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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
-----------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
COMMISSION FILE NUMBER _____________
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PRIME SUCCESSION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------------
<TABLE>
<S> <C>
DELAWARE 13-3904211
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3940 OLYMPIC BLVD., SUITE 500 41018
ERLANGER, KENTUCKY, U.S.A. (POSTAL CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(606) 746-6800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
The number of outstanding shares of Common Stock as of October 29,
1999, was 100.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of September 30, 1999 and December 31, 1998 1
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended September 30, 1999 and 1998 3
and the Nine Months Ended September 30, 1999 and 1998
CONSOLIDATED STATEMENTS of CASH FLOWS
for the Nine Months Ended September 30, 1999 and 1998 4
NOTES to INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 13
</TABLE>
(i)
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PART I
ITEM 1. FINANCIAL STATEMENTS
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 4,832,272 $ 1,146,670
Receivables:
Trade, less allowance of $2,669,035 and $2,086,520 11,949,004 14,718,380
Other 791,371 998,020
------------- -------------
Total current receivables 12,740,375 15,716,400
------------- -------------
Inventories:
Merchandise 3,707,887 3,582,912
Cemetery lots and mausoleum spaces 864,088 1,178,137
------------- -------------
Total current inventories 4,571,975 4,761,049
------------- -------------
Prepaids and other current assets 343,900 607,407
Deferred income taxes 588,088 588,088
------------- -------------
Total current assets 23,076,610 22,819,614
------------- -------------
Property and equipment:
Land and land improvements 16,841,886 16,447,209
Buildings and improvements 50,573,751 48,751,390
Equipment, furniture and fixtures 10,622,599 10,221,223
Accumulated depreciation (8,120,869) (5,906,519)
------------- -------------
Net property and equipment 69,917,367 69,513,303
------------- -------------
Developed cemetery properties 14,698,112 14,660,921
Undeveloped cemetery properties 30,992,379 30,992,379
Goodwill, less accumulated amortization of $17,555,095 and $13,222,612 213,733,434 218,065,917
Other intangible assets, less accumulated amortization of $12,619,054 and
$9,953,60 15,883,292 19,263,641
Long-term receivables, less allowance of $3,769,007 and $6,205,730 15,219,352 15,221,081
Other assets 837,110 585,439
------------- -------------
$ 384,357,656 $ 391,122,295
============= =============
</TABLE>
See accompanying notes to interim consolidated financial statements.
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PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(unaudited)
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C>
Accounts payable $ 1,914,324 $ 2,031,580
Other accrued expenses 7,051,744 9,708,454
Current installments of obligations under agreements with former owners 2,697,070 2,732,386
Current installments of long-term debt 4,472,491 1,396,074
Due to related party 275,000 83,333
------------- -------------
Total current liabilities 16,410,629 15,951,827
------------- -------------
Deferred merchandise liabilities and revenues, less trust fund deposits 15,908,155 14,384,071
Obligations under agreements with former owners, less current installments 10,362,533 12,537,499
Long-term debt, less current installments 209,489,416 208,888,446
Deferred income taxes 16,523,017 16,523,017
Other long-term liabilities 3,219,434 3,719,511
Shareholders' equity:
Common stock, par value $.01 per share, 1,000 shares authorized;
100 issued and outstanding shares 1 1
Additional paid-in capital 128,597,624 128,888,394
Accumulated deficit (16,153,153) (9,770,471)
------------- -------------
Total shareholders' equity 112,444,472 119,117,924
------------- -------------
$ 384,357,656 $ 391,122,295
============= =============
</TABLE>
See accompanying notes to interim consolidated financial statements.
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PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Funeral services $17,591,104 $ 17,373,676 $ 56,518,980 $ 56,477,498
Cemetery sales 3,391,819 6,317,333 12,558,639 18,911,323
------------ ------------ ------------ ------------
20,982,923 23,691,009 69,077,619 75,388,821
Costs and expenses:
Funeral homes 11,868,002 11,940,408 36,935,871 37,044,373
Cemetery 2,993,173 4,208,433 8,899,428 12,598,202
------------ ------------ ------------ ------------
14,861,175 16,148,841 45,835,299 49,642,575
Corporate general and
administrative expenses 880,783 927,252 2,574,630 2,467,398
Depreciation and amortization 2,968,700 2,810,166 8,762,290 8,479,614
------------ ------------ ------------ ------------
Operating income 2,272,265 3,804,750 11,905,400 14,799,234
Other expenses:
Interest expense, including
amortization of deferred loan
costs (see Note 1) 6,350,969 6,005,984 18,206,136 18,188,728
------------ ------------ ------------ ------------
Loss before income taxes (4,078,704) (2,201,234) (6,300,736) (3,389,494)
Income tax expense (32,202) (32,641) (81,946) (70,141)
------------ ------------ ------------ ------------
Net loss $ (4,110,906) $ (2,233,875) $ (6,382,682) $ (3,459,635)
============ ============ ============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
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PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,382,682) $ (3,459,635)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,062,099 9,795,033
Depletion of cemetery property 594,248 909,217
(Gain) loss on sale of assets (27,700) 7,217
Changes in operating assets and liabilities
net of effects of acquisition of subsidiaries:
Receivables (net) 2,977,753 (1,217,761)
Inventories (442,365) (1,068,363)
Accounts payable and accrued expenses (2,773,966) (3,526,285)
Deferred merchandise liabilities and revenue (net) 1,219,371 (3,763,523)
Other long-term liabilities (500,077) 1,243,696
Other 201,717 (845,237)
------------- ------------
Net cash provided by (used in) operating activities 4,928,398 (1,925,641)
------------- ------------
Cash flows from investing activities:
Proceeds from the disposal of assets 166,377 426,023
Purchases of property and equipment (2,862,771) (2,100,802)
Net cash received for sale of business -- 250,000
Net cash paid for purchase of business -- (805,000)
------------- ------------
Net cash used in investing activities (2,696,394) (2,229,779)
------------- ------------
Cash flows from financing activities:
Net proceeds of bank indebtedness under revolving loan 5,000,000 7,300,000
Proceeds from long-term debt -- 113,307
Payments on long-term debt (1,336,120) (1,342,430)
Payments on obligations under agreements with former owners (2,210,282) (1,828,760)
------------- ------------
Net cash provided by financing activities 1,453,598 4,242,117
------------- ------------
Net increase in cash and cash equivalents 3,685,602 86,697
Cash and cash equivalents at beginning of period 1,146,670 1,555,415
------------- ------------
Cash and cash equivalents at end of period $ 4,832,272 $ 1,642,112
============= ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
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PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Interest expense includes amortization of deferred loan costs as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C>
$412,281 $438,473 $1,299,806 $1,315,419
</TABLE>
(2) Footnote disclosure which would substantially duplicate the disclosure
contained in the Annual Report on Form 10-K for the year ended December
31, 1998 has not been included. The unaudited interim consolidated
financial statements reflect all adjustments which, in the opinion of
management, are necessary to reflect a fair statement of the results
for the periods presented and to present fairly the consolidated
financial position of Prime Succession, Inc. and subsidiaries as of
September 30, 1999. All such adjustments are of a normal recurring
nature.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
On August 26, 1996 (the "Closing Date"), Prime Succession, Inc.'s
(Predecessor Company) capital stock was purchased (the Acquisition) by
Blackstone Capital Partners II Merchant Banking Fund L.P. and affiliates, Loewen
Group International, Inc. and PSI Management Direct L.P. A new entity, Prime
Succession, Inc. (Successor Company), was formed and became a wholly-owned
subsidiary of the Predecessor Company. In connection with the Acquisition, all
of the assets and liabilities of the Predecessor Company were transferred to the
Successor Company. Collectively, the Predecessor Company and Successor Company
are herein referred to as "the Company".
