<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
MARK
ONE
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-5891
MHI GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1214129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Capital Circle, NE
Tallahassee, Florida 32308-3760
(Address of principal executive offices) (Zip Code)
Registrant s telephone number, including area code: (904) 385-8883
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
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APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 14 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of Securities under a plan
confirmed by a court. Yes X No
-------- -------
The number of shares of the registrant's common stock, $0.40 par value per
share, net of treasury stock outstanding as of March 7, 1995, was 6,271,126
shares.
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MHI GROUP, INC.
INDEX
-----
<TABLE>
<CAPTION>
PART I PAGE NO.
- - ------ --------
<S> <C>
Consolidated Condensed Financial Statements (Unaudited):
Consolidated Condensed Balance Sheets
January 31, 1995 and April 30, 1994 4-5
Consolidated Condensed Statements of
Income for the Three Months and Nine
Months Ended January 31, 1995 and 1994 6
Consolidated Condensed Statements of Cash
Flows for the Nine Months Ended
January 31, 1995 and 1994 7-8
Consolidated Condensed Statements of
Changes in Stockholders' Equity for the
Nine Months Ended January 31, 1995 and
for the Year Ended April 30, 1994 9
Condensed Notes to Consolidated Condensed
Financial Statements 10 - 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 15
PART II
- - -------
Other Information 16
Signatures 17
Exhibits 18
</TABLE>
3
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MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
Unaudited
January 31, April 30,
1995 1994
-------------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 4,349 $ 6,842
Installment contracts receivable and
other receivables, net 8,486 7,826
Inventories 2,477 2,420
Other current assets 495 160
Deferred tax asset, net 1,846 1,846
---------- ---------
Total current assets 17,653 19,094
Cemetery property 6,900 6,391
Property and equipment, net 11,465 9,778
Installment contracts receivable and
other receivables, net 10,763 9,648
Trust funds 38,768 35,863
Cost in excess of fair value of net
assets acquired, net 11,900 10,547
Other assets 3,147 2,278
Deferred tax asset, net 5,113 5,314
---------- ---------
Total assets $ 105,709 $ 98,913
========== =========
</TABLE>
4
<PAGE> 5
MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
Unaudited
January 31, April 30,
1995 1994
---------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable, accrued expenses
and other $ 2,829 $ 2,309
Notes payable 1,500 1,500
--------- ---------
Total current liabilities 4,329 3,809
--------- ---------
Notes payable 11,125 12,250
Other long-term liabilities 1,286 656
Accrued merchandise 15,103 14,119
--------- ---------
27,514 27,025
--------- ---------
Deferred revenue 32,125 29,168
--------- ---------
Total liabilities 63,968 60,002
--------- ---------
Commitments and contingencies - -
Stockholders' equity:
Series B Convertible Preferred Stock 25 25
Series C Convertible Preferred Stock 14 14
Common stock 2,531 2,489
Capital in excess of par value 48,356 47,926
Unrealized loss on marketable
securities (1,261) (1,057)
Accumulated deficit (6,324) (8,886)
Common Stock in treasury, at cost (1,600) (1,600)
---------- ---------
Total stockholders' equity 41,741 38,911
----------
Total liabilities and stockholders' equity $ 105,709 $ 98,913
========== =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
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MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(000'S OMITTED, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
--------------------------- ------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 5,198 $ 4,056 $ 14,984 $ 11,694
Trust income 530 631 1,571 2,405
Interest Income 198 152 579 410
Other income 14 9 45 46
--------- ------------ -------- -----------
Total revenues 5,940 4,848 17,179 14,555
COST AND EXPENSES:
Cost of merchandise and 1,269 956 3,760 2,809
cemetery property
Selling, general and
administrative expenses 3,309 2,777 9,810 7,970
--------- ------------ -------- -----------
Income before interest, non-recurring
item and income taxes 1,362 1,115 3,609 3,776
Interest expense (376) (443) (1,088) (1,470)
Non-recurring income - - 1,000 -
--------- ------------ -------- -----------
Income before income taxes 986 672 3,521 2,306
Income tax (expense) benefit (332) 252 (959) 671
--------- ------------ -------- -----------
Net income $ 654 $ 924 $ 2,562 $ 2,977
========= ============ ======== ===========
Earnings per common and common
equivalent share - primary and
fully diluted:
Net income $ .09 $ .16 $ .37 $ .63
========= ============ ======== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
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MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
-------------------------
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,562 $ 2,977
Adjustment to reconcile net income to net cash
provided by operations:
Depreciation and amortization 994 895
Deferred tax expense (benefit) 606 (1,019)
Undrawn trust income (596) (1,049)
Changes in assets and liabilities, net of effect of
acquisitions:
Increase in installment contract receivables (1,707) (781)
Decrease (increase) in inventories, net of
transfers from cemetery property 267 (64)
Decrease in cemetery property 44 428
Increase in trust funds (2,154) (1,865)
(Increase) decrease in other assets (152) 104
Increase (decrease) in accounts payable, accrued
expenses and other 318 (236)
Decrease in other liabilities (67) (63)
Increase in accrued merchandise 984 688
Increase in deferred revenue 2,193 1,665
------- --------
Net cash provided by operating activities 3,292 1,680
------- --------
</TABLE>
7
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MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
------------------------------
1995 1994
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (723) (426)
Acquisitions (4,428) (3,377)
Acquisition costs (151) (98)
Proceeds from sales of marketable securities 170 -
--------- --------
Net cash used in investing activities (5,132) (3,901)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement
and notes payable - 2,160
Principal payments on revolving credit agreement
and notes payable (1,125) (10,910)
Issuance of common stock and exercise of
warrants and options 472 16,769
Purchase of fractional shares - (6)
--------- --------
Net cash flow (used in) provided by
financing activities (653) 8,013
--------- --------
Net (decrease) increase in cash and cash equivalents (2,493) 5,792
Cash and cash equivalents at beginning of period 6,842 757
--------- --------
Cash and cash equivalents at end of period $ 4,349 $ 6,549
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Non-cash investing and financing activities:
Common stock issued in acquisition - $ 100
CASH PAYMENTS OF:
Interest $ 1,120 $ 1,551
Income taxes $ 308 $ 312
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
8
<PAGE> 9
MHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES
IN STOCKHOLDERS EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
Unaudited
Nine Months Year Ended
Ended January 31, April 30,
1995 1994
----------------- ------------
<S> <C> <C>
SERIES B CONVERTIBLE PREFERRED STOCK:
Balance, beginning of period $ 25 $ 25
-------- --------
Balance, end of period 25 25
-------- --------
SERIES C CONVERTIBLE PREFERRED STOCK:
Balance, beginning of period 14 14
-------- --------
Balance, end of period 14 14
-------- --------
COMMON STOCK:
Balance, beginning of period 2,489 1,469
Shares issued in the exercise of warrants and options 42 135
Common stock issued for acquisition - 5
Common stock issued in stock offering - 880
-------- --------
Balance, end of period 2,531 2,489
-------- --------
CAPITAL IN EXCESS OF PAR VALUE:
Balance, beginning of period 47,926 31,878
Common stock issued in the exercise of warrants
and options 430 425
Common stock issued for acquisition - 95
Common stock issued in stock offering - 15,463
Purchase fractional shares and convert to unissued - (6)
Issue warrants - 71
-------- --------
Balance, end of period 48,356 47,926
-------- --------
UNREALIZED LOSS ON MARKETABLE SECURITIES:
Balance, beginning of period (1,057) -
Unrealized depreciation of investments, net of
deferred income tax benefit (204) (1,057)
-------- --------
Balance, end of period (1,261) (1,057)
-------- --------
ACCUMULATED DEFICIT:
Balance, beginning of period (8,886) (14,831)
Net income for the period 2,562 5,945
-------- --------
Balance, end of period (6,324) (8,886)
-------- --------
TREASURY STOCK:
Balance, beginning of period (1,600) (1,600)
-------- --------
Balance, end of period (1,600) (1,600)
-------- --------
Total stockholders' equity $ 41,741 $ 38,911
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
9
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MHI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF FINANCIAL PRESENTATION
The accompanying unaudited consolidated condensed financial statements
should be read in conjunction with the Consolidated Financial Statements of MHI
Group, Inc. (the Company) for the fiscal year ended April 30, 1994 and the
notes thereto incorporated by reference in the Company's Annual Report on Form
10-K. A copy of such Consolidated Financial Statements and notes thereto may
be obtained by writing the Company.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments necessary to present
fairly the financial position of the Company at January 31, 1995 and April 30,
1994 and the results of operations for the three month and nine month periods
ended January 31, 1995 and 1994 and changes in cash flows for the nine month
period ended January 31, 1995 and 1994. All such adjustments are of a normal
recurring nature except for the adjustments resulting from the adoption of
Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" in the three month period ended July
31, 1994.
The Company's significant accounting policies are as set forth in the notes
to Consolidated Financial Statements referred to above. Certain
reclassifications have been made to the fiscal 1994 financial statements to
conform to the fiscal 1995 presentation.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
2. ACCOUNTING CHANGE
Effective May 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities." In contrast to prior accounting treatment, unrealized gains and
losses on the trading portion of the trust fund investment portfolio will now
be recognized in earnings currently. The implementation of this statement had
no impact on equity as of May 1, 1994 as the Company's trust funds were carried
at the lower of cost or market with a net unrealized loss recognized at April
30, 1994. However, implementation of the statement resulted in an immaterial
unrealized loss on securities held in the trust fund investment portfolio which
was recognized through earnings in first quarter of fiscal year 1995.
10
<PAGE> 11
3. SUBSEQUENT EVENT
The Company entered into an amended senior financing agreement with Heller
Financial, Inc. ("Heller") on February 2, 1995. The Amended Credit and
Security Agreement provides for a Term Loan in the amount of $12,625,000 and a
Revolving Loan in the amount of $22,375,000. The Credit and Security Agreement
is collateralized by all properties and business assets of the Company and its
subsidiaries except cemetery property and trust funds.
The $12,625,000 Term Loan replaced the Company's former Term Loan with
Heller of the same principal amount. The credit agreement provides for
interest on the outstanding Amended Term Loan at the prime rate plus 1-1/2%
with interest payable monthly, or at the Company's option, LIBOR plus 3-3/4%.
The aggregate principal balance of the Term Loan is payable in full at the
expiring date of January 31, 2000.
The $22,375,000 Revolving Loan provides for an Acquisition Loan Facility, as
well as a Working Capital Loan Facility. Amounts borrowed under the Revolving
Loan Facility may be repaid and reborrowed. At this date no funds have been
borrowed under this facility. Interest on outstanding Revolving Loan balances
is the prime rate plus 1% or LIBOR plus 3 1/4% in one, two, three or six-month
periods. In addition, a commitment fee of 3/8 of 1% per annum during the first
loan year and 1/2 of 1% per annum thereafter, is payable monthly, in arrears on
the Revolving Loan Commitment less the sum of the average daily balance of the
Revolving Loan.
The Revolving Loan Facility provides for loans to be made from time to time
during the period from February 2, 1995 to January 30, 2000, for the purpose of
financing acquisitions and working capital. Heller's decision to make loans
under this facility will be based upon its evaluation and approval of the
business and financial condition of proposed acquisitions, approval of the
acquisition documentation and the meeting of certain minimum financial
criteria. The principal amount of loans under this facility outstanding
January 31, 2000, will be payable in full.
Fees associated with the Amended Heller Loan Agreement amounted to $350,000
of which $175,000 was paid at closing and $175,000 of which shall be due and
payable on the earlier of (a) the date of any prepayment in full of both the
Term Loan and Revolver or the first anniversary of the closing date. If,
during the first two loan years, the Company makes a prepayment in full of the
Term Loan and Revolving Loan, it shall pay to Heller a fee for liquidated
damages and compensation for the costs of Heller's being prepared to make funds
available to the Company in the amount of 2% in the first loan year and 1% in
the second loan year.
11
<PAGE> 12
APPENDIX A
MHI GROUP, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months and Three Months Ended January 31, 1994 compared to Nine Months
and Three Months Ended January 31, 1995.
Total revenues increased $2,624,000 or 18% from the first nine months of
fiscal year 1994 to the first nine months of fiscal year 1995. Total revenues
increased $1,092,000 or 23% from the third quarter of fiscal year 1994 to
fiscal year 1995. These changes consisted of increases in net sales and
interest income and decreases in trust income. The Company increased its net
sales by $3,290,000 or 28% and $1,142,000 or 28% for the nine months and three
months ended January 31, 1995 as compared to the same periods in fiscal year
1994. The increase in net sales for the nine months ended January 31, 1995
reflected an increase in at-need funeral net sales of $1,417,000 or 29%, of
which $1,010,000 was attributable to properties acquired by the Company during
fiscal years 1994 and 1995 with the remaining increase primarily due to
increases in volume. The increase in net sales for the three months ended
January 31, 1995 reflected an increase in at-need funeral net sales of $402,000
or 21%, of which $380,000 was attributable to properties acquired during fiscal
year 1995 with the remaining increase primarily due to increases in volume.
Net sales also reflected increases in pre-need cemetery net sales of $1,638,000
or 26% and $594,000 or 31% during the nine month and three month periods ended
January 31, 1995, respectively, as compared to the same periods of fiscal year
1994, due primarily to increases in volume at existing operations.
Trust fund income decreased by $834,000 or 35% and $101,000 or 16% during
the nine month and three month period ended January 31, 1995, respectively, as
compared to the same periods of fiscal 1994. These decreases were due to
capital gains totaling $1,161,000 and $263,000 for the first nine months and
three months, respectively, in fiscal year 1994 compared to capital gains
totaling $127,000 and $5,000 for the first nine months and three months in
fiscal year 1995. Interest rates fell throughout the first nine months of
fiscal year 1994, increasing capital gains on the sale of fixed income
investments. The reduction in trust income in fiscal year 1995 is due
primarily to reduction in capital gains as noted above. Excluding capital
gains and losses, income yields were approximately 4.5% and 4.7% for the first
nine months of fiscal years 1994 and 1995, respectively and 8.7% and 5.2% with
capital gains and losses included. No significant changes are expected in
yields on the fixed income portfolio in the near future.
Interest income for the Company is principally generated by the Broward
operations representing imputed interest on its portfolio of installment
receivables and by interest earned on investment of the remaining proceeds from
the Company's secondary public offering completed in December, 1993. Interest
income increased $169,000 or 41%, from the first nine
12
<PAGE> 13
months of fiscal year 1994 to the first nine months of fiscal year 1995.
Interest income increased $46,000 or 30% from the three months ended January
31, 1994 to the three months ended January 31, 1995. These increases were
primarily due to interest earned on the investment of public offering proceeds.
Cost of merchandise and cemetery property increased $951,000, or 34% and
$313,000, or 33% from the first nine months and three months, respectively, of
fiscal year 1994 to the first nine months and three months, respectively, of
fiscal year 1995, primarily due to the 28% increase in net sales volume. As a
percentage of net sales, cost of merchandise and cemetery property was 24% for
the nine months and three months ended January 31, 1994, and 25% for the nine
months and 24% for the three months ended January 31, 1995.
