Exchange Notes; however, by so acknowledging and delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Any holder of Notes using the Exchange Offer to
participate in a distribution of the Exchange Notes (i) cannot rely on the
position of the staff of the Securities and Exchange Commission (the
"Commission") enunciated in its interpretive letter with respect to Exxon
Capital Holdings Corporation (available April 13, 1989) or similar letters and
(ii) must comply with the registration and prospectus requirements of the
Securities Act in connection with a secondary resale transaction. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange Notes.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Notes may
be withdrawn at any time prior to the Expiration Date in accordance with the
terms of the Letter of Transmittal.
Certificates for all Exchange Notes delivered in exchange for tendered
Notes and any Notes delivered herewith but not exchanged, and registered in the
name of the undersigned, shall be delivered to the undersigned at the address
shown below the signature of the undersigned.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
Signature(s) of Holder(s)
Dated Area Code and Telephone Number:
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Notes. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth the full title of such
person.) See Instruction 3.
Name(s)
(Please Print)
Capacity (full title)
Address
(Including Zip Code)
Area Code and Telephone No.
Taxpayer Identification No.
GUARANTEE OF SIGNATURE(S)
(If Required-See Instruction 3)
Authorized Signature
Name
Title
Address
Name of Firm
Area Code and Telephone No.
Dated
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Notes or confirmation of any
book-entry transfer to the Exchange Agent's or its agent's account at a
book-entry transfer facility of Notes tendered by book-entry transfer, as well
as a properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
The method of delivery of this Letter of Transmittal, the Notes and
any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used. In all cases sufficient time should be allowed to
permit timely delivery.
Holders whose Notes are not immediately available or who cannot
deliver their Notes and all other required documents to the Exchange Agent on
or prior to the Expiration Date or comply with book-entry transfer procedures
on a timely basis must tender their Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under "The Exchange Offer--Tender
Procedure." Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution (as defined in the Prospectus); (ii) on or
prior to the Expiration Date the Exchange Agent must have received from such
Eligible Institution a letter, telegram or facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) setting forth the name and address of the tendering holder, the names
in which such Notes are registered, and, if possible, the certificate numbers
of the Notes to be tendered; and (iii) all tendered Notes (as a confirmation of
any book-entry transfer of such Notes into the Exchange Agent's account at a
book-entry transfer facility) as well as this Letter of Transmittal and all
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such letter, telegram or facsimile transmission, all as
provided in the Prospectus under the caption "The Exchange Offer--Tender
Procedure."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance
of the Notes for exchange.
2. Effect of Non-Tender; Partial Tenders; Withdrawals.
Any Note or portion thereof not tendered will remain outstanding and
continue to accrue interest but will not retain any rights under the
Registration Rights Agreement.
If less than the entire principal amount of Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Notes submitted but not
tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise clearly indicated.
Tenders of Notes pursuant to the Exchange Offer are irrevocable,
except that Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. To be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be received by the
Exchange Agent by 5:00 P.M., New York City time, on the Expiration Date unless
extended by Prime. Any such notice of withdrawal must specify the person named
in the Letter of Transmittal as having tendered Notes to be withdrawn, the
certificate numbers of the Notes to be withdrawn, the principal amount of Notes
to be withdrawn, a statement that such holder is withdrawing his or her
election to have such Notes exchanged, and the name of the registered holder of
such Notes, and must be signed by the holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
guarantees) or be accompanied by evidence satisfactory to Prime that the person
withdrawing the tender has succeeded to the beneficial ownership of the Notes
being withdrawn. The Exchange Agent will return the properly withdrawn Notes
promptly following receipt of notice of withdrawal. If Notes have
<PAGE>
been tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Notes or otherwise comply
with the book-entry transfer facility's procedures. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by Prime, and such determination will be final and binding on all
parties.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s) of
the Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Notes) of Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Notes listed, such Notes must be endorsed
or accompanied by separate written instruments of transfer or exchange in form
satisfactory to Prime and duly executed by the registered holder, in either
case signed exactly as the name or names of the registered holder or holders
appear(s) on the Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by Prime, proper evidence
satisfactory to Prime of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Notes are tendered: (i) by a registered
holder of such Notes, for the holder of such Notes; or (ii) for the account of
an Eligible Institution.
4. Transfer Taxes.
Prime shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Notes to it or its order pursuant to the Exchange Offer. If a
transfer tax is imposed for any reason other than the transfer and exchange of
Notes to Prime or its order pursuant to the Exchange Offer, the amount of any
such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exception therefrom is not submitted herewith the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
<PAGE>
5. Waiver of Conditions.
Prime reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Notes.
Any holder whose Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated below for further
instructions.
7. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, NY 10017, Attention: Marni J. Lerner (telephone
212-455-3443).
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with certificates of Notes or confirmation of book-entry transfer and all other
required documents) or a Notice of Guaranteed Delivery must be received by the
Exchange Agent on or prior to the Expiration Date.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
10 3/4% Senior Subordinated Notes
due 2004
in Exchange for New
10 3/4% Senior Subordinated Notes due 2004
of
PRIME SUCCESSION, INC.
(formerly known as Prime Succession Acquisition Corp.)
Registered holders of outstanding 10 3/4% Senior Subordinated Notes
due 2004 (the "Notes") who wish to tender their Notes in exchange for a like
principal amount of new 10 3/4% Senior Subordinated Notes due 2004 (the
"Exchange Notes") and whose Notes are not immediately available or who cannot
deliver their Notes and Letter of Transmittal (and any other documents required
by the Letter of Transmittal) to United States Trust Company of New York (the
"Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight delivery) or mail to the Exchange Agent. See "The Exchange
Offer--Tender Procedure" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand: By Mail:
United States Trust Company of New York (insured or registered recommended)
111 Broadway--Lower Level United States Trust Company of New York
New York, New York 10006 P.O. Box 843
Attention: Corporate Trust Peter Cooper Station
New York, New York 10276
Attention: Corporate Trust
By Overnight Express:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services Window
<PAGE>
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
By Telephone:
(800) 548-6565
Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated _________ __, 1996 of Prime Succesion, Inc. (formerly known as Prime
Succession Acquisition Corp.) (the "Prospectus"), receipt of which is hereby
acknowledged.
DESCRIPTION OF SECURITIES TENDERED
Name and address of registered
holder as it appears on the
10 3/4% Senior Subordinated Certificate Number(s) Principal Amount
Notes due 2004 ("Notes") of Notes of Notes
(Please Print) Tendered Tendered
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<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Notes, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal
within three New York Stock Exchange, Inc. trading days after the date of
execution of this Notice of Guaranteed Delivery.
Name of Firm:
------------------------------- ------------------------------
(Authorized Signature)
Address: Title:
------------------------------------ -----------------------
------------------------------------ Name:
(Zip Code) -----------------------
(Please type or print)
Area Code and Telephone Number: Date:
-----------------------
- ---------------------------------------------
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-3-