The Company provides merchandise and services in both the funeral and
cemetery segments of the death care industry in the United States. In addition
to providing merchandise and services at the time of need, the Company also
makes funeral, cemetery and cremation arrangements on a pre-need basis. As of
September 30, 1999, the Company through its subsidiaries owns and operates 142
funeral homes and 20 cemeteries in 19 states, primarily in non-urban areas of
the United States. The Company commenced operations in 1992 and expanded rapidly
through the aggressive acquisition of funeral homes and cemeteries. The
Company's consolidated revenues were $69.1 million and $75.4 million for the
nine months ended September 30, 1999 and 1998, respectively. Sales of funeral
services of $56.5 million and cemetery sales of $12.6 million accounted for
approximately 81.8% and 18.2%, respectively, of total net sales for the nine
months ended September 30, 1999.
The Company had no funeral homes when it began operations in 1992 and
grew to 146 funeral homes in 1996. In order to achieve this rapid growth, former
management was primarily focused on identifying funeral homes to be acquired and
consummating acquisitions of such homes rather than on maximizing profitability
of the funeral homes and cemeteries which it had acquired. As a result, former
management did not take advantage of certain opportunities to improve the
efficiency and performance of the funeral homes acquired. New management
substantially eliminated the Company's acquisition program. In addition, in
order to improve the Company's present and long-term operating performance, new
management took 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, and (iii) the shift in focus from
acquisitions to profit maximization at existing locations. The Company's future
results of operations will depend in large part on the ability of management to
successfully maintain its business strategy.
The Company is a party to a supply agreement with Batesville Casket
Company, Inc. ("BCC"), The Forethought Group and Forethought Life Insurance
Company ("FLIC"), pursuant to which the Company must purchase caskets
exclusively from BCC and, in connection with its pre-need sales of funeral
services funded by insurance, the Company must offer to its customers in
specified markets exclusively FLIC insurance products. The agreement expires on
December 31, 2004, subject to earlier termination by any party thereto upon 30
days notice following a material, uncured breach of the agreement or the
occurrence of certain insolvency events. Management of the Company believes that
the terms of such supply agreement are favorable to the Company.
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RESULTS OF OPERATIONS
The Company's operations are detailed below for the three months and
the nine months ended September 30, 1999 and 1998 expressed in dollar amounts as
well as relevant percentages. Revenue, gross margin, earnings from operations
and expenses other than income taxes are presented as a percentage of revenue.
Income taxes are presented as a percentage of losses before income taxes.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(millions of dollars) (percent)
<S> <C> <C> <C> <C>
REVENUE
Funeral $17.6 $17.4 83.8% 73.4%
Cemetery 3.4 6.3 16.2 26.6
----- ----- ----- -----
Total $21.0 $23.7 100.0% 100.0%
===== ===== ===== =====
GROSS MARGIN
Funeral $ 5.7 $ 5.5 32.4% 31.6%
Cemetery 0.5 2.1 14.7 33.3
----- -----
Total 6.2 7.6 29.5 32.1
EXPENSES
Corporate general and administrative 0.9 0.9 4.3 3.8
Depreciation and amortization 3.0 2.9 14.3 12.2
----- -----
EARNINGS FROM OPERATIONS 2.3 3.8 11.0 16.0
Interest on long-term debt 6.4 6.0 30.5 25.3
----- -----
LOSS BEFORE INCOME TAXES (4.1) (2.2) (19.5) (9.3)
Income taxes -- -- -- --
----- -----
NET LOSS $(4.1) $(2.2) (19.5)% (9.3)%
===== =====
</TABLE>
Consolidated revenues decreased 11.4% to $21.0 million for the three months
ended September 30, 1999 compared to $23.7 million in the corresponding period
for 1998, with funeral service revenues increasing 1.1% to $17.6 million
compared to $17.4million in the corresponding period in 1998, and cemetery
revenues decreasing 46.0% to $3.4 million compared to $6.3 million in the
corresponding period for 1998. Cemetery revenues decreased primarily due to a
restructuring of pre-need commission rates and decline in sales force.
Consolidated operating income decreased from $3.8 million for the three months
ended September 30, 1998, to $2.3 million for the three months ended September
30, 1999.
Consolidated contribution margin of $6.2 million decreased 18.4% for
the three months ended September 30, 1999 from $7.6 million for the three months
ended September 30, 1998. Consolidated contribution margin decreased primarily
as a result of restructuring of pre-need commission rates and decline in sales
force which decreased cemetery revenues. Funeral contribution margin was 32.4%
for the three months ended September 30, 1999 compared to 31.6% for the three
months ended September 30, 1998 and cemetery contribution margin of 14.7% for
the three months ended September 30, 1999 compared to 33.3% for the
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corresponding period in 1998. Contribution margin is defined as a percentage of
funeral revenues or cemetery revenues, as the case may be, less related cost of
sales (including direct operating expenses).
Corporate general and administrative expense remained constant at $0.9
million for the three months ended September 30, 1999 compared to September 30,
1998. As a percentage of consolidated revenue, general and administrative
expense increased to 4.3% in 1999 from 3.8% for the corresponding period in
1998.
Depreciation and amortization expense increased $0.1 million to $3.0
million for the three months ended September 30, 1999 compared to $2.9 million
for the corresponding period in 1998. The increase is primarily the result of
increased depreciation on capital expenditures.
Interest expense of $6.4 million for the three months ended September
30, 1999 increased by $0.4 million compared to $6.0 million for the
corresponding period in 1998, primarily as a result of pricing premiums on
senior debt.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(millions of dollars) (percent)
--------------------- ---------
<S> <C> <C> <C> <C>
REVENUE
Funeral $56.5 $56.5 81.8% 74.9%
Cemetery 12.6 18.9 18.2 25.1
----- ----- ----- -----
Total $69.1 $75.4 100.0% 100.0%
===== ===== ===== =====
GROSS MARGIN
Funeral $19.6 $19.5 34.7% 34.5%
Cemetery 3.7 6.3 29.4 33.3
----- -----
Total 23.3 25.8 33.7 34.2
EXPENSES
Corporate general and administrative 2.6 2.5 3.7 3.3
Depreciation and amortization 8.8 8.5 12.7 11.3
----- -----
EARNINGS FROM OPERATIONS 11.9 14.8 17.2 19.6
Interest on long-term debt 18.2 18.2 26.3 24.1
----- -----
LOSS BEFORE INCOME TAXES (6.3) (3.4) (9.1) (4.5)
Income taxes 0.1 0.1 (1.6) 2.9
----- -----
NET LOSS $(6.4) $(3.5) (9.3)% 4.6%
===== =====
</TABLE>
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Consolidated revenues decreased 8.4% to $69.1 million for the nine
months ended September 30, 1999 compared to $75.4 million in the corresponding
period for 1998, with funeral service revenues remaining constant at $56.5
million compared to the corresponding period in 1998, and cemetery revenues
decreasing 33.3% to $12.6 million compared to $18.9 million in the corresponding
period for 1998. Cemetery revenues decreased primarily due to a restructuring of
pre-need commission rates and decline in sales force. Consolidated operating
income decreased from $14.8 million for the nine months ended September 30,
1998, to $11.9 million for the nine months ended September 30, 1999.
Consolidated contribution margin of $23.3 million decreased 9.7% for
the nine months ended September 30, 1999 from $25.8 million for the nine months
ended September 30, 1998. Consolidated contribution margin decreased primarily
as a result of restructuring of pre-need commission rates and decline in sales
force which decreased cemetery revenues. Funeral contribution margin was 34.7%
for the nine months ended September 30, 1999 compared to 34.5% for the nine
months ended September 30, 1998 and cemetery contribution margin of 29.4% for
the nine months ended September 30, 1999 compared to 33.3% for the corresponding
period in 1998. Contribution margin is defined as a percentage of funeral
revenues or cemetery revenues, as the case may be, less related cost of sales
(including direct operating expenses).
Corporate general and administrative expense increased to $2.6 million
for the nine months ended September 30, 1999 from $2.5 million for the
corresponding period in 1998. As a percentage of consolidated revenue, general
and administrative expense increased to 3.7% in 1999 from 3.3% for the
corresponding period in 1998. Corporate general and administrative expense
increased primarily due to personnel changes.