Selling, general and administrative expenses increased $1,840,000 or 23%,
from the first nine months of fiscal year 1994 to the first nine months of
fiscal year 1995, consistent with the 28% increase in sales volume and the
acquisitions purchased during fiscal year 1995. Selling, general and
administrative expenses of the operations acquired since the second quarter of
fiscal year 1994 accounted for $844,000 of the increase. Selling, general and
administrative expenses increased $532,000 or 19% from the third quarter of
fiscal year 1994 to the third quarter of fiscal year 1995, of which $291,000 of
the increase was due to operations acquired during fiscal year 1995. As a
percentage of net sales, selling, general and administrative expenses decreased
from 68% for the nine months and three months ended January 31, 1994, to 65% to
the nine months and 64% for the three months ended January 31, 1995. This
percentage should continue to decrease as acquisition revenues continue to
leverage off the existing management structure.
Interest expense decreased $382,000 or 26%, and $67,000 or 15% from the nine
month and three month period ended January 31, 1994, respectively, to the nine
month and three month period ended January 31, 1995, primarily due to the lower
average outstanding borrowings resulting from the Company's repayment of the
acquisition line of credit and 10% subordinated note in the third quarter of
1994.
In the first quarter of fiscal year 1995 a non-recurring credit of
$1,000,000 was recorded from the receipt of key man life insurance proceeds due
to the death of the former chairman.
Through third quarter 1994, there was a substantial risk that a significant
portion of the Company's net operating loss (NOL) carryforward could be limited
due to contemplated changes in the Company's ownership through the issuance of
common stock in equity offerings and acquisition/merger transactions. In
recognition of the substantial risk of realizing these tax benefits, upon
adoption of SFAS No. 109 and through third quarter 1994, the Company provided a
full valuation allowance for the deferred tax asset relating to the NOL and
alternative minimum tax (AMT) credit carryforwards. In fiscal year 1994
significant favorable events occurred and a substantial amount of taxable
income was generated further reducing the NOL carryforward. These events
culminated in the fourth quarter 1994 and the Company concluded, based on the
changed circumstances, that a valuation allowance on the deferred tax asset
relating to the NOL and AMT credit carryforwards was no longer
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<PAGE> 14
necessary. Realization of these tax benefits in future years is now considered
to be more likely than not. The tax benefit recorded in the first nine months
of fiscal year 1995, reflected the utilization of the NOL from the pre-tax
income generated during that quarter and increases in deductible temporary
differences related to pre-need funeral service contracts. The tax expense
recorded in the nine months and three months ended January 31, 1995, reflects
that the full benefit of the NOL was recorded in the fourth quarter 1994 as
described above and that a full tax provision is recorded on the taxable income
generated in the first nine months of fiscal 1995. The Company continues to
enjoy a significant cash flow benefit from continuing utilization of the NOL
(that is tax paid is based on only 10% of taxable income at the lower AMT
rates); however, the benefit to shareholders equity of the NOL has been fully
reflected in the financial statements by fully recording the deferred tax
asset. The 27.2% effective rate in the first nine months of fiscal 1995 is
less than the statutory rate because the key man life insurance proceeds are
not taxable. This effect is partially offset by nondeductible amortization.
FINANCIAL CONDITION
At January 31, 1995, the Company's working capital was $13,324,000, compared
to $15,285,000 at April 30, 1994. At January 31, 1995, the Company's debt to
equity ratio was .30:1 compared to .35:1 at April 30, 1994. The decrease in
working capital is primarily due to cash outlay to purchase the acquisitions
during fiscal year 1995. Additional cash was used to purchase the land and
building of one of the Company's funeral homes in Okaloosa County which was
previously leased by the Company.
Total assets increased $6,796,000 or 7% from April 30, 1994 to January 31,
1995 due to results from operations, the acquisitions made during fiscal 1995
and proceeds from the insurance policy of our deceased chairman. Trust fund
assets increased $2,905,000 or 8%, from April 30, 1994 to January 31, 1995,
with $646,000 of that increase attributable to the fiscal year 1995
acquisitions. Trust funds continued to increase due to deposits exceeding
withdrawals partially offset by a lower cost or market adjustment of $204,000
during fiscal year 1995. The Company expects this trend to continue throughout
fiscal year 1995. Receivables increased $1,775,000 or 10%, from April 30, 1994
to January 31, 1995 primarily as a result of continued sales of pre-need
cemetery and funeral service contracts. Consistent with the increase in
pre-need funeral sales and with the current fiscal year acquisitions, deferred
revenues increased $2,957,000, or 10%, from April 30, 1994 to January 31, 1995.
The Company's credit facility consists of a $12,625,000 term loan
outstanding at January 31, 1995 and a $10,000,000 acquisition line of credit
(of which up to $1,000,000 can be used as a revolving credit facility for
working capital). At January 31, 1995, the Company had $10,000,000 available
under such acquisition line of credit. The term loan bears interest at a prime
rate plus 1 1/2% and the acquisition line of credit bears interest at a prime
rate plus 2% (see Note 3 - Subsequent Event for Amended Credit Agreement as of
February 2, 1995). The credit facility is secured by the pledge of
substantially all the Company's assets (except cemetery land and trust fund
assets).
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<PAGE> 15
Capital expenditures (exclusive of the current year acquisitions) were
$723,000 during the first nine months of fiscal year 1995. These expenditures
included vehicles, office furniture and equipment at existing funeral homes,
additional investment in the Company's management information system and the
purchase of land and a funeral home at the Company's Okaloosa operation. In
addition, the Company plans to develop additional cemetery burial spaces and
construct additional mausoleum crypts as required to adequately maintain the
inventory level to support projected pre-need and at-need sales. The Company
has commitments to begin construction of mausoleum facilities during the fourth
quarter of fiscal 1995 for its Pasco operation, and the second quarter of
fiscal 1996 for its Okaloosa operations. The total amount of the contracts,
$358,000, will be paid over a period not exceeding one year from the date
construction begins.
LIQUIDITY
The Company believes that, for the foreseeable future, funds from operations
and borrowings under the Company's Credit Facility that was amended February 2,
1995 (Note 3 - Subsequent Event) will be sufficient to support the Company's
current operations and effect certain acquisitions. However, continuation of
the Company's acquisition strategy may eventually require future debt
financing. The proceeds of the Offering in fiscal 1994 has significantly
improved the Company's liquidity by reducing both the Company's interest
expense and the principal amount of the Company's indebtedness.
15
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MHI GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 10 Amended and Restated Credit and Security Agreement
Exhibit 11.1 Computation of Net Income Per Common Share
Exhibit 27 Financial Data Schedule (for SEC purposes only)
b. Reports on Form 8-K.
There were no reports filed on Form 8-K for the three month
period ended January 31, 1995.
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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.
MHI GROUP, INC.
-----------------------------
Registrant
Date: March 15, 1995 By: J.C. Ogier Mathewes
------------------------------
J.C. Ogier Mathewes
Vice President and
Chief Financial Officer
By: David J. McLaurin
------------------------------
David J. McLaurin
President and
Chief Executive Officer
17
<PAGE> 1
================================================================================
AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
between
MHI GROUP, INC.
and
FUNERAL SERVICES ACQUISITION GROUP, INC.
and
HELLER FINANCIAL, INC.
February 2, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1
DEFINITIONS
1.1 Certain Defined Terms . . . . . . . . . . . . . . . 1
1.2 Accounting Terms; Utilization of GAAP for Purposes
of Calculations Under Agreement . . . . . . . . . . 19
1.3 Other Definition Provisions . . . . . . . . . . . . 19
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . 20
(A) Term Loan . . . . . . . . . . . . . . . . . . 20
(B) Revolving Loan . . . . . . . . . . . . . . . . 20
(C) Repayment of Revolving Loan . . . . . . . . . 21
(D) Borrowing Procedures . . . . . . . . . . . . . 21
(E) Notes . . . . . . . . . . . . . . . . . . . . 21
2.2 Interest . . . . . . . . . . . . . . . . . . . . . 22
(A) Rates of Interest . . . . . . . . . . . . . . 22
(B) Default Rate of Interest . . . . . . . . . . . 22
(C) Computation and Payment of Interest . . . . . 22
(D) Interest Laws . . . . . . . . . . . . . . . . 23
(E) LIBOR Rate Election . . . . . . . . . . . . . 23
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . 24
(A) Closing Fee . . . . . . . . . . . . . . . . . 24
(B) Unused Line Fee . . . . . . . . . . . . . . . 24
(C) Administration Fee . . . . . . . . . . . . . . 24
(D) Termination Fee . . . . . . . . . . . . . . . 24
(E) LIBOR Breakage Fee . . . . . . . . . . . . . . 25
2.4 Payments and Prepayments . . . . . . . . . . . . . 25
(A) Manner and Time of Payment . . . . . . . . . . 25
(B) Payments on Business Days . . . . . . . . . . 25
(C) Mandatory Prepayments . . . . . . . . . . . . 25
(D) Voluntary Prepayments . . . . . . . . . . . . 27
(E) Application of Proceeds of Prepayments . . . . 27
2.5 Term of this Agreement . . . . . . . . . . . . . . 27
2.6 Borrowers' Loan Accounts and Statements . . . . . . 27
2.7 Capital Adequacy and Other Adjustments . . . . . . 28
<PAGE> 3
2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3
CONDITIONS TO LOANS
3.1 Conditions to Effectiveness . . . . . . . . . . . . 29
(A) Fees . . . . . . . . . . . . . . . . . . . . . 29
(B) Performance of Agreements . . . . . . . . . . 29
(C) Opinions of Counsel . . . . . . . . . . . . . 29
(D) Borrower Documents . . . . . . . . . . . . . . 29
(E) Other Documents . . . . . . . . . . . . . . . 30
3.2 Conditions to All Loans . . . . . . . . . . . . . . 31
SECTION 4
REPRESENTATIONS AND WARRANTIES
4.1 Organization, Powers, Capitalization, Good
Standing, Business and Subsidiaries . . . . . . . . 32
(A) Organization and Powers . . . . . . . . . . . 32
(B) Capitalization . . . . . . . . . . . . . . . . 32
(C) Qualification . . . . . . . . . . . . . . . . 33
(D) Conduct of Business . . . . . . . . . . . . . 33
(E) Subsidiaries . . . . . . . . . . . . . . . . . 33
4.2 Authorization of Borrowing; etc. . . . . . . . . . 33
(A) Authorization of Borrowing . . . . . . . . . . 33
(B) No Conflict . . . . . . . . . . . . . . . . . 33
(C) Governmental Consents . . . . . . . . . . . . 34
(D) Binding Obligation . . . . . . . . . . . . . . 34
4.3 Financial Condition . . . . . . . . . . . . . . . . 34
4.4 Indebtedness and Contingent Obligations . . . . . . 34
4.5 No Material Adverse Change; No Restricted Junior
Payment . . . . . . . . . . . . . . . . . . . . . . 34
4.6 Title to Properties; Liens . . . . . . . . . . . . 35
4.7 Litigation; Adverse Facts . . . . . . . . . . . . . 35
4.8 Payment of Taxes . . . . . . . . . . . . . . . . . 35
4.9 Adverse Contracts . . . . . . . . . . . . . . . . . 36
4.10 Performance and Delivery of Agreements . . . . . . 36
(A) Performance . . . . . . . . . . . . . . . . . 36
(B) Delivery . . . . . . . . . . . . . . . . . . . 36
4.11 Governmental Regulation . . . . . . . . . . . . . . 36
4.12 Employee Benefit Plans . . . . . . . . . . . . . . 36
4.13 Location of Equipment and Inventory . . . . . . . . 38
4.14 Office Locations; Fictitious Names . . . . . . . . 38
4.15 Perfection . . . . . . . . . . . . . . . . . . . . 38
ii
<PAGE> 4
4.16 Accounts . . . . . . . . . . . . . . . . . . . . . 38
4.17 Inventory . . . . . . . . . . . . . . . . . . . . . 38
4.18 Intellectual Property . . . . . . . . . . . . . . . 38
4.19 Certain Fees . . . . . . . . . . . . . . . . . . . 39
4.20 Environmental Compliance . . . . . . . . . . . . . 39
(A) No Environmental Claims . . . . . . . . . . . 39
(B) Compliance with Environmental Laws . . . . . . 39
4.21 Employee Matters . . . . . . . . . . . . . . . . . 40
4.22 Fair Trade and Other Regulations . . . . . . . . . 40
4.23 Solvency . . . . . . . . . . . . . . . . . . . . . 40
4.24 Disclosure . . . . . . . . . . . . . . . . . . . . 41
4.25 Use of Proceeds and Margin Security . . . . . . . . 41
4.26 Insurance . . . . . . . . . . . . . . . . . . . . . 41
4.27 Bank and Trust Accounts . . . . . . . . . . . . . . 41
4.28 Compliance with Laws . . . . . . . . . . . . . . . 42
4.29 Investments . . . . . . . . . . . . . . . . . . . . 42
4.30 Real Property . . . . . . . . . . . . . . . . . . . 42
SECTION 5
SECURITY INTERESTS
5.1 Grant of Security Interests . . . . . . . . . . . . 43
5.2 Borrowers Remain Liable . . . . . . . . . . . . . . 44
5.3 Further Assurances . . . . . . . . . . . . . . . . 44
(A) Other Documents and Actions . . . . . . . . . 44
(B) Lender Authorized . . . . . . . . . . . . . . 44
SECTION 6
COLLATERAL COVENANTS
6.1 Bank Accounts; Collection of Accounts and
Payments . . . . . . . . . . . . . . . . . . . . . 45
6.2 Corporate or Name Change . . . . . . . . . . . . . 46
6.3 Business Locations . . . . . . . . . . . . . . . . 46
6.4 Instruments . . . . . . . . . . . . . . . . . . . . 46
6.5 Account Covenants . . . . . . . . . . . . . . . . . 46
6.6 Equipment Covenants . . . . . . . . . . . . . . . . 47
6.7 Insurance . . . . . . . . . . . . . . . . . . . . . 47
6.8 Collateral Description . . . . . . . . . . . . . . 48