Depreciation and amortization expense increased $0.3 million to $8.8
million for the nine months ended September 30, 1999 compared to $8.5 million
for the corresponding period in 1998. This increase is primarily the result of
increased depreciation on capital expenditures.
Interest expense of $18.2 million for the nine months ended September
30, 1999 remained constant compared to the corresponding period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash since 1995 have been funds
provided by operations and proceeds from additional long-term debt and capital
contributions. As of September 30, 1999, the Company had a net working capital
surplus of $6.7 million and a current ratio of 1.41:1, compared to a net working
capital surplus of $6.9 million and a current ratio of 1.43:1 as of December 31,
1998.
The primary uses of cash since 1995 have been for the acquisition of
funeral homes and cemeteries, including the Acquisition, principal payments on
long-term debt and capital expenditures. In the nine months ended September 30,
1998, the Company acquired two funeral homes and a cemetery for $0.8 million.
The Company made no acquisitions in the nine months ended September 30, 1999.
In the nine months ended September 30, 1999 and 1998, the Company used
$2.9 million and $2.1 million for capital expenditures, respectively. In the
nine months ended September 30, 1999, the Company paid $1.3 million in principal
payments on long-term debt compared to $1.3 million in the corresponding period
in 1998. In the nine months ended September 30, 1998, the Company borrowed a net
of $7.3 million on its revolving line of credit. The Company had a net borrowing
on its revolving line of credit of $5.0 million for the same period in 1999.
The Company estimates that capital expenditures net of estimated
disposals of $2.0 million in 1999 to be used in part for the repair and
improvement of existing facilities. The Company also expects to invest
approximately $0.5 million in 1999 for cemetery inventory development.
Contemporaneously with the consummation of the Acquisition, the
Company entered into senior secured credit facilities (the "Bank Credit
Facilities") with a syndicate of financial institutions and The Bank of Nova
Scotia, as administrative agent.
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The Bank Credit Facilities provided the Company with senior secured
amortization extended term loan facilities (the "Bank Term Facility") in an
aggregate principal amount of $90.0 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 (the "Bank Revolving Facility") in an
aggregate principal amount of up to $25.0 million, the proceeds of which may 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. 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 is subject to
amortization, subject to certain conditions, in semi-annual installments in the
amounts of $1.0 million in each of the first three years after the anniversary
of the closing date of the Bank Term Facility (the "Bank Closing"); $4.0 million
in the fourth year after the Bank Closing; $9.0 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.
All obligations under the Bank Credit Facilities and any interest rate
hedging agreements entered into with the lenders or their affiliates in
connection therewith are unconditionally guaranteed (the "Bank Guarantees")
jointly and severally, by the Company and each of the Company's existing and
future domestic subsidiaries (the "Bank Guarantors"). 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.
In connection with the Acquisition, the Company also issued $100.0
million of 10 3/4% Senior Subordinated Notes due 2004, which were exchanged in
January 1997 for $100.0 million of 10 3/4% Senior Subordinated Notes due 2004
(the "Notes") that were registered under the Securities Act of 1933. The Notes
mature on August 15, 2004. Interest on the Notes is payable semi-annually on
February 15 and August 15 at the annual rate of 10 3/4%. The Notes are
redeemable in cash at the option of the Company, in whole or in part, at any
time on or after August 15, 2000, at prices ranging from 105.375% with annual
reductions to 100% in 2003 plus accrued and unpaid interest, if any, to the
redemption date. The proceeds of the Notes were used, in part, to finance the
Acquisition.
The Company and its subsidiaries are subject to certain restrictive
covenants contained in the Indenture relating to the Notes, including, but not
limited to, covenants imposing limitations on the incurrence of additional
indebtedness; certain payments, including dividends and investments; the
creation of liens; sales of assets and preferred stock; transactions with
interested persons; payment restrictions affecting subsidiaries; sale-leaseback
transactions; and mergers and consolidations. In addition, the Bank Credit
Facilities contain certain restrictive covenants that, among other things, limit
the ability of the Company and its subsidiaries to dispose of assets, incur
additional indebtedness, prepay other indebtedness, pay dividends or make
certain restricted payments, create liens on assets, engage in mergers or
acquisitions or enter into leases or transactions with affiliates.
As of September 30, 1999, the Company was in default of certain
negative covenants set forth in the Credit Agreement relating to the Bank Credit
Facilities. The syndicate of financial institutions and The Bank of Nova
Scotia have granted a conditional waiver of non-compliance that will expire on
January 31, 2000. There can be no assurance that the Company will be able to
secure from its lenders a further waiver at January 31, 2000 if such default
continues or if any other events of default are in existence at such time.
As of September 30, 1999, the Company had approximately $214.0 million
of indebtedness outstanding and approximately $0.2 million of borrowing
availability under the Revolving Credit Facility. On July 14, 1999, the State of
Florida approved the Company's application to change its method of funding
pre-need merchandise liabilities from trust funds to surety bonds, thus allowing
the Company to replace approximately $6.8 million of trust funds with a surety
bond of $8.5 million. 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.
In September 1998, Statement of Financial Accounting Standards (FAS)
No. 133, "Accounting for Derivative Instruments and Hedging" was issued. FAS No.
133 requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
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<PAGE> 13
on the use of the derivative and whether it qualified under the standard hedge
accounting. The Company is currently assessing the effect of this standard, but
does not anticipate a material impact on the result of operations.
YEAR 2000 ISSUES
Overview. As the Year 2000 approaches, all companies that use computers
must address "Year 2000" issues. Year 2000 issues result from the past practice
in the computer industry of using two digits rather than four to identify the
applicable year. This practice can create breakdowns or erroneous results when
computers perform operations involving years later than 1999.
The Company's State of Readiness. The Company has devised and commenced an
extensive compliance plan with the objective of bringing all of the Company's
information technology (IT) systems and non-IT systems into Year 2000 compliance
by the end of the second quarter of 1999. The Company has divided its systems
into (i) critical systems, consisting of IT systems, and (ii) non-critical
systems, consisting of a mixture of IT and non-IT systems. Each system will be
evaluated and brought into compliance in five phases:
<TABLE>
<S> <C> <C>
- Phase I: Awareness - Prepare and present comprehensive report to management
- Phase II: Assessment - Identify and evaluate all systems for Year 2000 compliance
- Phase III: Compliance - Complete necessary Year 2000 modifications
- Phase IV: Testing - Test all modified systems for Year 2000 compliance
- Phase V: Implementation - Return Year 2000 compliance systems to daily operation
</TABLE>
The Company's systems used to maintain financial records were either
found to be compliant or have completed Phases I through V. As a result, 100% of
these critical systems are currently compliant. All of the Company's other
critical and noncritical systems have also completed Phase V.
In addition, the Company has communicated with all of its significant
vendors, financial institutions and insurers to determine the extent to which
these third parties' failure to resolve their Year 2000 issues could affect the
Company's operations. The Company received indication that its significant
suppliers expected to be Year 2000 compliant prior to the end of the second
quarter of 1999. The Company has completed its evaluation of third parties'
compliance.
The Costs Involved. Because all of the Company's computer systems have
been replaced in the past two years as part of the Company's ongoing goal to
maintain state of the art technology, the Company's Year 2000 compliance costs
have been relatively low. To date, the company has incurred minor expenses in
implementing its compliance plan. Management estimates that the total cost to be
incurred by the Company to complete its compliance plan will be insignificant.
This estimate includes the use of both internal and external resources. All
costs related to the Year 2000 compliance plan are included in the Information
Systems budget and are based on management's best estimates. There can be no
guarantee that actual results will not differ from those estimated.
Risks. If the Company is not successful in its efforts to bring its
systems into Year 2000 compliance, the Company's ability to procure merchandise
in a timely and cost-effective manner may be impaired, daily business procedures
may be delayed due to the use of manual procedures, and some business procedures
may be interrupted if no alternative methodology is available, which could have
a material adverse effect on the Company's operations.
The Company has no guarantee that the systems of third parties will be
brought into compliance on a timely basis. The non-compliance of a third party's
system could have a material adverse effect on the Company's operations.
The Company's Contingency Plan. Although the Company believes that its
Year 2000 compliance plan is adequate to achieve full system operation on a
timely basis, the Company has developed a contingency plan to address the
possibility of the Company's and third parties' non-compliance.
-11-
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential change arising from increases or
decreases in the prices of interest rates as discussed below. Generally, the
Company's market risk sensitive instruments and positions are characterized as
"other than trading". The Company's exposure to market risk as discussed below
includes "forward-looking statements" and represents an estimate of possible
changes in fair value or future earnings that would occur assuming hypothetical
future movements in interest rates. The Company's views on market risk are not
necessarily indicative of actual results that may occur and do not represent the
maximum possible gains and losses that may occur, since actual gains and losses
will differ from those estimated, based upon actual fluctuations in interest
rates and the timing of transactions.
INTEREST
The Company has entered into various fixed and variable rate debt
obligations.
As of September 30, 1999, the carrying value of the company's long-term
fixed-rate debt was approximately $103.5 million, compared to fair value of
$53.5 million. Fair value was determined using quoted market prices, where
applicable, or discounted future cash flows based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. If
these instruments are held to maturity, no change in fair value will be
realized.
As of September 30, 1998, the Company had $110.5 million in
variable-rate debt. Each 0.5% change in average interest rates applicable to
such debt would result in a change of approximately $0.5 million in the
Company's pre-tax earnings.
The Company monitors its mix of fixed and variable rate debt
obligations in light of changing market conditions and from time to time may
alter that mix by, for example, refinancing balances outstanding under its
variable rate revolving credit facilities with fixed-rate debt, or by entering
into interest rate swaps or other interest rate hedging transactions.
-12-
<PAGE> 15
PART II
ITEM 5 - OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q include
"forward-looking statements" as defined in Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included herein, including, without limitation, the statements under Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" 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 herein, including, without
limitation, in conjunction with the forward-looking statements included herein.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The Exhibits, as shown in the "Index of Exhibits", attached hereto as
pages 14 and 15, are filed as a part of this Report.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PRIME SUCCESSION, INC.
/s/ ARTHUR J. ANSIN
-------------------
Arthur J. Ansin
Chief Financial Officer,
Secretary and Treasurer
October 29, 1999
-13-
<PAGE> 16
INDEX OF EXHIBITS
(a) EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
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)
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)
10.1(d)* Exclusive Supply Agreement, dated January 1, 1998 between
Batesville Casket Company, Inc., The Forethought Group,
Forethought Life Insurance Company and Prime Succession, Inc.
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.
10.4(a)* First Amendment to Credit Agreement dated September 30, 1998
among Prime Succession, Inc. (formerly known as Prime
Succession Acquisition Corp.), Prime Succession Holdings, Inc.
(formerly known as Prime Succession, Inc.), Goldman Sachs
Credit Partners L.P., as syndication agent and arranging
agent, and The Bank of Nova Scotia as administrative agent.
-14-
<PAGE> 17
(a) EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
10.4(b) Limited Waiver and Amendment dated November 12, 1999 entered
into by and among Prime Succession, Inc. (formerly known as
Prime Succession Acquisition Corp.), Prime Succession
Holdings, Inc., (formerly known as Prime Succession, Inc.),
the Financial Institutions listed therein, Goldman Sachs
Credit Partners L.P., as syndication agent and arranging
agent, and The Bank of Nova Scotia, as administrative agent.
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.
10.7* Put/Call Agreement, dated as of August 26, 1996, among
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., Loewen Group International Inc. and the Loewen Group
Inc.
10.8* 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.
12 Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of Prime Succession, Inc. (formerly known as
Prime Succession Acquisition Corp.)
27 Financial Data Schedule
* Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-4 (Registration No. 333-14599).
(b) Reports on Form 8-K
None
-15-
<PAGE> 1
Exhibit 10.4(b)
LIMITED WAIVER AND AMENDMENT
This LIMITED WAIVER AND AMENDMENT (this "WAIVER" ) is dated as of
November 12, 1999 and entered into by and among PRIME SUCCESSION, INC. (formerly
known as Prime Succession Acquisition Corp.), a Delaware corporation
("BORROWER"), PRIME SUCCESSION HOLDINGS, INC. (formerly known as Prime
Succession, Inc.), a Delaware corporation ("HOLDINGS"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "LENDER" and collectively as the "LENDERS"), GOLDMAN SACHS CREDIT
PARTNERS L.P., as syndication agent and arranging agent (in such capacities,
"ARRANGING AGENT"), and THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as
administrative agent (in such capacity, "ADMINISTRATIVE AGENT"), and is made
with reference to that certain Credit Agreement dated as of August 26, 1996, as
heretofore amended, supplemented or otherwise modified (as so amended,
supplemented or modified, the "CREDIT AGREEMENT"), by and among Borrower,
Holdings, the Lenders, Arranging Agent and Administrative Agent. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement and in the amendments contained in Section 3 and
Section 4 hereof.
RECITALS
WHEREAS, subject to certain conditions, Borrower has requested that
Requisite Lenders (i) approve the waiver of certain provisions of the Credit
Agreement relating to financial covenants set forth in Section 7.6 of the Credit
Agreement and (ii) agree to make certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. WAIVER
Subject to the terms and conditions set forth herein and in reliance on
the representations and warranties of Borrower herein contained, Requisite
Lenders hereby consent to the following limited waivers through January 31,
2000:
<PAGE> 2
(a) waiver of compliance with the minimum interest coverage
ratio requirement of 1.40:1.00 set forth in subsection 7.6A; provided that the
interest coverage ratio as of September 30, 1999 and December 31, 1999 shall not
be less than 1.15:1:00;
(b) waiver of compliance with the minimum fixed charge coverage
ratio requirement of 1.25:1.00 set forth in subsection 7.6B; provided that the
fixed charge coverage ratio as of September 30, 1999 and December 31, 1999 shall
not be less than 1.05:1.00;
(c) waiver of compliance with the maximum total senior debt
leverage ratio requirement of 3.30:1.00 set forth in 7.6C; provided that the
maximum leverage ratio as of September 30, 1999 and December 31, 1999 shall not
be greater than 4.35:1.00;
PROVIDED that the foregoing waiver shall only be effective through January 31,
2000 and, on and after such date, any failure to have complied with the
above-referenced provisions of the Credit Agreement as of September 30, 1999 or
December 31, 1999 without giving effect to the waivers specified above shall
constitute an Event of Default.
The waiver set forth in this Section 1 shall be effective only as to
the matters set forth specifically herein and shall not entitle Borrower to any
other waiver or agreement with respect to any other matter.
2. LIMITATION OF WAIVER
Without limiting the generality of the provisions of subsection 10.6 of
the Credit Agreement, the waiver set forth above shall be limited precisely as
written and relates solely to the waiver and consent of the provisions of the
Credit Agreement in the manner and to the extent described above, and nothing in
this Waiver shall be deemed to:
(a) constitute a waiver of compliance by Borrower with respect to
(i) subsection 2.4 of the Credit Agreement or (ii) any other term, provision or
condition of the Credit Agreement and any other instrument or agreement referred
to therein; or
(b) prejudice any right or remedy that Administrative Agent or
any Lender may now have (except to the extent such right or remedy was based
upon existing defaults that will not exist after giving effect to this Waiver)
or may have in the future under or in connection with the Credit Agreement or
any other instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
2
<PAGE> 3
3. AMENDMENT
(i) Section 1.1. of the Credit Agreement is hereby amended by
adding the following definitions in appropriate alphabetical order:
"FINANCIAL OFFICER CERTIFICATION" means, with respect to the financial
statements for which such certification is required, the certification of the
chief financial officer of Holdings that such financial statements 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,
to the extent provided to the board of directors, their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-end
adjustments.