6.9 Use of Collateral . . . . . . . . . . . . . . . . . 48
6.10 Records of Collateral . . . . . . . . . . . . . . . 48
6.11 Other Information . . . . . . . . . . . . . . . . . 48
6.12 Lender Appointed Attorney-in-Fact . . . . . . . . . 48
iii
<PAGE> 5
SECTION 7
AFFIRMATIVE COVENANTS
7.1 Financial Statements and Other Reports . . . . . . 50
(A) Monthly Financials . . . . . . . . . . . . . . 50
(B) Year-End Financials . . . . . . . . . . . . . 50
(C) Officer Certificate . . . . . . . . . . . . . 51
(D) Accountants' Certification . . . . . . . . . . 51
(E) Accountants' Reports . . . . . . . . . . . . . 52
(F) Management Report . . . . . . . . . . . . . . 52
(G) Trustee Transmittal Letter . . . . . . . . . . 52
(H) Funds Audit Reports . . . . . . . . . . . . . 52
(I) Appraisals . . . . . . . . . . . . . . . . . . 52
(J) Projections . . . . . . . . . . . . . . . . . 53
(K) SEC Filings and Press Releases . . . . . . . . 53
(L) Indebtedness and Capital Stock Notices . . . . 53
(M) Events of Default, etc. . . . . . . . . . . . 53
(N) Litigation . . . . . . . . . . . . . . . . . . 53
(O) Employee Benefit Plans . . . . . . . . . . . . 54
(P) Termination Events . . . . . . . . . . . . . . 54
(Q) ERISA Notices . . . . . . . . . . . . . . . . 54
(R) Insurance . . . . . . . . . . . . . . . . . . 54
(S) Trust Fund's Noncompliance with Laws . . . . . 54
(T) Supplemental Schedules . . . . . . . . . . . . 54
(U) Other Information . . . . . . . . . . . . . . 55
7.2 Access to Accountants . . . . . . . . . . . . . . . 55
7.3 Corporate Existence, etc. . . . . . . . . . . . . . 55
7.4 Payment of Taxes and Claims; Tax Consolidation . . 55
7.5 Maintenance of Properties . . . . . . . . . . . . . 56
7.6 Inspection; Lender Meeting . . . . . . . . . . . . 56
7.7 Compliance with ERISA . . . . . . . . . . . . . . . 56
7.8 Environmental Compliance . . . . . . . . . . . . . 56
(A) Environmental Laws . . . . . . . . . . . . . . 56
(B) Indemnification . . . . . . . . . . . . . . . 56
(C) Remedial Action . . . . . . . . . . . . . . . 57
(D) Further Assurance . . . . . . . . . . . . . . 57
7.9 Environmental Disclosure . . . . . . . . . . . . . 57
7.10 Compliance with Laws, etc. . . . . . . . . . . . . 58
7.11 Mortgages; Title Insurance; Surveys . . . . . . . . 58
(A) Title Insurance . . . . . . . . . . . . . . . 58
(B) Additional Mortgaged Property . . . . . . . . 58
(C) Surveys . . . . . . . . . . . . . . . . . . . 59
(D) Expenses . . . . . . . . . . . . . . . . . . . 59
7.12 Further Assurances . . . . . . . . . . . . . . . . 59
iv
<PAGE> 6
7.13 Interest Rate Protection . . . . . . . . . . . . . 59
7.14 Management . . . . . . . . . . . . . . . . . . . . 59
7.15 Acquisition Information . . . . . . . . . . . . . . 60
(A) Excess Acquisitions . . . . . . . . . . . . . 60
(B) Non-Excess Acquisitions . . . . . . . . . . . 60
SECTION 8
FINANCIAL COVENANTS
8.1 Capital Expenditure Limits . . . . . . . . . . . . 61
8.2 Lease Limitations . . . . . . . . . . . . . . . . . 61
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3 Interest Expense Coverage . . . . . . . . . . . . . 61
8.4 Fixed Charge Coverage . . . . . . . . . . . . . . . 61
8.5 Total Debt to Pro Forma EBIDAT . . . . . . . . . . 62
SECTION 9
NEGATIVE COVENANTS
9.1 Indebtedness . . . . . . . . . . . . . . . . . . . 62
9.2 Liens and Related Matters . . . . . . . . . . . . . 62
(A) Prohibition of Liens . . . . . . . . . . . . . 62
(B) No Negative Pledges . . . . . . . . . . . . . 63
(C) No Restrictions on Subsidiary Distributions . 63
9.3 Investments; Joint Ventures . . . . . . . . . . . . 63
9.4 Contingent Obligations . . . . . . . . . . . . . . 63
9.5 Restricted Junior Payments . . . . . . . . . . . . 64
9.6 Restriction on Fundamental Changes . . . . . . . . 65
9.7 Disposal of Assets . . . . . . . . . . . . . . . . 65
9.8 Sales and Lease-Backs . . . . . . . . . . . . . . . 66
9.9 Transactions with Shareholders and Affiliates . . . 66
9.10 Compensation and Fees . . . . . . . . . . . . . . . 66
9.11 Disposal of Stock . . . . . . . . . . . . . . . . . 66
9.12 Environmental Liabilities . . . . . . . . . . . . . 66
9.13 Conduct of Business . . . . . . . . . . . . . . . . 67
9.14 Changes Relating to Subordinated Indebtedness . . . 67
9.15 Fiscal Year; Charter and ByLaws . . . . . . . . . . 67
9.16 No New Subsidiaries . . . . . . . . . . . . . . . . 67
9.17 Compliance with ERISA . . . . . . . . . . . . . . . 68
9.18 Surety Bonds and Letters of Credit . . . . . . . . 68
9.19 Acquisitions . . . . . . . . . . . . . . . . . . . 68
v
<PAGE> 7
SECTION 10
DEFAULT, RIGHTS AND REMEDIES
10.1 Event of Default . . . . . . . . . . . . . . . . . 69
(A) Payment . . . . . . . . . . . . . . . . . . . 69
(B) Default in Other Agreements . . . . . . . . . 69
(C) Breach of Certain Provisions . . . . . . . . . 69
(D) Breach of Warranty . . . . . . . . . . . . . . 70
(E) Other Defaults Under Loan Documents . . . . . 70
(F) Involuntary Bankruptcy; Appointment of
Receiver, etc. . . . . . . . . . . . . . . . . 70
(G) Voluntary Bankruptcy; Appointment of
Receiver, etc. . . . . . . . . . . . . . . . . 70
(H) Liens . . . . . . . . . . . . . . . . . . . . 71
(I) Judgments and Attachments . . . . . . . . . . 71
(J) Dissolution . . . . . . . . . . . . . . . . . 71
(K) Solvency . . . . . . . . . . . . . . . . . . . 71
(L) Injunction . . . . . . . . . . . . . . . . . . 71
(M) Invalidity of Loan Documents . . . . . . . . . 71
(N) Damage, Strike, Casualty . . . . . . . . . . . 71
(O) Licenses and Permits . . . . . . . . . . . . . 72
(P) Failure of Security . . . . . . . . . . . . . 72
(Q) Assets Seized . . . . . . . . . . . . . . . . 72
(R) RICO . . . . . . . . . . . . . . . . . . . . . 72
(S) Criminal Action Against Officers . . . . . . . 72
10.2 Suspension of Commitments . . . . . . . . . . . . . 72
10.3 Acceleration . . . . . . . . . . . . . . . . . . . 72
10.4 Disposition of Collateral . . . . . . . . . . . . . 73
10.5 Assignment of Intellectual Property . . . . . . . . 74
10.6 Assigned Agreements . . . . . . . . . . . . . . . . 74
10.7 Limitation on Duty of Lender with Respect to
Collateral . . . . . . . . . . . . . . . . . . . . 74
10.8 Application of Proceeds . . . . . . . . . . . . . . 75
10.9 Termination of Security Interests; Release of
Collateral . . . . . . . . . . . . . . . . . . . . 75
SECTION 11
ASSIGNMENT AND PARTICIPATION
11.1 Assignments and Participations in Loans and Notes . 75
(A) Assignment by Lender . . . . . . . . . . . . . 75
(B) Issuance of New Notes . . . . . . . . . . . . 75
(C) Participations . . . . . . . . . . . . . . . . 76
(D) Disclosure of Information . . . . . . . . . . 77
11.2 Appointment of Agent . . . . . . . . . . . . . . . 77
11.3 Set-Off and Sharing of Payments . . . . . . . . . . 77
vi
<PAGE> 8
SECTION 12
MISCELLANEOUS
12.1 Expenses and Attorneys' Fees . . . . . . . . . . . 78
12.2 Indemnity . . . . . . . . . . . . . . . . . . . . . 79
12.3 Amendments and Waivers . . . . . . . . . . . . . . 80
12.4 Retention of Documents . . . . . . . . . . . . . . 80
12.5 Notices . . . . . . . . . . . . . . . . . . . . . . 80
12.6 Survival of Warranties and Certain Agreements . . . 81
12.7 Failure or Indulgence Not Waiver; Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . 82
12.8 Marshaling; Payments Set Aside . . . . . . . . . . 82
12.9 Independence of Covenants, Representations and
Warranties . . . . . . . . . . . . . . . . . . . . 82
12.10 Severability . . . . . . . . . . . . . . . . . . . 82
12.11 Lenders' Obligations Several; Independent
Nature of Lenders' Rights . . . . . . . . . . . . . 83
12.12 Headings . . . . . . . . . . . . . . . . . . . . . 83
12.13 Applicable Law . . . . . . . . . . . . . . . . . . 83
12.14 Successors and Assigns; Subsequent Holders of
Notes . . . . . . . . . . . . . . . . . . . . . . . 83
12.15 No Fiduciary Relationship . . . . . . . . . . . . . 83
12.16 Consent to Jurisdiction and Service of
Process . . . . . . . . . . . . . . . . . . . . . . 83
12.17 Waiver of Jury Trial . . . . . . . . . . . . . . . 84
12.18 Confidentiality . . . . . . . . . . . . . . . . . . 85
12.19 Counterparts; Effectiveness . . . . . . . . . . . . 85
12.20 Entire Agreement . . . . . . . . . . . . . . . . . 85
12.21 Obligations of Borrowers . . . . . . . . . . . . . 86
vii
<PAGE> 9
EXHIBITS
Exhibit A Form of Amended Revolving Note
Exhibit B Form of Amended Term Note
Exhibit C Form of Compliance Certificate
Exhibit D Form of Availability Certificate
Exhibit E Form of Notice of Borrowing
Exhibit F Form of LIBOR Rate Loan Request
Exhibit G General Acquisition Criteria
Exhibit H Due Diligence Requirements
Exhibit I LIBOR Breakage Fee Calculation
SCHEDULES
1.1 Existing Liens
4.1(A) Organization of Borrowers
4.1(B) Capitalization of Borrowers
4.1(C) Qualification of Borrowers
4.1(D) Business of Borrowers
4.1(E) Borrowers and their Subsidiaries
4.2(B) Material Consents
4.3 Projections
4.4 Indebtedness and Contingent Liabilities
4.6 Title to Properties
4.7 Litigation
4.12 Employee Benefit Plans, Retiree Benefits
4.13 Location of Equipment and Inventory
4.14(A) Office Locations
4.14(B) Fictitious Names
4.18 Intellectual Property
4.19 Certain Fees
4.20 Environmental Matters
4.21 Employee Matters
4.26 Insurance Policies
4.27 Bank Accounts
4.29 Investments
4.30 Real Property
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<PAGE> 10
Amended and Restated Credit and Security Agreement
This Amended and Restated Credit and Security Agreement is dated as of
February 2, 1995, and entered into by and between MHI GROUP, INC., a Florida
corporation ("MHI"), with its principal place of business at 3100 Capital
Circle, N.E., Tallahassee, Florida, and FUNERAL SERVICES ACQUISITION GROUP,
INC., a Florida corporation ("FSAG"), with its principal place of business at
3100 Capital Circle, N.E., Tallahassee, Florida ("MHI" and "FSAG" are each
herein sometimes referred to individually as a "Borrower" and collectively as
the "Borrowers"), and HELLER FINANCIAL, INC., a Delaware corporation
("Lender"), with offices at 500 West Monroe Street, Chicago, Illinois 60661.
PRELIMINARY STATEMENT
Borrowers and Lenders entered into that certain Credit and Security
Agreement dated as of October 9, 1992, as subsequently amended (the "Original
Credit Agreement"). Pursuant to the Original Credit Agreement, Lender made a
term loan to Borrowers in the principal amount of $16,000,000 (the "Original
Term Loan"), established a revolving working capital facility in the maximum
principal amount of $1,000,000 and agreed to make acquisition loans to Borrower
in an aggregate principal amount of $9,000,000. Borrowers and Lender have
agreed to provide for additional acquisition loans and to make certain other
amendments to the terms of the Original Credit Agreement. Borrowers and Lender
have entered into this Agreement for the purpose of amending and restating the
Original Credit Agreement. All Liens previously granted by Borrowers in favor
of Lender shall remain in full force and affect, and this Agreement shall
evidence a continuation of the grant of the Security Interests under the
Original Credit Agreement.
SECTION 1
DEFINITIONS
1.1 Certain Defined Terms
The following terms used in this Agreement shall have the following
meanings:
"Accounting Changes" has the meaning assigned to that term in
subsection 1.2.
"Accounts" means all of the following: (a) accounts receivable,
contract rights, book debts, notes, drafts and other obligations and
indebtedness arising from the sale, lease or exchange of goods or other
property and/or the performance of services; (b) rights in, to and under all
purchase orders for goods, services or other property; (c) rights to any goods,
services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid sellers' rights of rescission,
replevin, reclamation and rights to stoppage in transit); (d) monies due to or
to become due under all contracts for the sale,
<PAGE> 11
lease or exchange of goods or other property and/or the performance of services
(whether or not yet earned by performance); (e) uncertificated securities; and
(f) Proceeds of any of the foregoing and all collateral security and guaranties
of any kind given by any Person with respect to any of the foregoing.
"Acquisition" means the acquisition by MHI or FSAG after the Closing
Date of a funeral home or cemetery business, whether by asset acquisition,
stock acquisition, merger or otherwise.
"Acquisition Documents" means all material documents, agreements and
certificates executed or delivered by MHI or FSAG to any seller or governmental
agency in connection with an Acquisition.
"Acquisition Loan" means an advance of the Revolving Loan made to
finance Acquisitions permitted hereunder.
"Additional Mortgaged Property" has the meaning assigned to that term
in subsection 7.11(B).
"Affiliate" means with respect to any Person (other than Lender), any
other Person (a) directly or indirectly controlling, controlled by, or under
common control with, such Person; (b) directly or indirectly owning or holding
five percent (5%) or more of any equity interest in such Person; or (c) five
percent (5%) or more of whose voting stock or other equity interest is owned
directly or indirectly or held by such Person; provided, that the term
"Affiliate" shall not be deemed to include Lender. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or by contract or otherwise. For the purpose of this
definition, each of the officers and directors of each Borrower shall be deemed
to control such Borrower and its Subsidiaries.
"Agent" has the meaning assigned to that term in subsection 11.2 and
shall include its successors and assigns appointed pursuant to subsection 11.2;
provided that if no Agent shall have been appointed, then "Agent" shall mean
Heller Financial, Inc.
"Agreement" means this Amended and Restated Credit and Security
Agreement as it may be amended, supplemented or otherwise modified from time to
time.
"Asset Disposition" means the disposition of the following, whether by
sale, lease, transfer, loss, damage, destruction, condemnation or otherwise:
(a) any stock of any Subsidiary of a Borrower (including stock of FSAG) or (b)
any or all of the assets of a Borrower or any of its Subsidiaries other than
sales of Inventory in the ordinary course of business.
2
<PAGE> 12
"Assigned Agreements" means, collectively, the Acquisition Documents,
the equipment leases, real property leases and other significant agreements
collaterally assigned to Lender.