(ii) Section 6.1 of the Credit Agreement is hereby amended by
deleting subsection 6.1 (xviii) and substituting the following therefor:
"(xviii) Monthly Reports and Other Information (i) As soon as
available, and in any event within twenty (20) days after the end of each month
ending after September 30,1999, the monthly report prepared for the board of
directors which shall include, to the extent and with the format and content
provided to the board of directors, the consolidated balance sheet of Holdings
and its Subsidiaries as at the end of such month and the related consolidated
statements of income, stockholders' equity and cash flows of Holdings and its
Subsidiaries for such month and for the period from the beginning of the then
current Fiscal Year to the end of such month, 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, to the extent prepared on a monthly basis, all in
reasonable detail, together with a Financial Officer Certification with respect
thereto, (ii) weekly report at the beginning of each week which shall include
the consolidated cash balance of Holdings and its Subsidiaries as of the end of
the immediately preceding week and availability as at such date under the
Revolving Loan Commitment and (iii) 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."
4. AMENDMENT OF CERTAIN LOAN DOCUMENTS
A. AMENDMENT OF COLLATERAL DOCUMENTS
(i) The Preliminary Statements of each of the Holdings Pledge
Agreement, the Borrower Pledge Agreement, the Borrower Security Agreement, the
Subsidiary Pledge Agreement and the Subsidiary Security Agreement (collectively,
the "SECURITY DOCUMENTS") are amended by adding the following at the end of the
Preliminary Statements as a final Preliminary Statement:
3
<PAGE> 4
Borrower has entered into a letter agreement dated November 10, 1997
with The Bank of Nova Scotia ("BNS") (as amended, supplemented or otherwise
modified from time to time, the "BNS AGREEMENt"), pursuant to which Borrower has
agreed to indemnify and hold harmless BNS from and against various claims and
liabilities in order to induce BNS to facilitate the provision of certain cash
management or other services through BNS' alliance with The First National Bank
of Chicago and Banco Inverlat S.A. Institucion de Banca Multiple Grupo Financier
Inverlat for the benefit of the Loan Parties."
(ii) Section 2 of each of the Security Documents is hereby
amended by:
(a) inserting after the words "payments for early termination of
Lender Hedge Agreements," the following:
"all obligations and liabilities of Borrower under the BNS Agreement or any
other indebtedness or obligations of Borrower to BNS in an aggregate amount not
to exceed $2,500,000, all obligations and liabilities of Borrower under the
Credit Agreement and the other Loan Documents,"
and
(b) deleting the last parenthetical phrase in its entirety and
substituting the following therefor:
"(all such obligations being the 'SECURED OBLIGATIONS')"
B. AMENDMENT OF SUBSIDIARY GUARANTY
(i) The Recitals of the Subsidiary Guaranty are amended by
adding the following at the end of the Recitals as a final Recital:
"F. Borrower has entered into a letter agreement dated November 10,
1997 with The Bank of Nova Scotia ("BNS") (as amended, supplemented or otherwise
modified from time to time, the "BNS AGREEMENT"), pursuant to which Borrower has
agreed to indemnify and hold harmless BNS from various claims and liabilities in
order to induce BNS to facilitate the provision of certain cash management or
other services through BNS' alliance with The First National Bank of Chicago and
Banco Inverlat S.A. Institucion de Banca Multiple Grupo Financier Inverlat for
the benefit of the Loan Parties."
and
4
<PAGE> 5
(ii) Section 2.1(a) of the Subsidiary Guaranty is hereby amended
by inserting after the words "after they have been satisfied," the following:
"and all obligations and liabilities of Borrower under the BNS
Agreement or any other indebtedness or obligations of Borrower to BNS"
5. CONDITIONS TO EFFECTIVENESS
Section 1, Section 3 and Section 4 of this Limited Waiver and Amendment
shall become effective only upon the satisfaction of all of the following
conditions precedent (the date of satisfaction of such conditions being referred
to herein as the "EFFECTIVE DATE"):
(a) EXECUTION. Borrower, Holdings, each Subsidiary Guarantor
and Requisite Lenders shall have executed this Amendment.
(b) ORGANIZATIONAL DOCUMENTS; INCUMBENCY. Administrative Agent
shall have received (i) sufficient copies of each Organizational Document
(defined below) originally executed and delivered by each Credit Support Party
(as defined below) executing an Effective Date Mortgage (as defined below), as
applicable, and, to the extent applicable, certified as of a recent date by the
appropriate governmental official, each dated the Effective Date or a recent
date prior thereto; (ii) signature and incumbency certificates of the officers
of such Person executing the Effective Date Mortgage or other applicable
document to which it is a party; (iii) resolutions of the Board of Directors or
similar governing body of each Credit Support Party approving and authorizing
the execution, delivery and performance of this Agreement and the other Credit
Support Documents (as defined below) to which it is a party or by which it or
its assets may be bound as of the Effective Date, certified as of the Effective
Date by its secretary or an assistant secretary as being in full force and
effect without modification or amendment; (iv) a good standing certificate from
the applicable Governmental Authority of each Credit Support Party's
jurisdiction of incorporation, organization or formation and in each
jurisdiction in which it is qualified as a foreign corporation or other entity
to do business, each dated a recent date prior to the Effective Date; and (v)
such other documents as Administrative Agent may reasonably request. As used
herein, the term "Organizational Documents" means (i) with respect to any
corporation, its certificate or articles of incorporation, as amended, and its
by-laws, as amended, (ii) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (iii) with respect to any general partnership, its partnership
agreement, as amended, and (iv) with respect to any limited liability company,
its articles of organization, as amended, and its operating agreement, as
amended; PROVIDED, HOWEVER, that such organizational and other documents listed
above may be provided to the Administrative Agent by no later than ten (10)
Business Days after the Effective Date. In the event any term or condition of
this Agreement or any other Credit Support Document requires any Organizational
Document to be certified by a secretary of state or similar governmental
official, the reference to
5
<PAGE> 6
any such "Organizational Document" shall only be to a document of a type
customarily certified by such governmental official.
(c) PERFECTION OF SECURITY INTERESTS to the extent not previously
provided, UCC financing statements, duly executed by each applicable Credit
Support Party with respect to all personal and mixed property Collateral of such
Credit Support Party, for filing in all jurisdictions as may be necessary or, in
the opinion of Syndication Agent and Administrative Agent, desirable to perfect
the security interests created in such Collateral pursuant to the Credit Support
Documents;
(d) NECESSARY CONSENTS. Borrower shall have obtained all
material consents necessary or advisable in connection with this Waiver.
(e) PREPAYMENT OF REVOLVING LOANS. Borrower shall on the
Effective Date, using Cash on hand, prepay Revolving Loans and accrued interest
thereon in amount not less than $3,500,000.
(f) EFFECTIVE DATE MORTGAGED PROPERTIES. In order to create in
favor of Administrative Agent, for the benefit of Lenders, a valid and, subject
to any filing and/or recording referred to herein, perfected First Priority
security interest in the real property assets listed on Schedule A attached
hereto (collectively, the "EFFECTIVE DATE MORTGAGED PROPERTIES"), Administrative
Agent shall have received from Borrower, Holdings and each applicable Subsidiary
Guarantor:
(i) fully executed and notarized mortgages in form
acceptable to the Administrative Agent (each, an "EFFECTIVE DATE
MORTGAGE"), in proper form for recording in all appropriate places in
all applicable jurisdictions, encumbering each Effective Date Mortgaged
Property;
(ii) a title report issued by a title company with respect
to each Effective Date Mortgaged Property, dated not more than thirty
(30) days prior to the Effective Date (collectively, the "TITLE
REPORTS") and copies of all recorded documents listed as exceptions to
title or otherwise referred to therein, each in form and substance
reasonably satisfactory to Administrative Agent;
(iii) evidence of flood insurance under the National Flood
Insurance Program with respect to each Effective Date Mortgaged
Property that is located in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards, in each
case in compliance with any applicable regulations of the Board of
Governors of the Federal Reserve System, in form and substance
reasonably satisfactory to Administrative Agent; and
6
<PAGE> 7
(iv) ALTA surveys of all Effective Date Mortgaged
Properties, to the extent available.