"Availability Certificate" means a certificate of Borrowers' chief
financial officer substantially in the form of Exhibit D.
"Bank Agency Agreement" has the meaning assigned to the term in
subsection 6.1(A).
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as amended from time to time, or any successor statute.
"Base Rate" means a variable rate of interest per annum equal to the
higher of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System in Federal Reserve statistical release
H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or
(b) the Federal Funds Effective Rate. Base Rate also includes rates published
in any successor publications of the Federal Reserve System reporting the Bank
prime loan rate or its equivalent. The statistical release generally sets
forth a Bank prime loan rate for each business day. The applicable Bank prime
loan rate for any date not set forth shall be the rate set forth for the last
preceding date. In the event the Board of Governors of the Federal Reserve
System ceases to publish a Bank Prime loan rate or equivalent, the term "Base
Rate" shall mean a variable rate of interest per annum equal to the highest of
the "prime rate," "reference rate," "base rate" or other similar rate as
determined by Heller announced from time to time by any of Bankers Trust
Company, The Chase Manhattan Bank, National Association or Chemical Bank (with
the understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by such bank).
"Base Rate Loan" means a Loan bearing interest at a rate determined by
reference to the Base Rate.
"Blocked Accounts" has the meaning assigned to the term in subsection
6.1(B).
"Borrower" means each of MHI and FSAG, and "Borrowers" means MHI and
FSAG collectively.
"Business Day" means (a) for all purposes other than as covered by
clause (b) below, any day excluding Saturday, Sunday and any day that is a
legal holiday under the laws of the Commonwealth of Pennsylvania, the State of
Illinois or the State of Florida or is a day on which banking institutions
located in any of such states are authorized or required to be closed, and (b)
with respect to all notices, determinations, fundings and payments in
connection with LIBOR Rate Loans, any day that is a Business Day described in
clause (a) above and that is also a day for trading by and between banks in
Dollar deposits in the applicable interbank LIBOR market.
3
<PAGE> 13
"Capital Expenditures" means all expenditures (whether made in the
form of cash or other property, including, without limitation, expenditures
made by exchanging or trading in property and including deposits but not
including expenditures related to inventory development, including development
of mausoleums, burial plots and vaults in the ordinary course of business and
also not including expenditures relating to Acquisitions) for, or contracts for
expenditures with respect to, any fixed assets or improvements, or for
replacements, substitutions or additions thereto, that have a useful life of
more than one year, including, but not limited to, the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) by any Person that, in conformity with GAAP, should be
accounted for as a capital lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
commercial paper maturing no more than one year from the date issued and, at
the time of acquisition thereof, having a rating of at least A-1 from Standard
& Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances maturing within one year from
the date of issuance thereof issued by any commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia having combined capital and surplus of not less than $100,000,000 and
not subject to set-off or offset rights in favor of such bank arising from any
banking relationship with such bank; and (d) repurchase agreements in form and
substance and for amounts reasonably satisfactory to Lender.
"Cemetery Laws" means any and all applicable federal, state or local
laws, statutes, ordinances, codes, rules, regulations, orders, decrees and
directives imposing liability or standards of conduct for or relating to the
operation of funeral homes, cemeteries, mortuaries and related businesses.
"Closing Date" means the date hereof.
"Collateral" means, collectively: (a) all capital stock and other
property pledged pursuant to the Pledge Agreement; (b) all of the property
listed in subsection 5.1; (c) all real property, or interests in real property,
mortgaged pursuant to the Mortgages; and (d) all property or interests provided
as collateral security for the Obligations in addition to or in substitution
for any of the foregoing, unless such property is exempt from Liens under
Cemetery Laws.
"Collecting Banks" has the meaning assigned to the term in subsection
6.1(B).
"Commitment" means the commitment of Lender to make Loans as set forth
in subsections 2.1(A) and 2.1(B).
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<PAGE> 14
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C delivered to Lender by Borrowers pursuant to subsection 7.1(C).
"Consolidated Subsidiary" means, with respect to any Person, each
Subsidiary of such Person whose financial statements are consolidated with the
financial statements of such Person in accordance with GAAP.
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) with respect
to any indebtedness, lease, dividend and other obligation of another Person if
the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; (b) 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; (c) under Interest Rate Agreements; or (d) under any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
designed to protect that Person against fluctuations in currency values.
Contingent Obligations shall include, without limitation, (i) 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, (ii) the obligation to
make take-or-pay or similar payments if required regardless of nonperformance
by any other party or parties to an agreement, and (iii) any liability of such
Person for the obligations of another through any agreement to purchase,
repurchase or otherwise acquire such obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any Contingent
Obligation shall be equal to the United States dollar equivalent amount of the
obligation so guaranteed or otherwise supported or, if a fixed and determined
amount, the maximum amount so guaranteed in United States dollars.
"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, including the
Acquisition Documents.
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Depository Account" has the meaning assigned to such term in
subsection 6.1(B).
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods.
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<PAGE> 15
"EBIDAT," as applied to any Person, means, for any period, such
Person's Net Income (without deduction of income and franchise taxes that have
been accrued) for such period, plus (a) Interest Expense paid or accrued during
such period, plus (b) amortization and depreciation deducted in determining Net
Income for such period.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of section 3(3) of ERISA under which a Borrower or any of its
Subsidiaries is or (within the immediately preceding six (6) years) was an
"employer" as defined in section 3(5) of ERISA.
"Environmental Claims" has the meaning assigned to that term in
subsection 4.20(A).
"Environmental Laws" means any and all federal, state or local laws,
statutes, ordinances, codes, rules, regulations, orders, decrees and directives
imposing liability or standards of conduct for or relating to pollution, waste,
disposal, industrial hygiene, land use or the protection of human health or
welfare, plant life or animal life, natural resources, the environment or
property, including, but not limited to, the following statutes as now written
and amended, and as amended hereafter: the Federal Water Pollution Control Act,
33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Section 11001 et seq., and the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"Event of Default" means each of the events set forth in subsection
10.1.
"Excess Acquisition" means an Acquisition having a Purchase Price in
excess of $2,500,000 or whose Purchase Price, when aggregated with the Purchase
Price of all other Acquisitions having an individual Purchase Price of
$2,500,000 or less that are made in any Loan Year, exceeds $7,500,000. It is
understood and agreed that in determining whether cumulative Acquisitions in a
given Loan Year exceed the $7,500,000 limit, only those Acquisitions not
requiring Lender's approval will be counted.
"Excess Interest" has the meaning assigned to that term in subsection
2.2(D).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
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<PAGE> 16
"Expiry Date" means the earliest of (a) the termination of the
Commitments pursuant to subsection 10.3 or (b) January 31, 2000 or (c) the
date on which the Term Loan is prepaid in full.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve system arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of Chicago, 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 Agent from three federal funds
brokers of recognized standing selected by Agent.
"Fiscal Year" means the twelve month period ending on the last day of
April in each year.
"Fixed Charge Coverage," as applied to any Person, means, for any
period, such Person's OCF for such period divided by such Person's Fixed
Charges for such period.
"Fixed Charges," as applied to any Person, means, for any period, (a)
the aggregate of all Interest Expense paid or accrued by such Person during
such period, plus (b) scheduled payments of principal with respect to all
Indebtedness of such Person during such period, plus (c) all taxes paid in cash
during such period, plus (d) all permitted Restricted Junior Payments paid
during such period.
"Fixtures" means all plant fixtures, business fixtures, other fixtures
and storage office facilities and all additions and accessions thereto and
replacements therefor.
"FSAG" means Funeral Services Acquisition Group, Inc., a Florida
corporation, and its successors and permitted assigns.
"Funding Date" means the date of each funding of a Loan.
"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 any successor authority) that are
applicable to the circumstances as of the date of determination, consistently
applied and maintained throughout the periods indicated.
"General Criteria" means the acquisition criteria set forth on
Exhibit G.
"General Intangibles" means all "general intangibles" (as defined in
the UCC), including, without limitation: (a) the Assigned Agreements and all
other agreements, leases, licenses and contracts to which a Borrower is or may
become a party; (b) all obligations or
7
<PAGE> 17
Indebtedness owing to a Borrower (other than Accounts) from whatever source
arising; (c) all tax refunds; (d) Intellectual Property; (e) all choses in
action and causes of action; and (f) all trade secrets and other confidential
information relating to the business of a Borrower, including by way of
illustration and not limitation, systems and techniques for the analysis,
diagnosis and correction of malfunctions of products used by a Borrower's
customers; the names and addresses of, and credit and other business
information concerning, a Borrower's past, present or future customers; the
prices that a Borrower obtains for its services or at which it sells
merchandise; estimating and cost procedures; profit margins; policies and
procedures pertaining to the sale and design of equipment, components, devices,
services and products furnished by a Borrower; information concerning suppliers
of a Borrower; and information concerning the manner of operation, business
plans, pledges, projections, and all other information of any kind or
character, whether or not reduced to writing, with respect to the conduct by a
Borrower of its business not generally known by the public.
"Hazardous Material" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity or "EP toxicity"; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(c) any flammable substances or explosives or any radioactive materials; and
(d) asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Indebtedness," as applied to any Person, means: (a) all indebtedness
for borrowed money, whether by loan or issuance of debt securities; (b) that
portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet in conformity with GAAP; (c) notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation owed for all or
any part of the deferred purchase price of property acquired by or services
rendered to Borrowers if the purchase price is due more than six months from
the date the obligation is incurred or is evidenced by a note or similar
written instrument; and (e) 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. Obligations under Interest Rate
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12.2.
"Indemnitee" has the meaning assigned to that term in subsection 12.2.
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<PAGE> 18
"Instruments" means all "instruments," "chattel paper" or "letters of
credit" (each as defined in the UCC) including, but not limited to, promissory
notes, drafts, bills of exchange and trade acceptances.
"Intellectual Property" shall mean collectively all of the following:
(a) rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications; (b) all patents and patent
applications; (c) all certification marks, collective marks, service marks,
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, logos, other business identifiers,
prints and labels on which any of the foregoing have appeared or appear, all
registrations and recordings thereof, and all applications in connection
therewith; (d) all licenses of the foregoing; (e) all renewals of any of the
foregoing; (f) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the foregoing;
(g) the right to sue for past, present and future infringements of any of the
foregoing; (h) all goodwill associated with any of the foregoing; and (h) all
rights corresponding to any of the foregoing throughout the world.
"Interest Expense," as applied to any Person, means the aggregate of
all interest paid or accrued by such Person, including, without limitation, all
interest, fees and costs payable with respect to Indebtedness (other than fees
and costs that may be capitalized as transaction costs in accordance with
GAAP), all as determined in accordance with GAAP.
"Interest Expense Coverage," as applied to any Person, means for any
period, such Person's OCF for that period divided by Interest Expense for that
period.
"Interest Period" has the meaning assigned to that term in subsection
2.2(A).
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect any Person against fluctuations in
interest rates.
"Inventory" means all "inventory" (as defined in the UCC) and real
estate held for sale in the ordinary course of business of Borrowers.
"Investment," as applied to any Person, means (a) any direct or
indirect purchase or other acquisition by such Person of any beneficial
interest in, including stock, partnership interest or other Securities of, any
other Person (other than a Person that prior to the relevant purchase or
acquisition was a Subsidiary of such Person) or (b) any direct or indirect
loan, advance or capital contribution by such Person to any other Person (other
than a Subsidiary of such Person), 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. The amount
of any Investment shall be the original cost of such Investment plus 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.
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<PAGE> 19
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.
"Lender" initially means Heller Financial, Inc. and shall include each
Person that becomes a lender pursuant to subsection 11.1 and the successors and
assigns of Heller Financial, Inc. and each such Person.
"LIBOR Rate" means, for each Interest Period, a rate of interest
determined by Agent equal to: (a) the rate of interest determined by Agent at
which deposits in Dollars for the relevant Interest Period are offered based on
information presented on the Reuters Screen LIBO Page as of 11:00 a.m. (London
time) on the day which is two (2) Business Days prior to the first day of such
Interest Period, provided that if at least two such offered rates appear on the
Reuters Screen LIBO Page in respect of such Interest Period, the arithmetic
mean of all such rates will be the rate used, provided, further, that if fewer
than two offered rates appear or if Reuters ceases to provide LIBOR quotations,
such rate shall be the rate of interest at which deposits in U.S. dollars are
offered for the relevant Interest Period by any of Bankers Trust Company, The
Chase Manhattan Bank, National Association or Chemical Bank to prime banks in
the London interbank market, divided by (b) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day which is two (2)
Business Days prior to the beginning of such Interest Period (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or
other governmental authority having jurisdiction with respect thereto, as now
and from time to time in effect) for Eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of such Board) which are
required to be maintained by a member bank of the Federal Reserve System; such
rate to be rounded upward to the next whole multiple of one-sixteenth of one
percent (.0625%).
"LIBOR Rate Loan" means a Loan bearing interest at a rate determined
by reference to the LIBOR Rate.
"LIBOR Rate Loan Request" means a written request for a LIBOR Rate
Loan substantially in the form of Exhibit F.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" means the Term Loan or a Revolving Loan, and "Loans" means,
collectively, the Term Loan and the Revolving Loans.
"Loan Account" has the meaning assigned to that term in subsection 2.6.
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<PAGE> 20
"Loan Documents" mean, collectively, this Agreement, the Notes, the
Security Documents and all other instruments, documents and agreements
delivered concurrently herewith or at any time hereafter to or for the benefit
of Lender in connection with the Loans and other transactions contemplated by
this Agreement, all as amended, supplemented or modified from time to time.
"Loan Year" means each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereof.
"Lock Box" has the meaning assigned to that term in subsection 6.1(B).
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Borrowers taken as a whole or (b) the impairment of the ability of any party
(other than Lender) to perform its obligations under any Loan Document to which
it is a party or of Lender to enforce or collect any of the Obligations.
"Maximum Rate" has the meaning assigned to that term in subsection
2.2(C).
"Maximum Revolving Loan Amount" means on any date, the lesser of (a)
the Revolving Loan Commitment and (b) (i) 4 times Borrowers' consolidated Pro
Forma EBIDAT as of the most recent month-end for which Borrowers have delivered
to Lender their monthly financial statements as required by this Agreement,
computed for the Trailing Twelve-Month Period ending on such month-end, less
(ii) Borrowers' consolidated Indebtedness as of such date of determination
(including any Indebtedness assumed in an Acquisition).
"MHI" means MHI Group, Inc., a Florida corporation, and its successors
and permitted assigns.
"MHI Capital Stock" means the common stock of MHI, $0.40 par value per
share and the MHI Preferred Stock.
"MHI Preferred Stock" means MHI's non-voting Class E Junior
Convertible Preferred Stock, $1.00 par value per share.
"Mortgage" means each of the mortgages, deeds of trust, deeds to
secure debt, leasehold mortgages, leasehold deeds of trust, leasehold deeds to
secure debt, collateral assignments of leases or other real estate security
documents delivered to Lender with respect to Mortgaged Property or Additional
Mortgaged Property, all in form and substance satisfactory to Lender.