(g) LINE OF CREDIT. Borrower shall on or before the Effective
Date execute such documents and instruments as shall be necessary to ensure that
any currently unsecured line of credit advanced to Borrower by Administrative
Agent is secured by Collateral and Effective Date Mortgaged Properties and shall
rank pari passu with respect to the Obligations on the Effective Date.
(h) OTHER DOCUMENTS. Administrative Agent and Lenders shall
have received such other documents and information regarding Company and its
Subsidiaries as Administrative Agent or Requisite Lenders may reasonably
request.
6. REPRESENTATIONS AND WARRANTIES
In order to induce Requisite Lenders to enter into this Waiver,
Borrower hereby represents and warrants that after giving effect to this Waiver:
(a) as of the date hereof, there exists no Event of Default or
Potential Event of Default under the Credit Agreement;
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and complete
in all material respects on and as of the date hereof except to the
extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date;
(c) as of the date hereof, Borrower has performed all
agreements to be performed on its part as set forth in the Credit
Agreement; and
(d) as of the Effective Date, (i) good, sufficient and legal
title to each of the Effective Date Mortgaged Properties is held by the
Credit Support Party designated on Schedule A, and (ii) except as
permitted by the Credit Agreement or as shown in the Title Reports, all
such Effective Date Mortgaged Properties are free and clear of Liens.
7. ACKNOWLEDGMENT AND CONSENT
Each of Aaron Cremation & Burial Services, Inc., Aaron Cremation &
Burial Services P.C., Benton Funeral Home, Inc., Buckner-Rush Enterprises, Inc.,
Bury-Pine Funeral Home, Inc.,
7
<PAGE> 8
Carlisle Funeral Home, Inc., Cemetery Development Corporation, Inc.,
Clary-Godwin Funeral Home, Inc., Clayton Frank & Sons, Inc., Comander Funeral
Home, Inc., Cremation Society of America, Incorporated, Dawson & Wikoff, Ltd.,
Fraser Funeral Home, Inc., Fred Hunter Memorial Services, Inc., Grotewold Simi
Valley Mortuary, Inc., Hertz-Thoma Chapel, Ltd., Hignell Phelps Funeral Home,
Inc., Hughes Funeral Chapel, J&W, Inc., John A. Beck Company, Kerley & Starks
Funeral Homes, Inc., Lambert Corporation, Inc., McWane Family Funeral Home,
Inc., Neal-Tarpley, Inc., Pifer-Smith Funeral Home, Inc., Pine Funeral Home,
Inc., Pine Group, Inc., Pine Memorials, Inc., Prime Business Solutions, Inc.,
Prime Business Solutions of Kentucky, Inc., Prime Enterprises of California,
Inc., Prime Holdings, Inc., Prime Holdings of Arkansas, Inc., Prime Holdings of
California, Inc., Prime Holdings of Florida, Inc., Prime Holdings of Illinois,
Inc., Prime Holdings of Indiana, Inc., Prime Holdings of Michigan, Inc., Prime
Holdings of Minnesota, Inc., Prime Holdings of Nebraska, Inc., Prime Holdings of
Ohio, Inc., Prime Holdings of West Virginia, Inc., Prime Indiana Limited
Partnership, Prime Succession of Alabama, Inc., Prime Succession of Arizona,
Inc., Prime Succession of Arkansas, Inc., Prime Succession of California, Inc.,
Prime Succession of Florida, Inc., Prime Succession of Georgia, Inc., Prime
Succession of Illinois, Inc., Prime Succession of Indiana, Inc., Prime
Succession of Iowa, Inc., Prime Succession of Kentucky, Inc., Prime Succession
of Michigan, Inc., Prime Succession of Minnesota, Inc., Prime Succession of
Missouri, Inc., Prime Succession of Nebraska, Inc., Prime Succession of New
York, Inc., Prime Succession of South Carolina, Inc., Prime Succession of
Tennessee, Inc., Prime Succession of Texas, Inc., Prime Succession of West
Virginia, Inc., Prime Succession of Wisconsin, Inc., Prime Succession Partners,
Inc., Roselawn Memorial Gardens, Inc., Rostad Mortuary, Inc., Simpson Funeral
Home, Inc., Simpson-Meyer Corporation, Simpson-Volkman Corporation, Swem Funeral
Home, Inc., Talisman Enterprises, Inc., The Funeral Outlet Store, Inc., Van
Zantwick, Bartels and Kammeraad Funeral Homes, Inc., Vankirk Funeral Home,
Incorporated, Weigel Funeral Home, Inc., Welsheimer Funeral Home, Inc., Whitney
& Murphy Funeral Homes, Inc., Whitney & Murphy Life Insurance Agency, Inc.,
Williams Memorial Chapel, Inc., and Williams Memorial Chapel of Gordon, Inc. is
a party to the Subsidiary Guaranty (as amended hereby), Subsidiary Pledge
Agreement (as amended hereby) and Subsidiary Security Agreement (as amended
hereby) and Prime Succession Holdings, Inc. (together with the above mentioned
parties, collectively referred to herein as the "CREDIT SUPPORT PARTIES") is a
party to the Holdings Guaranty and Holdings Pledge Agreement (as amended
hereby), (the Subsidiary Guaranty (as amended hereby), Subsidiary Pledge
Agreement (as amended hereby), Effective Date Mortgages, Subsidiary Security
Agreement (as amended hereby), Holdings Guaranty and Holdings Pledge Agreement
(as amended hereby) are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS") pursuant to which each Credit Support Party has (i) guarantied the
Obligations and (ii) created Liens in favor of the Lenders on certain Collateral
to secure its obligations under the Subsidiary Guaranty (as amended hereby) and
Holdings Guaranty.
8
<PAGE> 9
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Waiver and consents to the
amendment of the Credit Agreement effected pursuant to this Waiver. Each Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "Guarantied Obligations" and "Secured
Obligations", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "Guaranteed Obligations" or "Secured Obligations",
as the case may be, in respect of the Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement, and the other Loan
Documents, all as defined therein.
Each Credit Support Party acknowledges and agrees that any of the Credit
Support Documents to which it is a party or otherwise bound shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of this Waiver. Each Credit Support Party represents and warrants
that all representations and warranties contained in the Credit Agreement and
the Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Effective 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 they were true, correct and complete in all material respects on and as of
such earlier date.
Each Credit Support Party, in its capacity as such, acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Waiver, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Waiver and (ii) nothing in the Credit
Agreement, this Waiver or any other Loan Document shall be deemed to require the
consent of such Credit Support Party to any future amendments to the Credit
Agreement.
8. MISCELLANEOUS
(a) REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the Effective Date, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of
like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit
9
<PAGE> 10
Agreement shall mean and be a reference to the Credit Agreement as amended
by this Waiver.
(ii) Except as specifically amended by this Waiver, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Waiver shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Agent or Lender under, the Credit Agreement or any of the other Loan
Documents.
(b) HEADINGS. Section and subsection headings in this Waiver are
included herein for convenience of reference only and shall not constitute a
part of this Waiver for any other purpose or be given any substantive effect.
(c) GOVERNING LAW. THIS WAIVER 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
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(d) COUNTERPARTS. This Waiver 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.
[Remainder of page intentionally left blank]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
BORROWER:
PRIME SUCCESSION, INC.
(formerly known as Prime Succession
Acquisition Corp.)
By:
----------------------------------
Name:
Title:
Notice Address:
Olympic Corporate Center
Suite 300
3940 Olympic Boulevard
Erlanger, Kentucky 41018
Attention: Chief Executive Officer
Facsimile: (606) 382-2522
with a copy to each of the following:
The Blackstone Group
31st Floor
345 Park Avenue
New York, New York 10154
Attention: Howard Lipson
Telephone: (212) 583-5844
Facsimile: (212) 583-5703
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 358 Canada
Attention: Robert Lundgren
Telephone: (604) 293-6401
Facsimile: (604) 473-7350
S-1
<PAGE> 12
CREDIT SUPPORT
PARTIES: PRIME SUCCESSION HOLDINGS, INC.
(formerly known as Prime Succession Inc.)
By:
--------------------------------------
Name:
Title:
Notice Address:
Olympic Corporate Center
Suite 500
3940 Olympic Boulevard
Erlanger, Kentucky 41018
Attention: Chief Executive Officer
Facsimile: (606) 382-2522
with a copy to each of the following:
The Blackstone Group
31st Floor
345 Park Avenue
New York, New York 10154
Attention: Howard Lipson
Telephone: (212) 583-5844
Facsimile: (212) 583-5703
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 358 Canada
Attention: Robert Lundgren
Telephone: (604) 293-6401
Facsimile: (604) 473-7350
S-2
<PAGE> 13
AARON CREMATION & BURIAL
SERVICES, INC.
By:
---------------------------------
Name:
Title:
AARON CREMATION & BURIAL
SERVICES P.C.
By:
---------------------------------
Name:
Title:
BENTON FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
BUCKNER-RUSH ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
BURY-PINE FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
S-3
<PAGE> 14
CARLISLE FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
CEMETERY DEVELOPMENT
CORPORATION, INC.
By:
---------------------------------
Name:
Title:
CLARY-GODWIN FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
CLAYTON FRANK & SONS, INC.
By:
---------------------------------
Name:
Title:
COMANDER FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
S-4
<PAGE> 15
CREMATION SOCIETY OF AMERICA,
INCORPORATED
By:
---------------------------------
Name:
Title:
DAWSON & WIKOFF, LTD.
By:
---------------------------------
Name:
Title:
FRASER FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
FRED HUNTER MEMORIAL SERVICES, INC.
By:
---------------------------------
Name:
Title:
GROTEWOLD SIMI VALLEY
MORTUARY, INC.
By:
---------------------------------
Name:
Title:
S-5
<PAGE> 16
HERTZ-THOMA CHAPEL, LTD.
By:
---------------------------------
Name:
Title:
HIGNELL PHELPS FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
HUGHES FUNERAL CHAPEL
By:
---------------------------------
Name:
Title:
J&W, INC.
By:
---------------------------------
Name:
Title:
JOHN A. BECK COMPANY
By:
---------------------------------
Name:
Title:
S-6
<PAGE> 17
KERLEY & STARKS FUNERAL HOMES, INC.
By:
---------------------------------
Name:
Title:
LAMBERT CORPORATION, INC.
By:
---------------------------------
Name:
Title:
MCWANE FAMILY FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
NEAL-TARPLEY, INC.
By:
---------------------------------
Name:
Title:
PIFER-SMITH FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
S-7
<PAGE> 18
PINE FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
PINE GROUP, INC.
By:
---------------------------------
Name:
Title:
PINE MEMORIALS, INC.
By:
---------------------------------
Name:
Title:
PRIME BUSINESS SOLUTIONS, INC.
By:
---------------------------------
Name:
Title:
PRIME BUSINESS SOLUTIONS OF
KENTUCKY, INC.
By:
---------------------------------
Name:
Title:
S-8
<PAGE> 19
PRIME ENTERPRISES OF CALIFORNIA, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF ARKANSAS, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF CALIFORNIA, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF FLORIDA, INC.
By:
---------------------------------
Name:
Title:
S-9
<PAGE> 20
PRIME HOLDINGS OF ILLINOIS, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF INDIANA, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF MICHIGAN, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF MINNESOTA, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF NEBRASKA, INC.
By:
---------------------------------
Name:
Title:
S-10
<PAGE> 21
PRIME HOLDINGS OF OHIO, INC.
By:
---------------------------------
Name:
Title:
PRIME HOLDINGS OF WEST VIRGINIA, INC.
By:
---------------------------------
Name:
Title:
PRIME INDIANA LIMITED PARTNERSHIP
By Prime Succession of Illinois, Inc.,
its general partner
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF ALABAMA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF ARIZONA, INC.
By:
---------------------------------
Name:
Title:
S-11
<PAGE> 22
PRIME SUCCESSION OF ARKANSAS, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF CALIFORNIA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF FLORIDA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF GEORGIA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF ILLINOIS, INC.
By:
---------------------------------
Name:
Title:
S-12
<PAGE> 23
PRIME SUCCESSION OF INDIANA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF IOWA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF KENTUCKY, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF MICHIGAN, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF MINNESOTA, INC.
By:
---------------------------------
Name:
Title:
S-13
<PAGE> 24
PRIME SUCCESSION OF MISSOURI, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF NEBRASKA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF NEW YORK, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF SOUTH
CAROLINA, INC.
By:
---------------------------------
Name:
Title:
S-14
<PAGE> 25
PRIME SUCCESSION OF TENNESSEE, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF TEXAS, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF WEST
VIRGINIA, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION OF WISCONSIN, INC.
By:
---------------------------------
Name:
Title:
PRIME SUCCESSION PARTNERS, INC.
By:
---------------------------------
Name:
Title:
S-15
<PAGE> 26
ROSELAWN MEMORIAL GARDENS, INC.
By:
---------------------------------
Name:
Title:
ROSTAD MORTUARY, INC.
By:
---------------------------------
Name:
Title:
SIMPSON FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
SIMPSON-MEYER CORPORATION
By:
---------------------------------
Name:
Title:
SIMPSON-VOLKMAN CORPORATION
By:
---------------------------------
Name:
Title:
S-16
<PAGE> 27
SWEM FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
TALISMAN ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
THE FUNERAL OUTLET STORE, INC.
By:
---------------------------------
Name:
Title:
VAN ZANTWICK, BARTELS AND KAMMERAAD
FUNERAL HOMES, INC.
By:
---------------------------------
Name:
Title:
S-17
<PAGE> 28
VANKIRK FUNERAL HOME,
INCORPORATED
By:
---------------------------------
Name:
Title:
WEIGEL FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
WELSHEIMER FUNERAL HOME, INC.
By:
---------------------------------
Name:
Title:
WHITNEY & MURPHY FUNERAL HOMES, INC.
By:
---------------------------------
Name:
Title:
WHITNEY & MURPHY LIFE INSURANCE
AGENCY, INC.
By:
---------------------------------
Name:
Title:
S-18
<PAGE> 29
WILLIAMS MEMORIAL CHAPEL, INC.
By:
---------------------------------
Name:
Title:
WILLIAMS MEMORIAL CHAPEL OF GORDON, INC.
By:
---------------------------------
Name:
Title:
S-19
<PAGE> 30
AGENTS AND LENDERS:
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as Syndication Agent
and as Arranging Agent
By:
------------------------------------
Authorized Signatory
Notice Address:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Stephen King
Telephone: (212) 902-8123
Facsimile: (212) 357-0932
S-20
<PAGE> 31
THE BANK OF NOVA SCOTIA,
individually and as
Administrative Agent
By:
---------------------------------
Name:
Title:
Notice Address:
The Bank of Nova Scotia
Atlanta Agency
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: [ ]
Telephone: [ ]
Facsimile: [ ]
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) 201-4183
Facsimile: (312) 201-4108
S-21
<PAGE> 32
STEIN ROE & FARNHAM INCORPORATED,
AS AGENT FOR KEYPORT LIFE
INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
Notice Address:
Stein Roe & Farnham
One South Wacker Drive
23rd Floor
Chicago, IL 60606
Attention: James Fellows
Telephone: (312) 368-5641
Facsimile: (312) 368-7857
S-22
<PAGE> 33
MEDICAL LIABILITY MUTUAL INSURANCE
COMPANY
By:
---------------------------------
Name:
Title:
Notice Address:
Invesco Senior Secured Management, Inc.