"Mortgage Policies" means ALTA lender's title insuring policies issued
by title insurers reasonably satisfactory to Lender and in form, substance and
amounts reasonably satisfactory to Lender.
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<PAGE> 21
"Mortgaged Property" means each parcel of real property on which
Lender has a Mortgage as of the Closing Date.
"Multi-employer Plan" means a "multi-employer plan" as defined in
section 4001(a)(3) of ERISA under which a Borrower or any of its Subsidiaries
is making, or is accruing an obligation to make, contributions or has made, or
been obligated to make, contributions within the preceding six years.
"Net Income (Loss)," as applied to any Person, means, for any period,
such Person's net income (or loss) after income and franchise taxes determined
in conformity with GAAP, but excluding: (a) the income of any other Person
(other than Wholly-Owned Subsidiaries of such Person) in which such Person or
any of its Wholly-Owned Subsidiaries has an ownership interest, unless received
by such Person or its Wholly-Owned Subsidiary in a cash distribution; (b) any
after-tax gains or losses attributable to Asset Dispositions; and (c) to the
extent not included in clauses (a) and (b) above, any after-tax extraordinary
non-cash gains or extraordinary non-cash losses, provided that utilization of
net operating loss carryforwards will not be treated as an extraordinary
non-cash gain.
"Net Proceeds" means proceeds received by a Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition and insurance proceeds and awards of compensation received
with respect to the destruction or condemnation of all or a part of such
property), net of: (a) the costs of such sale, lease, transfer or other
disposition; (b) any tax liability arising from such transaction; and (c)
amounts applied to repayment of Indebtedness (other than the Obligations)
secured by a Lien on the asset or property disposed.
"Net Worth," as applied to any Person, means as of the date of any
determination thereof, such Person's total assets less such Person's total
liabilities (as such terms are defined under GAAP but excluding accumulated
amortization of such Person's goodwill) less any increase in Net Worth arising
from transactions (other than transactions pursuant to which such Person
receives an infusion of capital or cancellation of indebtedness other than for
consideration) consummated following the Original Closing Date except as
arising from Net Income.
"Note" means the Term Note or Revolving Note, and "Notes" means both
the Term Note and the Revolving Note.
"Notice of Borrowing" means a notice with respect to a proposed
borrowing substantially in the form of Exhibit E.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Borrower from time to time owed to Lender under the Loan
Documents including, without limitation, the principal amount of all debts,
claims and indebtedness, accrued and unpaid interest and all fees, costs and
expenses, whether primary, secondary, direct,
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<PAGE> 22
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable.
"OCF," means, for any period, Borrowers' consolidated EBIDAT for the
period, minus all Capital Expenditures, minus increases (or plus decreases) in
Borrowers' "Merchandise Trust Funds" and "Pre-Need Funeral Trust Funds" during
such period, minus increases (or plus decreases) in Borrowers' notes receivable
related to Pre-Need Sales during such period, plus increases (or minus
decreases) in Borrowers' deferred revenue liability during such period for
pre-need funeral sales, plus any increases in Borrowers' accrued merchandise
liability during such period, and minus any decreases in Borrowers' accrued
merchandise liability during such period.
"Original Closing Date" means October 9, 1992.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" means any Employee Benefit Plan (other than a
Multi-employer Plan) that is subject to the provisions of section 302 or Title
IV of ERISA or section 412 of the IRC and that (a) is maintained for employees
of a Borrower or any of its Subsidiaries or (b) has at any time within the
preceding six years been maintained for the employees of a Borrower or any of
its current or former Subsidiaries.
"Permitted Encumbrances" means the following types of Liens:
(a) Liens (other than Liens relating to Environmental
Claims or imposed under ERISA that exceed $50,000) for taxes,
assessments or other governmental charges not yet due and payable;
(b) Statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by law that are
incurred in the ordinary course of business for sums not more than
thirty (30) days delinquent or that are being contested in good faith,
provided that a reserve or other appropriate provision shall have been
made therefor;
(c) Liens (other than Liens imposed under ERISA) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, 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);
(d) Deposits, in an aggregate amount not to exceed
$100,000, made in the ordinary course of business to secure
liabilities to insurance carriers;
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<PAGE> 23
(e) Any attachment or judgment Lien not constituting an
Event of Default under subsection 10.1(I) of this Agreement;
(f) Easements, rights-of-way, restrictions, and other
similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of a Borrower or any
of its Subsidiaries and not lessening in any material respect the
value of such property being encumbered;
(g) Any interest or title of a lessor or sublessor under
any lease permitted by this Agreement;
(h) Liens arising from filing UCC financing statements
regarding leases permitted by this Agreement;
(i) Liens in favor of Lender;
(j) Liens securing Permitted Purchase Money Indebtedness;
(k) Liens existing on the date hereof to the extent set
forth on Schedule 1.1; and
(l) Liens securing other Indebtedness up to an aggregate
amount outstanding at any time not in excess of $200,000.
"Permitted Purchase Money Indebtedness" means Purchase Money
Indebtedness of Borrowers incurred after the Original Closing Date at a time
when an Event of Default is not then in existence
(a) that is secured by a Lien at all times confined
solely to the tangible personal property the purchase price of which
was financed through the incurrence of such Purchase Money
Indebtedness;
(b) the aggregate principal amount of which does not
exceed an amount equal to 100% of the lesser of
(i) the cost (including the principal amount of
such Indebtedness, whether or not assumed) of the tangible
personal property subject to such Lien, and
(ii) the fair value of such tangible personal
property at the time of its acquisition, except that on new
property for which there is a readily determinable market,
fair value shall equal cost; and
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<PAGE> 24
(c) which, when aggregated with the principal amount of
all such Indebtedness and Capital Lease obligations of Borrowers
incurred during any Fiscal Year of Borrowers, does not exceed
$400,000.
"Person" means and includes natural persons, corporations, limited
partnerships, general 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
and agencies and political subdivisions thereof.
"Pledge Agreement" means the Stock Pledge Agreement dated October 9,
1992, executed and delivered by MHI, with respect to the capital stock of each
of its Subsidiaries, as such agreement may hereafter be amended, supplemented
or otherwise modified from time to time.
"Pro Forma Cost Reduction" means (a) with respect to Acquisitions made
by Borrowers prior to the Closing Date, the estimated amount of cost savings
attributable to operational efficiencies expected to be created by Borrowers,
as calculated by Borrowers, and as determined to be acceptable to Lender in its
reasonable discretion, for the portion of the year ending April 30, 1995 which
has not yet elapsed as of the date of determination of Pro Forma EBIDAT, and
(b) with respect to any Acquisition made by Borrowers after the Closing Date,
if requested by Borrowers pursuant to the succeeding sentence, the estimated
amount of cost savings attributable to operational efficiencies expected to be
created by Borrowers with respect to the Target acquired in such Acquisition,
as calculated by Borrowers and acceptable to Lender in its reasonable
discretion, for the number of months which have not elapsed during the period
(i) commencing on the last day of the month preceding the consummation of such
Acquisition for which financial statements were available and (ii) ending on
the first anniversary of the date determined pursuant to clause (i). If
Borrowers wish to have, with respect to any Target proposed to be acquired by
Borrowers after the Closing Date, the estimated amount of cost savings
attributable to operational efficiencies expected to be created by Borrowers
with respect to such Target, treated as part of the term Pro Forma Cost
Reduction (pursuant to clause (b) above), then Borrowers will so notify Lender
in writing, and Lender will endeavor, within five (5) Business Days after the
receipt of any such notice, to advise Borrowers of the amount of cost savings
which Lender is willing to consider as Pro Forma Cost Reductions pursuant to
clause (b) above.
"Pro Forma EBIDAT" means, for any Trailing Twelve-Month Period,
Borrowers' consolidated EBIDAT for such Trailing Twelve- Month Period, adjusted
for non-recurring expenses or income (to the extent not already reflected in
the computation of Net Income), plus effective upon the consummation of any
Acquisition of any Target, the amount determined by Lender, in its reasonable
discretion, based upon and derived from projections delivered by Borrowers to
Lender and taking into consideration Pro Forma Cost Reductions, to be the
Target's EBIDAT for such Trailing Twelve-Month Period. In the Trailing
Twelve-Month Period immediately following the consummation of an Acquisition,
each month's pro forma component of Trailing Twelve-Month Period EBIDAT would
be replaced by the
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actual EBIDAT achieved during that month until such time as all of the pro
forma components of Trailing Twelve-Month EBIDAT have been replaced with actual
EBIDAT. Effective upon the consummation of any Asset Disposition, Trailing
Twelve-Month Period Pro Forma EBIDAT shall be adjusted to remove the impact of
the segment of the business of Borrowers which is subject to such Asset
Disposition.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance with respect to any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
"Projections," as applied to any Person, means such Person's
forecasted consolidated and consolidating: (a) balance sheets; (b) profit and
loss statements; and (c) cash flow statements, all prepared on a division by
division and Subsidiary by Subsidiary basis and otherwise consistent with such
Person's historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
"Purchase Money Indebtedness" means
(a) Indebtedness created to finance the payment of all or
any part of the purchase price of any personal property,
(b) any Indebtedness incurred at the time of or within 10
days prior to or after the acquisition of any tangible personal
property for the purpose of financing all or any part of the purchase
price thereof, and
(c) any renewals, extensions or refinancings of the
foregoing, but not any increases in the principal amounts thereof
outstanding at the time.
"Purchase Price" means, with respect to an Acquisition, the total
amount that in accordance with GAAP is to be capitalized on the acquiring
Borrower's balance sheet.
"Reportable Event" means any of the events described in section 4043
of ERISA.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of a Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock to the
holders of that class; (b) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of a Borrower or any of
its Subsidiaries now or hereafter outstanding, except for redemptions,
conversions and exchanges payable solely in shares of common stock; (c) any
payment or prepayment of principal of, premium, if any,
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or interest on, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Indebtedness; and (d) 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 a Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Revolving Loan" means all Loans made pursuant to subsection 2.1(B)
and any amounts added to the principal balance of the Revolving Loan pursuant
to this Agreement.
"Revolving Loan Commitment" means $22,375,000.
"Revolving Note" means the promissory note of Borrowers issued
pursuant to subsection 2.1(E)(1), together with any promissory note replacing,
supplementing or extending such note.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, 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.
"Security Documents" means all instruments, documents and agreements
executed by or on behalf of a Borrower or any other Person to guaranty or
provide collateral security with respect to the Obligations and other
transactions contemplated by this Agreement including, without limitation, the
Pledge Agreement, the Mortgages and all instruments, documents and agreements
executed pursuant to any Security Document, all as amended, supplemented or
modified from time to time.
"Security Interests" means the security interests granted pursuant to
subsection 5.1, as well as all other security interests granted, created or
assigned as additional security for the Obligations pursuant to the provisions
of this Agreement and the Security Documents.
"Subordinated Indebtedness" means all Indebtedness of either Borrower
or any of its Subsidiaries that is expressly subordinated in right of payment
to the Obligations.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees 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.
"Target" means the business unit that Borrowers propose to acquire in
connection with an Acquisition.
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"Term Loan" means the Term Loan made pursuant to subsection 2.1(A)(1).
"Term Loan Commitment" means $12,625,000.
"Term Note" means the promissory note of Borrowers issued pursuant to
subsection 2.1(E)(2), together with any promissory note replacing,
supplementing or extending such note.
"Termination Date" means January 31, 2000.
"Termination Event" means (a) a Reportable Event with respect to any
Pension Plan; (b) the withdrawal of a Borrower or any of its Subsidiaries from
a Pension Plan during a plan year in which a Borrower or any of its
Subsidiaries was a "substantial employer" as defined in section 4001(a)(2) or
an event requiring disclosure under section 4062(e) of ERISA; (c) the
termination of a Pension Plan, the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination
under section 4041 of ERISA; (d) the institution of proceedings to terminate,
or to appoint a receiver with respect to, a Pension Plan; (e) any event or
condition that would constitute grounds under section 4042(a) of ERISA for the
termination of, or appointment of a trustee to administer, any Pension Plan; or
(f) the imposition of a Lien pursuant to Section 412 of the IRC or Section 302
of ERISA with respect to any Pension Plan.
"Trailing Twelve-Month Period" shall mean, at any time the twelve (12)
month period immediately preceding the date of such calculation.
"Transmittal Letter" means the report delivered by MHI or FSAG to each
Trust Fund trustee setting forth the payments due and amounts that may be
withdrawn by MHI or FSAG from each Trust Fund.
"Trust Fund" means each trust fund required by applicable law to be
maintained by FSAG or MHI or any of their Subsidiaries in connection with the
sale of pre-need funeral services contracts and cemetery plots, including,
without limitation, any "Care and Maintenance Trust Fund," "Merchandise Trust
Fund," "Pre-Construction Trust Fund" or "Pre-Need Funeral Trust Fund."
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Illinois, provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral or the availability of any remedy
hereunder is governed by the Uniform Commercial Code as in effect on or after
the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection or
availability of such remedy.
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"Wholly-Owned Subsidiary," as applied to any Person, means each
Subsidiary in which such Person or one or more Wholly-Owned Subsidiaries of
such Person owns all of the outstanding capital stock or equity interests.
"Working Capital Loan" means an advance of the Revolving Loan made to
finance Borrowers' working capital requirements.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement
For purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity
with GAAP. Financial statements and other information furnished to Lender
pursuant to this Agreement (unless otherwise specified herein) shall be
prepared in accordance with GAAP as in effect at the time of such preparation.
In the event that any "Accounting Changes" (as defined below) occur and such
changes result in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then Borrowers and Lender agree to enter
into negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Borrowers' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made.
"Accounting Changes" means (a) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions); (b)
changes in accounting principles recommended and implemented by Borrowers'
certified public accountants; and (c) changes in the determination of
Borrowers' net book value or amortization and depreciation thereof resulting
from (i) the application of purchase accounting principles under A.P.B. 16
and/or 17 and EITF-16 and (ii) the application of the accounting principles set
forth in FASB 109.
1.3 Other Definition Provisions
References to "Sections," "subsections," "Exhibits" and "Schedules"
shall be to Sections, subsections, Exhibits and Schedules, respectively, of
this Agreement unless otherwise specifically provided. Any of the terms
defined in subsection 1.1 may, unless the context otherwise requires, be used
in the singular or the plural depending on the reference. In this Agreement,
"hereof," "herein," "hereto," "hereunder" and the like mean and refer to this
Agreement as a whole and not merely to the specific section, paragraph or
clause in which the respective word appears; words importing any gender include
the other genders; reference to "writing" includes printing, typing,
lithography and other means of reproducing words in a tangible visible form;
the words "including," "includes" and "include," unless followed by the word
"only," shall be deemed to be followed by the words "without limitation";
references to agreements and other contractual instruments shall be deemed to
include subsequent amendments, assignments, and other modifications thereto,
but only to the extent such amendments, assignments and other modifications are
not prohibited by the
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terms of this Agreement or any other Loan Document; references to Persons
include their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 Loans
(A) Term Loan. On the Closing Date, subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Borrowers herein set forth, Lender agrees to continue the
Original Term Loan in the amount of the Term Loan Commitment. The Original
Term Loan, the terms of which are amended as provided herein, shall be the Term
Loan hereunder. Repayments of the Term Loan may not be reborrowed. The entire
principal amount of the Term Loan shall be due and payable in full in one
payment on the Expiry Date.
(B) Revolving Loan.
(1) Agreement to Lend. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Borrowers herein set forth, Lender agrees to make loans to
Borrowers, from time to time during the period from the Closing Date to and
excluding the Expiry Date. The aggregate outstanding principal amount of the
Revolving Loan (including the unpaid principal amount of the Revolving Loan
outstanding under the Original Credit Agreement) shall not exceed at any time
the Maximum Revolving Loan Amount. Advances of the Revolving Loan that are
repaid by Borrowers may be reborrowed as advances under the Revolving Loan
subject to the terms and conditions of this Agreement.
(2) Use of Proceeds. Borrowings of the Revolving Loan
made after the Closing Date shall be used solely for the purposes of financing
Acquisitions that are permitted hereunder and Borrowers' working capital
requirements.
(3) Other Relationships. Borrowers acknowledge and agree
that Heller has entered into certain financing agreements and agreed to extend
certain credit facilities to Prime Holdings, Inc., a subsidiary of Prime
Succession, Inc. ("Prime") and Hamilton Funeral Service Centers ("HFSC"),
certain competitors of Borrowers. A portion of the credit facilities provided
to Prime and HFSC consist of acquisition loan facilities to finance all or a
portion of the purchase price of acquisitions by Prime and HFSC, or their
affiliates, of funeral homes and/or cemetery businesses. Borrowers, Prime and
HFSC may be interested in acquiring, and may make offers with respect to, the
same Target and each may seek
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Lender's approval for such Acquisition. Borrowers (i) are fully aware of the
foregoing, (ii) recognize the possible conflict of interest, (iii) consent to
the foregoing and (iv) acknowledge that Lender may disapprove a potential
Acquisition hereunder while at the same time grant to Prime or HFSC approval
thereof, provided that, in order to avoid unduly influencing the outcome of any
such competitive bidding process, if the Lender shall have become obligated or
shall have agreed to finance any such potential Acquisition by Prime or HFSC,
the Lender will not unreasonably withhold its consent to a request by the
Borrowers for approval of the financing of such Acquisition as an Excess
Acquisition pursuant to subsection 9.19, provided that such potential
Acquisition meets all of the General Criteria. Borrowers hereby waive and
release the Lender from all claims, causes of action, demands, obligations and
liabilities relating to or arising out of any action taken, or not taken, in
good faith in accordance with the terms of this Agreement in connection with
any such potential Acquisition.
(C) Repayment of Revolving Loan.
The principal amount of the Revolving Loan shall be due and payable in
full on the Expiry Date.
(D) Borrowing Procedures.
Loans made on any Funding Date shall be in a minimum principal amount
of One Hundred Thousand Dollars ($100,000) and integral multiples of Fifty
Thousand Dollars ($50,000) in excess of that amount, except for Acquisition
Loans, which shall be in the amount necessary to consummate the applicable
Acquisitions. When Borrowers desire to borrow under this subsection 2.1, it
shall deliver to Lender a fully and properly completed Notice of Borrowing no
later than 11:00 a.m. (Chicago time) at least (i) one (1) Business Day in
advance of the proposed Funding Date. In lieu of delivering the above
described Notice of Borrowing, Borrowers may give Lender telephonic notice by
the required time of the proposed borrowing; provided, that such notice shall
be promptly, and in any event within one (1) Business Day, confirmed in writing
by delivery of a Notice of Borrowing to Lender. Lender shall not incur any
liability to Borrowers for acting upon any telephonic notice that Lender
believes in good faith to have been given by a duly authorized officer of
Borrowers or such other person authorized to borrow on behalf of Borrowers or
for otherwise acting in good faith under this subsection 2.1(D). The making of
any advance pursuant to telephonic notice shall constitute a Loan under this
Agreement. Each such advance to Borrowers under the Revolving Loan shall, on
the Funding Date, be deposited in immediately available funds, in such account
as Borrowers may from time to time designate to Lender in writing.
(E) Notes.
Borrowers shall execute and deliver to Lender: (1) a Revolving Note
substantially in the form of Exhibit A to evidence the Revolving Loan, as
amended hereby, such
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Revolving Note to be in the principal amount of the Revolving Loan Commitment
and with other appropriate insertions and (2) a Term Note substantially in the
form of Exhibit B, with appropriate insertions, in the principal amount of the
Term Loan Commitment. In the event of an assignment under subsection 11.1,
Borrowers shall, upon surrender of the assigning Lender's Notes, issue new
Notes to reflect the new Commitments of the assigning Lender and its assignee.
2.2 Interest
(A) Rates of Interest. Subject to the provisions of subsection
2.2(B), (a) the Revolving Loan shall bear interest at a floating rate per annum
equal to the sum of the Base Rate plus one percent (1%) or the LIBOR Rate plus
three and one-quarter percent (3.25%), as selected pursuant to subsection
2.2(E), and (b) the Term Loan shall bear interest at a floating rate per annum
equal to the sum of the Base Rate plus one and one-half percent (1.50%) or the
LIBOR Rate plus three and three-quarters percent (3.75%), as selected pursuant
to subsection 2.2(E).
LIBOR Rate Loans may be obtained for a one, two, three, or six (6)
month period (each being an "Interest Period") provided
that: (a) the interest is calculated from the date the Loan is made, (b) if the
Interest Period expires on a day that is not a Business Day, then it will
expire on the next Business Day, (c) no Interest Period shall extend beyond the
Termination Date.
If the introduction of or the interpretation of any law, rule, or
regulation would increase the reserve requirement and as a result there would
be an increase in the cost of making or maintaining a LIBOR Rate Loan, then
Agent shall submit a certificate demonstrating the impact of the increased cost
and require payment thereof within ten (10) days from the Borrower. There are
no limitations on the number of times such certificate may be submitted.
(B) Default Rate of Interest. After the occurrence of an Event of
Default and for so long as such Event of Default continues, the Loans and all
other Obligations shall bear interest until paid in full at a rate per annum
that is two percent (2.0%) in excess of the rate of interest otherwise payable
on such Loans or other Obligations under this Agreement. Furthermore, during
any period in which any Event of Default exists, and is continuing, as the then
current Interest Periods for LIBOR Rate Loans expire such Loans shall be
converted into Base Rate Loans and the LIBOR Rate election will not be
available to the Borrower until all Events of Default are cured or waived.
(C) Computation and Payment of Interest. Interest on the Loans
and all other Obligations shall be computed on the daily principal balance on
the basis of a 360-day year for the actual number of days elapsed in the period
during which it accrues. The date of funding a Base Rate Loan, the first day
of an Interest Period with respect to a LIBOR Rate Loan and the date of
conversion of a LIBOR Rate Loan to a Base Rate Loan shall be included in the
calculation. The date of payment of a Base Rate Loan, the last day of an
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Interest Period with respect to a LIBOR Rate Loan and the date of conversion of
a Base Rate Loan to a LIBOR Rate Loan shall be excluded in the calculation. If
a Loan is repaid on the same day on which it is made, one day's interest shall
be paid on that Loan. Interest on Base Rate Loans and all other Obligations
(other than LIBOR Rate Loans) shall be payable monthly in arrears on the first
Business Day of the month following the Closing Date and the first Business Day
of each month thereafter, on the date of any prepayment of Loans and at
maturity, whether by acceleration or otherwise. Interest on LIBOR Rate Loans
shall be payable on the last day of the applicable Interest Period, unless the
Interest Period is greater than three (3) months, in which case interest will
be payable on the last day of each three (3) month interval, and also shall be
payable on the date of any prepayment of such Loans and at maturity, whether by
acceleration or otherwise. Upon Borrowers' request from time to time, Lender
shall notify Borrowers of the Base Rate in effect as of the date and during the
period specified in such request.
(D) Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("Excess
Interest"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Agreement or in any of
the other Loan Documents, then in such event: (1) the provisions of this
subsection shall govern and control; (2) Borrowers shall not be obligated to
pay any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, subject to the provisions of applicable
law, (a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time
under applicable law (the "Maximum Rate"), and this Agreement and the other
Loan Documents shall be deemed to have been and shall be, reformed and modified
to reflect such reduction; and (5) Borrowers shall not have any action against
Lender for any damages arising out of the payment or collection of any Excess
Interest. Notwithstanding the foregoing, if for any period of time interest on
any Obligation is calculated at the Maximum Rate rather than the applicable
rate under this Agreement, and thereafter such applicable rate becomes less
than the Maximum Rate, the rate of interest payable on such Obligation shall
remain at the Maximum Rate until Lender shall have received the amount of
interest that Lender would have received during such period on such Obligation
had the rate of interest not been limited to the Maximum Rate during such
period.
(E) LIBOR Rate Election. All Loans outstanding as of the Closing
Date shall be Base Rate Loans unless Borrower shall have delivered a LIBOR Rate
Loan Request not less than three (3) Business Days prior to the Closing Date
requesting that all or a portion of such outstanding Loans be LIBOR Rate Loans.
After the Closing date, Borrowers may request that Revolving Loans to be made
be LIBOR Rate Loans and that portions of outstanding Loans be converted to
LIBOR Rate Loans. All LIBOR Rate Loans require three (3) Business Days notice.
Any such request, which will be made by submitting a
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LIBOR Rate Loan Request to Lender, shall pertain to Loans in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess
thereof. Once given, a LIBOR Rate Loan request shall be irrevocable and
Borrowers shall be bound thereby. Upon the expiration of an Interest Period,
in the absence of a new LIBOR Rate Loan request submitted to Lender not less
than three (3) days prior to the end of such Interest Period, the LIBOR Rate
Loan then maturing shall be automatically converted to a Base Rate Loan. There
may be no more than five (5) LIBOR Rate Loans having different Interest Periods
outstanding at any one time.
2.3 Fees
(A) Closing Fee. Borrowers shall pay to Lender a closing fee in
the amount of $350,000, $175,000 of which shall be payable on the Closing Date,
and $175,000 of which shall be due and payable on the earlier of (a) the date
of any prepayment in full of the Loans or (b) the first anniversary of the
Closing Date. The closing fee shall be fully earned by Lender on the Closing
Date and shall not be subject to proration or rebate upon the termination of
this Agreement.
(B) Unused Line Fee. From the Closing Date, Borrowers shall pay
Lender a fee in an amount equal to the Revolving Loan Commitment less the sum
of the average daily balance of the Revolving Loan multiplied by three-eights
of one percent (0.375%) per annum during the first Loan Year, and one-half
percent (0.50%) per annum thereafter. Such fee is payable monthly in arrears
on the first day of each month, commencing March 1, 1995.
(C) Administration Fee. Borrowers shall pay Lender an
administration fee of $10,000 for each Acquisition for which Lender's consent
is required hereunder, payable on the closing date of such Acquisition, to
compensate Lender for administrative and legal documentation costs it incurs in
connection therewith.
(D) Termination Fee. If during the first two (2) Loan Years,
Borrowers for any reason make a voluntary prepayment of the Obligations in
whole, Borrowers shall pay Lender as liquidated damages and compensation for
the costs of being prepared to make funds available to Borrowers under this
Agreement, and not as a penalty, an amount determined by multiplying the
percentage set forth below by the sum of the outstanding principal balance of
the Term Loan at the date of such prepayment plus the amount of the Revolving
Loan Commitment.
Loan Year When
Prepayment Made Prepayment Fee
--------------- --------------
1 2.0%
2 1.0%
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(E) LIBOR Breakage Fee. Upon any payment of a LIBOR Rate Loan on
any day that is not the last day of the Interest Period applicable to that Loan
(regardless of the source of such prepayment and whether voluntary or
otherwise), in addition to any other termination or prepayment fees due from
Borrower, Borrower shall pay a breakage fee as provided on Exhibit I (to
compensate Lender for the administrative costs associated with such
prepayment).
2.4 Payments and Prepayments
(A) Manner and Time of Payment. All payments by Borrowers of the
Obligations shall be made without deduction, defense, set-off or counterclaim
and in same day funds and delivered to Lender by wire transfer to Lender's
account, ABA No. 0710-0001-3, Account No. 55-00540 at The First National Bank
of Chicago, One First National Plaza, Chicago, IL 60670, Reference: Heller
Corporate Finance Group, for the benefit of MHI Group, Inc. or at such other
place as Lender may direct from time to time by notice to Borrowers. Borrowers
shall receive credit for such funds on the date received if Borrowers have
given Lender telephonic notice by 9:00 a.m. (Chicago, Illinois time) of the
transfer of such funds and such funds are received by Lender by 1:00 p.m.
(Chicago, Illinois time) on such day. In the absence of timely notice and
receipt, such funds shall be deemed to have been paid by Borrowers on the next
succeeding Business Day after the date of receipt. In order to cause timely
payment to be made to Lender of all Obligations as and when due, Borrowers
hereby authorize and direct Lender, at Lender's option, to debit Borrowers'
Loan Account (by increasing the principal balance of the Revolving Loan) when
such Obligations become due. Solely for the purpose of calculating interest
earned by Lender with respect to the Obligations, any check, draft or similar
item by or for the account of Borrowers delivered to Lender shall be applied on
account of the Obligations on the second Business Day after receipt thereof.
Checks, drafts or other items of payment received after 1:00 p.m. (Chicago,
Illinois time) shall be deemed to have been received on the following Business
Day.
(B) 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, the
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.
(C) Mandatory Prepayments.
(1) Revolving Loan Overadvance. At any time that the
principal balance of the Revolving Loan exceeds the Maximum Revolving Loan
Amount, Borrowers, upon written demand, shall immediately repay the Revolving
Loan to the extent necessary to reduce the principal balance to an amount that
is equal to or less than the Maximum Revolving Loan Amount.
(2) Prepayments from Asset Dispositions. Immediately
upon receipt by a Borrower or any of its Subsidiaries of Net Proceeds of any
Asset Disposition in excess of $100,000 for any single transaction or series of
related transactions (it being understood that
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if the proceeds exceed $100,000, then the entire proceeds and not just the
portion in excess of the foregoing amount shall be subject to this subsection),
Borrowers shall prepay the Loans in an amount equal to the Net Proceeds of such
Asset Disposition. Concurrently with the making of any such payment, Borrowers
shall deliver to Lender a certificate of MHI's chief executive officer or chief
financial officer demonstrating its calculations of the amount required to be
paid.
Notwithstanding the foregoing, to the extent that Borrowers have an
accrued tax liability with respect to an Asset Disposition, or reasonably
expect the proceeds of such Asset Disposition to be reinvested within six (6)
months in productive assets of a kind then used or useable in the business of
Borrowers, then Borrowers shall not be required to prepay the Loans by the
amount of the tax liability or the amount to be reinvested; provided, however,
that to the extent that Borrowers are not required to pay all or any portion of
the accrued tax liability or fail to reinvest all such proceeds within such six
(6) month period, then Borrowers shall prepay the Loans by the amount that is
not so paid or reinvested.