1166 Avenue of the Americas
27th Floor
New York, New York 10036-2789
Attention: Anthony R. Clemente
Telephone: (212) 278-9870
Facsimile: (212) 278-9619
S-23
<PAGE> 34
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By:
---------------------------------
Name:
Title:
Notice Address:
Two World Trade Center
72nd Floor
New York, New York 10048
Attention: Kevin Egan
Telephone: (212) 392-5845
Facsimile: (212) 392-5345
S-24
<PAGE> 35
NEW YORK LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
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
S-25
<PAGE> 36
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
---------------------------------
Name:
Title:
Notice Address:
Merrill Lynch Senior Floating Rate
Fund, Inc.
800 Scudders Mill Road - Section 1B
Plainsboro, New Jersey 08536
Attention: Joseph Moroney
Telephone: (609) 282-8926
Facsimile: (609) 282-2756
S-26
<PAGE> 37
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:
----------------------------------
Name:
Title:
Notice Address:
Merrill Lynch Prime Rate Portfolio
800 Scudders Mill Road - Section 1B
Plainsboro, New Jersey 08536
Attention: Joseph Moroney
Telephone: (609) 282-8926
Facsimile: (609) 282-2756
S-27
<PAGE> 38
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
Notice Address:
1295 State Street
Springfield, MA 01111
Attention: John Wheeler
Telephone: (413) 744-6228
Facsimile: (413) 744-6127
S-28
<PAGE> 39
INDOSUEZ CAPITAL FUNDING
By:
---------------------------------
Name:
Title:
Notice Address:
Indosuez Capital Funding
1211 Avenue of the Americas
7th Floor
New York, NY 10036-8701
Attention: Daniel Smith
Telephone: (212) 278-2232
Facsimile: (212) 278-2201
S-29
<PAGE> 40
SENIOR DEBT PORTFOLIO
BY: BOSTON MANAGEMENT AND RESEARCH
AS INVESTMENT ADVISOR
By:
---------------------------------
Name:
Title:
Notice Address:
225 State Street, 8th Floor
Boston, MA 02109
Attention: Scott Page
Telephone: (617) 598-8486
Facsimile: (617) 695-9594 or
(707) 202-0815
S-30
<PAGE> 41
CITIBANK GLOBAL ASSET MANAGEMENT
By:
---------------------------------
Name:
Title:
Notice Address:
599 Lexington Avenue
26th Floor
New York, NY 10043
Attention: Daniel Slotkin
Telephone: (212) 559-9191
Facsimile: (212) 793-1871
S-31
<PAGE> 42
SCHEDULE A
EFFECTIVE DATE MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PROPERTY NAME
AND ADDRESSES TITLE HOLDER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Memory Hill Prime Succession of Alabama, Inc., an
1430 Hartford Highway, 52 West Alabama corporation
Dothan, Alabama
2. Jefferson Memorial Funeral Home and Jefferson Prime Succession of Alabama, Inc., an
Memorial Gardens - South Alabama corporation
2701 Highway 150
Hoover, Alabama
3. Jefferson Memorial Funeral Home and Jefferson Prime Succession of Alabama, Inc., an
Memorial Gardens - East Alabama corporation
1591 Gadsden Highway
Trussville, Alabama
4. Kern Hesperia Mortuary Prime Succession of California, Inc., a
16120 Main Street Delaware corporation
Hesperia, California
5. Mark B. Shaw Company Prime Holdings of California, Inc., a
1525 North Waterman Ave. Delaware corporation
San Bernardino, California
6. Dudley Apple Valley Prime Succession of California, Inc., a
Mortuary Delaware corporation
16095 Tuscola Road
Apple Valley, California
7. Fred Hunter's Funeral Home Fred Hunter Memorial Services, Inc., a
6301 Taft Street Florida corporation
Hollywood, Florida
8. Administrative Office Build. Fred Hunter Memorial Services, Inc., a
1600 North State Road 7 Florida corporation
Hollywood, Florida
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 43
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PROPERTY NAME
AND ADDRESSES TITLE HOLDER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
9. Fred Hunter's University Drive Funeral Home Fred Hunter Memorial Services, Inc., a
2401 University Drive Florida corporation
Davie, Florida
10. Fred Hunter's Miramar Funeral Home Fred Hunter Memorial Services, Inc., a
6107 Miramar Parkway Florida corporation
Miramar, Florida
11. Fred Hunter's Downtown Funeral Home Fred Hunter Memorial Services, Inc., a
718 South Federal Highway Florida corporation
Fort Lauderdale, Florida
12. Fred Hunter's Cremation Memorial Center Fred Hunter Memorial Services, Inc., a
5899 West Oakland Blvd. Florida corporation
Lauderhill, Florida
13. Forest Hill Funeral Home and Memorial Park-South Prime Succession of Tennessee, Inc., a
2545 East Holmes Road Delaware corporation
Memphis, Tennessee
14. Forest Hill Funeral Home and Memorial Park - Midtown Prime Succession of Tennessee, Inc., a
1661 Elvis Presley Boulevard Delaware corporation
Memphis, Tennessee
15. Forest Hill Funeral Home and Memorial Park - East Prime Succession of Tennessee, Inc., a
2440 Whitten Road Delaware corporation
Memphis, Tennessee
16. Woodlawn Memorial Gardens Prime Succession of Kentucky, Inc.,
6965 Old U.S. Highway 45 successor by merger to Cemetery Development
Paducah, Kentucky Corporation, Inc., a Kentucky corporation
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE> 44
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PROPERTY NAME
AND ADDRESSES TITLE HOLDER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
17. Benton-Glunt Funeral Home Prime Succession of Kentucky, Inc.,
629 South Green Street successor by merger to Benton Funeral Home,
Henderson, Kentucky Inc., a Kentucky corporation
18. Dawson & Wikoff Funeral Home Prime Succession of Illinois, Inc.,
4020 North Water Street successor by merger to Dawson & Wikoff,
Decatur, Illinois Ltd., an Illinois Corporation
19. Whitney-Murphy Funeral Home Whitney & Murphy Funeral Homes, Inc. a/k/a
4800 East Indian School Road Whitney & Murphy Funeral Homes, an Arizona
Phoenix, Arizona corporation
- -------------------------------------------------------------------------------------------------------
</TABLE>
A-3
<PAGE> 1
Exhibit 12
Prime Succession, Inc. and subsidiaries
Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges
Earnings:
Loss before income taxes (4,079) (2,201) (6,301) (3,389)
Add: Fixed charges, net 6,616 6,240 18,966 18,918
Income before income taxes and fixed
charges, net 2,537 4,039 12,665 15,529
Fixed Charges:
Total interest expense (1) 6,351 6,006 18,206 18,189
Interest factor in rents (2) 265 234 760 729
Total fixed charges 6,616 6,240 18,966 18,918
Ratio of earnings to fixed charges 0.38 0.65 0.67 0.82
Coverage deficiency (3) 4,079 2,201 6,301 3,389
</TABLE>
FN
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF PRIME SUCCESSION, INC.
AND SUBSIDIARIES, FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,832
<SECURITIES> 0
<RECEIVABLES> 34,398
<ALLOWANCES> 6,438
<INVENTORY> 50,262
<CURRENT-ASSETS> 23,077
<PP&E> 78,038
<DEPRECIATION> (8,121)
<TOTAL-ASSETS> 384,357
<CURRENT-LIABILITIES> 16,411
<BONDS> 213,962
0
0
<COMMON> 0
<OTHER-SE> 112,444
<TOTAL-LIABILITY-AND-EQUITY> 384,357
<SALES> 69,078
<TOTAL-REVENUES> 69,078
<CGS> 45,835
<TOTAL-COSTS> 45,835
<OTHER-EXPENSES> 11,337
<LOSS-PROVISION> 1,028
<INTEREST-EXPENSE> 18,206
<INCOME-PRETAX> (6,301)
<INCOME-TAX> (82)
<INCOME-CONTINUING> (6,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,383)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