(3) Prepayments from Equity Offerings. In the event that
a Borrower issues capital stock the net proceeds from which exceed $100,000, no
later than the third Business Day following the date of receipt of such
proceeds (other than (a) proceeds from the issuance of capital stock that are
used or held for future use by Borrowers to pay the cost of Acquisitions, (b)
proceeds from the issuance of capital stock to a Borrower or any of its
Subsidiaries by any Person that was a Subsidiary of such Borrower immediately
prior to such issuance and (c) proceeds from the exercise of options and
warrants to purchase capital stock of MHI that were outstanding on the Original
Closing Date, provided that the proceeds from such exercise are retained for
use in Borrowers' business), Borrowers shall prepay the Loans in an amount
equal to such proceeds, net of underwriting discounts and commissions and other
reasonable costs associated therewith.
(4) Prepayment from Acquisition Document Proceeds.
Immediately upon receipt by a Borrower of any amounts payable under or pursuant
to any Acquisition Documents (other than amounts payable as a result of a claim
by a Borrower for indemnification under the Acquisition Documents to the extent
that the amounts so recovered are applied by Borrowers for the purpose of
replacing, repairing or restoring any assets or properties of Borrowers, or
satisfying claims made against Borrowers, or otherwise remedying or correcting
the condition giving rise to the claim for indemnification or otherwise
covering any fees or expenses incurred by Borrowers in obtaining such
indemnification), Borrowers shall prepay the Loans in an amount equal to one
hundred percent (100%) of such amounts. Concurrently with the making of any
such payment, Borrowers shall deliver to Lender a certificate of MHI's chief
executive officer or chief financial officer demonstrating its calculation of
the amount required to be paid.
(5) Prepayments From Pension Plan Reversion. Upon the
return to a Borrower or any of its Subsidiaries of any surplus assets of any
Pension Plan, Borrowers shall prepay the Loans in an amount equal to such
returned surplus assets net of transaction costs
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(including income, excise or other taxes) incurred in obtaining such return.
Concurrently with the making of any such payment, Borrowers shall deliver to
Lender a certificate of MHI's chief executive officer or chief financial
officer demonstrating its calculation of the amount required to be paid.
(D) Voluntary Prepayments. Borrowers' Obligations may, at any
time upon not less than three (3) Business Days' prior notice to Lender, be
prepaid in whole or in part. Prepayments in part shall be in the principal
amount of $100,000 or an integral multiple thereof. Upon prepayment in full of
the Obligations, the Revolving Loan Commitment shall terminate. After notice
of prepayment is given, all Obligations as to which such notice of prepayment
has been given, including any fees due under subsection 2.3(D) or (E), shall
become due and payable on the prepayment date specified in such notice.
(E) Application of Proceeds of Prepayments. All mandatory
prepayments of the Loans shall be applied first to the outstanding principal of
the Revolving Loan and second to the outstanding principal of the Term Loan.
2.5 Term of this Agreement
This Agreement shall be effective until the Expiry Date, provided that
all of the Lender's rights and remedies under the Agreement shall survive any
such termination until all the Obligations under this Agreement and the other
Loan Documents have been finally paid in full. Upon termination of this
Agreement, all Obligations shall become immediately due and payable without
notice or demand. Notwithstanding any termination, until all Obligations have
been fully paid and satisfied, Lender shall be entitled to retain the Security
Interests in and Liens upon all Collateral, and even after payment of all
Obligations hereunder, Borrowers' joint and several obligation to indemnify
Lender in accordance with the terms hereof shall continue.
2.6 Borrowers' Loan Accounts and Statements
Lender shall maintain for Borrowers a loan account (the "Loan
Account") on its books to record: (a) all Loans to Borrowers; (b) all payments
made by Borrowers; and (c) all other appropriate debits and credits as provided
in this Agreement with respect to the Obligations. All entries in Borrowers'
Loan Account shall be made in accordance with Lender's customary accounting
practices as in effect from time to time. Borrowers jointly and severally
promise to pay the amount reflected as owing by them under Borrowers' Loan
Account (absent manifest error) and all other Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement. After
the occurrence and during the continuance of an Event of Default, Borrowers
irrevocably waive the right to direct the application of any and all payments
at any time or times thereafter received by Lender from or on behalf of
Borrowers, and Borrowers hereby irrevocably agree that Lender shall have the
continuing exclusive right to apply and to reapply any and all payments
received at any time or times after the occurrence and during the continuance
of an Event of Default against the Obligations hereunder in such manner as
Lender may deem advisable
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notwithstanding any previous entry by Lender upon the Loan Account or any other
books and records.
The balance in Borrowers' Loan Account, as set forth on Lender's most
recent printout or other written statement, shall be presumptive evidence of
the amounts due and owing to Lender by Borrowers; provided that any failure to
so record or any error in so recording shall not limit or otherwise affect
Borrowers' joint and several obligation to pay the Obligations. Not more than
twenty (20) days after the last day of each calendar month, Lender shall render
to Borrowers a statement setting forth the principal balance of Borrowers' Loan
Account and the calculation of interest due thereon. Each statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be presumed correct and binding upon Borrowers, and shall constitute
an account stated unless, within thirty (30) days after receipt of such
statement, Borrowers shall deliver to Lender their written objection thereto
specifying the error or errors, if any, contained in such statement. In the
absence of a written objection delivered to Lender as set forth above, Lender's
statement of Borrowers' Loan Account shall be conclusive evidence against
Borrowers of the amount of the Obligations.
2.7 Capital Adequacy and Other Adjustments
In the event that Lender shall have determined that the adoption after
the date hereof of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve requirements
or similar requirements or compliance by Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) from any central bank or governmental agency or
body having jurisdiction does or shall have the effect of increasing the amount
of capital, reserves or other funds required to be maintained by Lender and
thereby reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from Lender (together with the certificate
referred to in the next sentence) pay to Lender additional amounts sufficient
to compensate Lender for such reduction. A certificate as to the amount of
such cost and showing the basis of the computation of such cost submitted by
Lender to Borrowers shall, absent manifest error, be final, conclusive and
binding for all purposes.
2.8 Taxes
Any and all payments or reimbursements made hereunder shall be made
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
imposed in connection with the transactions contemplated hereby (collectively,
"tax liabilities") excluding taxes imposed on the net income of Lender by the
jurisdiction under the laws of which Lender is organized or any political
subdivision thereof and taxes imposed on its net income by the jurisdiction of
Lender's applicable lending office or any political subdivision thereof. If
Borrowers shall
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be required by law to deduct any such amounts from or in respect of any sum
payable hereunder to Lender, then the sum payable hereunder shall be increased
as may be necessary so that, after making all required deductions, Lender
receives an amount equal to the sum it would have received had no such
deductions been made. Borrowers hereby jointly and severally indemnify and
agree to hold Lender harmless from and against all tax liabilities.
SECTION 3
CONDITIONS TO LOANS
The obligations of Lender to make Loans are subject to satisfaction of
all of the conditions set forth below.
3.1 Conditions to Effectiveness
The effectiveness of this Agreement is subject to the prior or
concurrent satisfaction of the conditions set forth below.
(A) Fees. Borrowers shall have paid the portion of the closing
fee that is due and payable on the Closing Date pursuant to subsection 2.3(A).
(B) Performance of Agreements. Borrowers shall have performed in
all material respects all agreements that this Agreement provides shall be
performed on or before the Closing Date except as otherwise agreed to in
writing by Lender.
(C) Opinions of Counsel. Lender shall have received an executed
original of the favorable written opinion of Douglass, Powell & Rudolph,
counsel for Borrowers, and such local counsel as Lender may request, in form
and substance reasonably satisfactory to Lender and its counsel, dated as of
the Closing Date, and setting such matters as Lender may reasonably request.
(D) Borrower Documents. On or before the Closing Date, Borrowers
shall deliver or cause to be delivered to Lender the documents listed below,
each, unless otherwise noted, dated the Closing Date, duly executed, in form
and substance reasonably satisfactory to Lender and in quantities designated by
Lender (except for the Notes, of which only the originals shall be signed).
(1) Agreement, Notes. This Agreement, the Term Note
and the Revolving Note.
(2) Confirmation of Pledge Agreement. A
confirmation regarding the continuing validity of the Pledge
Agreement.
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(3) Officer's Certificate. Certificates executed by
the chief executive officer and chief financial officer of
Borrowers stating that: (a) on such date, no Default or Event
of Default has occurred and is continuing; (b) no material
adverse change in the Collateral or the financial condition or
operations of the business of Borrowers or any of their
Subsidiaries or the projected cash flow of Borrowers or any of
their Subsidiaries has occurred since April 30, 1994; (c) the
representations and warranties set forth in Section 4 are true
and correct in all material respects on and as of such date
with the same effect as though made on and as of such date;
and (d) Borrowers on such date are in compliance with all the
terms and provisions set forth in this Agreement on its part
to be observed and performed.
(4) Solvency Certificate. A certificate of
Borrowers' chief financial officer certifying that, after
giving effect to the execution and delivery of this Agreement,
each Borrower is solvent.
(5) Charter and Good Standing. Certified copies of
the articles of incorporation of each Borrower as in effect on
the Closing Date together with good standing certificates from
the state of its incorporation, from the state in which its
principal place of business is located and from all states in
which the laws thereof require Borrowers to be qualified
and/or licensed to do business, each to be dated a recent date
prior to the Closing Date.
(6) Bylaws. Copies of the bylaws of each Borrower
certified as of the Closing Date by its corporate secretary or
an assistant secretary.
(7) Resolutions. Resolutions of the Board of
Directors of each Borrower approving and authorizing the
execution, delivery and performance of the Loan Documents to
which Borrowers are parties, certified as of the Closing Date
by such Borrower's corporate secretary or an assistant
secretary as being in full force and effect without
modification or amendment.
(8) Incumbency Certificates. Signature and
incumbency certificates of the officers of each Borrower
executing the Loan Documents.
(9) Other Borrower Documents. Such other documents
respecting Borrowers or any of their Subsidiaries as Lender
may reasonably request.
(E) Other Documents. Borrowers shall have delivered such other
documents as Lender may reasonably request, including, without limitation,
evidence that the consents described in subsections 4.2(B) and (C) have been
obtained.
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3.2 Conditions to All Loans
The obligations of Lender to make Loans on each Funding Date are
subject to the further conditions precedent set forth below.
(A) In the case of a Working Capital Loan or an Acquisition Loan,
Lender shall have received a Notice of Borrowing in compliance with subsection
2.1(D).
(B) In the case of an Acquisition Loan, (1) Lender shall have
received all of the documents and information required by subsection 7.15 with
respect to the Acquisition; (2) the Acquisition Documents shall be in full
force and effect and no material term or condition thereof shall have been
amended, modified or waived after the execution thereof (other than solely to
extend the date by which the Acquisition is required to occur) except with the
prior written consent of Lender; (3) none of the parties to any of the
Acquisition Documents shall have failed to perform any material obligation or
covenant required by such Acquisition Document to be performed or complied with
by it on or before the Funding Date; (4) if the Acquisition is an Excess
Acquisition or Lender's consent thereto otherwise is required hereunder, then
Lender shall have given its written consent thereto; and (5) Lender shall have
received a certificate from MHI's chief executive or chief financial officer to
the effect set forth in clauses (1), (2) and (3) above. In addition, upon
Lender's request, all certificates, opinions and letters delivered to Borrower
in connection with the Acquisition Documents and the Acquisition shall be
addressed to Lender or accompanied by a written authorization from the person
delivering such certificate, opinion or letter stating that Lender may rely on
such document as though it were addressed to it.
(C) In the case of an Acquisition Loan, Borrowers shall have
delivered to Lender a collateral assignment to Lender of the seller's
representations to Borrower under the Acquisition Documents and of its rights
with respect to all of the seller's representations and indemnities under the
Acquisition Documents, acknowledged by the seller.
(D) The representations and warranties contained herein and in the
Loan Documents shall be true, correct and complete 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 for any representation or warranty limited by its terms to a
specific date and taking into account any amendments to the Schedules or
Exhibits as a result of any disclosures made by Borrowers to Lender after the
Closing Date and approved by Lender.
(E) 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 Default.
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(F) Borrowers shall have performed in all material respects all
agreements and satisfied all conditions that any Loan Document provides shall
be performed by them on or before that Funding Date, including, without
limitation, satisfying all reporting requirements hereunder.
(G) No injunction or other restraining order shall have been
issued and remain in effect 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
execution, delivery or performance of the Loan Documents.
(H) The making of the Loans requested on such Funding Date shall
not violate Regulation G, Regulation T, Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System.
(I) There shall not be pending or, to the knowledge of Borrowers,
threatened, any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation, letter of violation or arbitration against or
affecting any Borrower or any of its Subsidiaries or any property of any
Borrower or any of its Subsidiaries that has not been disclosed by Borrowers in
writing to the extent required by subsections 4.7, 4.20 or 7.1(O), and there
shall have occurred no development in any such action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration that, in
the reasonable opinion of Lender, would reasonably be expected to have a
Material Adverse Effect.
SECTION 4
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make
Loans, Borrowers jointly and severally represent and warrant to Lender that the
following statements are true, correct and complete:
4.1 Organization, Powers, Capitalization, Good Standing, Business and
Subsidiaries
(A) Organization and Powers. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation (which jurisdiction is set forth on Schedule
4.1(A)). Each Borrower has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted and to enter into each Loan Document to which it is a
party.
(B) Capitalization. The authorized capital stock and number of
outstanding shares of each class of capital stock of each Borrower is as set
forth on Schedule 4.1(B). All issued and outstanding shares of capital stock
of each Borrower are duly authorized and validly
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issued, fully paid, nonassessable, and such shares were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. There are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for the
purchase or acquisition from either Borrower of any shares of capital stock or
other securities of such Borrower, except as set forth on Schedule 4.1(B).
(C) Qualification. Each Borrower is duly qualified and in good
standing wherever necessary to carry on its present business and operations,
except in jurisdictions in which the failure to be qualified and in good
standing has not had and reasonably could not be expected to have a Material
Adverse Effect. All jurisdictions in which each Borrower is qualified to do
business are set forth on Schedule 4.1(C).
(D) Conduct of Business. On the date hereof, Borrowers are
engaged only in businesses of the type described on Schedule 4.1(D).
(E) Subsidiaries. All of the Subsidiaries of each Borrower are
identified on Schedule 4.1(E). The ownership of the capital stock of such
Subsidiaries is identified on Schedule 4.1(E), and all such capital stock is
duly authorized, validly issued, fully paid and nonassessable and free and
clear of all Liens other than Liens in favor of Lender. Each Subsidiary of
each Borrower is duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation as set forth on
Schedule 4.1(E) and is duly qualified and in good standing wherever necessary
to carry on its present business and operations, except in jurisdictions in
which the failure to be qualified and in good standing has not had and will not
have a Material Adverse Effect. Each Subsidiary of each Borrower has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and proposed to be conducted, to enter
into any Loan Document to which it is a party and to carry out the transactions
contemplated hereby and thereby.
4.2 Authorization of Borrowing; etc.
(A) Authorization of Borrowing. Each Borrower has the corporate
power and authority to incur the Indebtedness evidenced by the Notes. The
execution, delivery and performance of each of the Loan Documents by each
Borrower have been duly authorized by all necessary corporate and shareholder
action.
(B) No Conflict. The execution, delivery and performance by each
Borrower of each Loan Document to which it is a party do not and will not: (1)
violate any provision of law applicable to Borrowers, the certificate of
incorporation or bylaws of either Borrower or any order, judgment or decree of
any court or other agency of government binding on Borrowers; (2) 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 either Borrower; (3) result
in or require the creation or imposition of any material Lien upon any of the
properties or assets of either Borrower (other than Liens in favor of Lender);
or (4) require any approval
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or consent of any Person under any Contractual Obligation of either Borrower,
except for (a) such approvals or consents to be obtained on or before the
Closing Date and identified on Schedule 4.2(B) and (b) such violations,
conflicts, breaches, Liens and defaults that would not have, and such approvals
the absence of that would not have, a Material Adverse Effect.
(C) Governmental Consents. The execution, delivery and
performance by each Borrower of each Loan Document to which it is a party 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 for filings required in
connection with the perfection of security interests granted pursuant to the
Loan Documents, and other filings, authorizations, consents and approvals that
have been made or obtained or the absence of which would not have a Material
Adverse Effect.
(D) Binding Obligation. This Agreement is, and the other Loan
Documents, including, without limitation, the Notes, when executed and
delivered will be, the legally valid and binding obligations of the Borrowers,
each enforceable against the Borrowers in accordance with their respective
terms.
4.3 Financial Condition
All financial statements concerning Borrowers and their Subsidiaries
that have been or will hereafter be furnished by Borrowers to Lender pursuant
to this Agreement have been or will be prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein) and do or will present fairly the financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
4.4 Indebtedness and Contingent Obligations
As of the Closing Date, neither Borrower and none of their
Subsidiaries has any Indebtedness or Contingent Obligations except as set forth
on Schedule 4.4.
4.5 No Material Adverse Change; No Restricted Junior Payment
Since April 30, 1994, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect
with respect to Borrowers other than the events or changes contemplated by or
disclosed in this Agreement. Neither Borrower has or will have, as of the
Closing Date, 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 9.5.
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4.6 Title to Properties; Liens
Each Borrower and each of their Subsidiaries has good, sufficient and
legal title, subject to Permitted Encumbrances, to all their respective
material properties and assets. Except for Permitted Encumbrances, all such
properties and assets are free and clear of Liens. To the best knowledge of
Borrowers after due inquiry, there are no actual, threatened or alleged
defaults with respect to any leases of real property under which Borrowers or
any of their Subsidiaries is lessee or lessor that would have a Material
Adverse Effect. No effective financing statement or other form of Lien notice
covering all or any part of any properties or assets of either Borrower or any
of its Subsidiaries is on file in any recording office, except for those in
favor of Lender and as disclosed on Schedule 4.6. Except as disclosed on
Schedule 4.6, none of the Collateral is in the possession of any bailee,
warehouseman, agent or processor.
4.7 Litigation; Adverse Facts
Except as set forth on Schedule 4.7, as of the date hereof there are
no material judgments outstanding against either Borrower or affecting any
material property of either Borrower nor is there any material action, charge,
claim, demand, proceeding, suit, petition, governmental investigation, letter
of violation or arbitration now pending or, to the best knowledge of Borrowers
after due inquiry, threatened against or affecting either Borrower or any
material property of either Borrower. Neither Borrower has received any notice
that it is exposed to any liability or disadvantage that could reasonably be
expected to result in any Material Adverse Effect. The actions, charges,
claims, demands, proceedings, suits, petitions, investigations, letters of
violation and arbitrations set forth on Schedule 4.7 will not, if adversely
determined, result in any Material Adverse Effect. Neither Borrower is in
default under any demand, award, judgment, order, decree, consent, conciliation
agreement or settlement agreement the violation of which could reasonably be
expected to result in a Material Adverse Effect.
4.8 Payment of Taxes
Except to the extent permitted hereunder, all material tax returns and
reports of each Borrower and each of its Subsidiaries required to be filed by
any of them have been timely filed, and all taxes, assessments, fees and other
governmental charges upon such Persons and upon their respective properties,
assets, income and franchises that are shown on such returns as due and payable
have been paid when due and payable. None of the United States income tax
returns of either Borrower or of any of its Subsidiaries are under audit. No
tax liens have been filed and no claims are being asserted with respect to any
such taxes. The charges, accruals and reserves on the books of each Borrower
and each of its Subsidiaries in respect of any taxes or other governmental
charges are in accordance with GAAP.
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4.9 Adverse Contracts
Neither Borrower and none of their Subsidiaries is a party to nor is
it or any of its property subject to or bound by any forward purchase contract,
futures contract, labor agreement, covenant not to compete, confidentiality
agreement, employment or consulting agreement, unconditional purchase,
take-or-pay or other agreement that has a Material Adverse Effect.
4.10 Performance and Delivery of Agreements
(A) Performance. Neither Borrower and none of their Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation of
any such Person, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default or have a Material
Adverse Effect.
(B) Delivery. Borrowers have provided Lender accurate and
complete copies of all of the following agreements or documents to which either
Borrower or any of its Subsidiaries is subject as of the date hereof:
(i) leases of real property used as funeral homes or
cemeteries;
(ii) contracts or agreements with each Affiliate;
(iii) instruments and agreements evidencing the issuance of
any equity securities, warrants, rights or options to
purchase equity securities of such Person; and
(iv) all management agreements, labor agreements, bonus
compensation agreements and employment agreements.
4.11 Governmental Regulation
Neither Borrower and none of their Subsidiaries is, or after giving
effect to any Loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company
Act of 1940 or to any federal or state statute or regulation limiting its
ability to incur the Obligations or grant the Security Interest.
4.12 Employee Benefit Plans
(A) Except as disclosed on Schedule 4.12, as of the date hereof,
neither Borrower nor any of its Subsidiaries has maintained, contributed to or
has any obligation under any Employee Benefit Plan.
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(B) Borrowers and each of their Subsidiaries are in material
compliance with all applicable provisions of each Employee Benefit Plan, ERISA
and the IRC and the regulations and published interpretations thereunder with
respect to all Employee Benefit Plans. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the IRC has been determined by
the Internal Revenue Service to be so qualified, and each trust related to such
plan has been determined to be exempt from taxation under Section 501(a) of the
IRC. No material liability has been incurred or is reasonably expected to be
incurred, and neither Borrowers nor any of their Subsidiaries has engaged in
any transaction or has failed to take any action that could result in any
material liability, by Borrowers or any of their Subsidiaries for any taxes,
penalties, premiums or benefits with respect to any Employee Benefit Plan,
other than the payment of benefits and the making of contributions in
accordance with the terms of the Employee Benefit Plans.
(C) No Termination Event has occurred or is reasonably expected to
occur.
(D) No Pension Plan has any accumulated funding deficiency (as
defined in Section 412 of the IRC), without regard to any waiver granted under
Section 412 of the IRC, nor has any funding waiver from the IRS been received
or requested with respect to any Pension Plan, nor has there been any event
requiring any disclosure under Section 4063(a) of ERISA with respect to any
Pension Plan.
(E) With respect to each Pension Plan, the market value of assets
equals or exceeds the present value of benefit liabilities as of the latest
actuarial valuation date for such plan (but not prior to 12 months prior to the
date hereof), determined in accordance with actuarial assumptions used by the
PBGC in single-employer plan terminations, and since its last valuation date,
there have been no amendments to such plan that materially increased the
present value of accrued benefits.
(F) Except as disclosed on Schedule 4.12, as of the date hereof,
neither Borrower nor any of its Subsidiaries has any contingent liability with
respect to any post-retirement benefit under any Employee Benefit Plan that is
a welfare plan (as defined in section 3(1) of ERISA), other than liability for
health plan continuation coverage described in part 6 of title I of ERISA and
Section 4980B of the IRC, and such disclosed liability on Schedule 4.12 will
have no Material Adverse Effect.
(G) Borrowers have given to Lender true and complete copies of
each Employee Benefit Plan and related trust agreement (including all
amendments and commitments with respect to such plan or trust) that Borrowers
or any of their Subsidiaries maintains or is committed to contribute to as of
the date hereof.
(H) No material proceeding, claim, lawsuit, audit or investigation
is existing or, to Borrowers' knowledge, threatened concerning or involving any
Employee Benefit Plan.
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4.13 Location of Equipment and Inventory
Each Borrower's Equipment and Inventory is located at one or more of
the places specified on Schedule 4.13.
4.14 Office Locations; Fictitious Names
(A) As of the date hereof, the chief place of business, the chief
executive office and the office where Borrowers keep their books and records
are located at the places specified on Schedule 4.14(A).
(B) Borrowers do not do business and, as of the date hereof, have
not done business during the past five years under any trade name or fictitious
business name except as disclosed on Schedule 4.14(B).
4.15 Perfection
Upon recordation of applicable Mortgage amendments, Lender will have a
valid, perfected and (except for the Permitted Encumbrances) first priority
security interest in the Collateral, securing the payment of the Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
4.16 Accounts
Except as set forth on Schedule 4.16, to the Borrowers' knowledge,
each Borrower's Accounts constitutes the legally valid and binding obligation
of the Person obligated to pay the same. No Person has any defense, set-off,
claim or counterclaim against either Borrower that can be asserted against
Lender, whether in any proceeding to enforce Lender's rights in the Collateral
or otherwise except defenses, set-offs, claims or counterclaims that are not,
in the aggregate, material to the value of the Borrowers' Accounts.
4.17 Inventory
All of each Borrower's Inventory is of good and merchantable quality,
free from any defects; such Inventory is not subject to any licensing, patent,
trademark, trade name or copyright agreement with any Person.
4.18 Intellectual Property
Each Borrower and each of its Subsidiaries owns all Intellectual
Property and is licensed to use or otherwise has the right to use, all
technology, know-how and business information used in or necessary for the
conduct of its business as currently conducted. All such Intellectual Property
is identified on Schedule 4.18 and all such Intellectual Property is fully
protected and/or duly and properly registered, filed or issued in the
appropriate office and jurisdictions for such registrations, filing or
issuances. Except as disclosed in Schedule
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4.18, no material claim has been asserted by any Person with respect to the use
of any such Intellectual Property, or challenging or questioning the validity
or effectiveness of any such Intellectual Property. Except as disclosed in
Schedule 4.18, the use of such Intellectual Property by the Borrowers or their
Subsidiaries does not infringe on the rights of any Person or give rise to any
liabilities on the part of Borrowers or any of their Subsidiaries.
4.19 Certain Fees
Except as described on Schedule 4.19, no broker's or finder's fee or
commission will be payable with respect to the transactions contemplated
hereby. Borrowers shall and do jointly and severally indemnify, pay and hold
Lender harmless from and against any claim, demand or liability for broker's or
finder's fees alleged to have been incurred in connection with any such offer,
issuance and sale or any of the other transactions contemplated hereby and any
expenses, including reasonable attorneys' fees, arising in connection with any
such claim, demand or liability. No other similar fees or commissions will be
payable by Borrowers for any other services rendered to Borrowers or any of
their Subsidiaries ancillary to the transactions contemplated hereby.
4.20 Environmental Compliance
(A) No Environmental Claims. Except as set forth on Schedule
4.20, to the knowledge of Borrowers after due inquiry, there are no claims,
liabilities, investigations, litigation, administrative proceedings, whether
pending or threatened, or judgments or orders relating to any Hazardous
Materials (collectively called "Environmental Claims") asserted, threatened
against or affecting Borrowers or any of their Subsidiaries. No Borrower nor,
to the knowledge of Borrowers after due inquiry, any other Person has caused or
permitted any Hazardous Material to be used, generated, transported, released,
treated, stored or disposed of in a manner that could form the basis for an
Environmental Claim against a Borrower or any of its Subsidiaries. Except as
set forth on Schedule 4.20, no Borrower nor any of its Subsidiaries has assumed
any liability of any Person for cleanup, compliance or required Capital
Expenditures in connection with any Environmental Claim. The items disclosed
pursuant to this subsection 4.20(A) will not have a Material Adverse Effect.
(B) Compliance with Environmental Laws. Except as set forth on
Schedule 4.20, Borrowers and each of their Subsidiaries have been and are
currently in compliance with all applicable Environmental Laws, including,
without limitation, obtaining and maintaining in effect all permits, licenses
or other authorizations required by applicable Environmental Laws, and
Borrowers and each of their Subsidiaries have been and are currently in
compliance with all such permits, licenses and authorizations. The items
disclosed pursuant to this subsection 4.20(B) will not have a Material Adverse
Effect.
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4.21 Employee Matters
(A) Each Borrower and each of its Subsidiaries is in material
compliance with all applicable federal, state and local employment laws and
regulations, including laws and regulations relating to unfair labor practices,
equal employment opportunity and employee safety, wage payment, unemployment
insurance, immigration control, drug testing and worker's compensation, as in
effect in all jurisdictions in which Borrowers or their Subsidiaries are
presently doing business.
(B) Except as set forth on Schedule 4.21, (A) none of the
employees of either Borrower or any of its Subsidiaries is subject to any
collective bargaining agreement, (B) no petition for certification or union
election is pending with respect to the employees of either Borrower and no
union or collective bargaining unit has sought such certification or
recognition with respect to the employees of either Borrower and (C) there are
no strikes, work stoppages, election or decertification petitions or
proceedings, unfair labor practice charges, equal employment opportunity
proceedings, wage payment or material unemployment compensation proceedings,
material workmen's compensation proceeding or other material labor/employee
related controversies pending or, to the best knowledge of Borrowers after due
inquiry, threatened between a Borrower or any of its Subsidiaries and any of
its employees.
4.22 Fair Trade and Other Regulations
(A) Borrowers and their Subsidiaries are in strict compliance with
all applicable federal, state, local and other laws and regulations regulating
the conduct of business with competitors, customers and suppliers, including,
without limitation, all such laws prohibiting the fixing of prices, illegal
boycotts, predatory practices, monopolization, and the unfair conduct of
business.
(B) Neither Borrowers nor any of their Subsidiaries has made any
political contribution for the purpose of maintaining or furthering its
business or any payment, direct or indirect, in the nature of bribes, kickbacks
or similar payments.
4.23 Solvency
As of and from and after the date of this Agreement, each Borrower:
(A) owns and will own assets the fair saleable value of which are (1) greater
than the total amount of liabilities (including contingent liabilities) of such
Borrower, and (2) greater than the amount that will be required to pay the
probable liabilities of such Borrower's then existing debts as they become
absolute and matured considering all financing alternatives and potential asset
sales reasonably available to such Borrower; (B) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (C) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.
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4.24 Disclosure
No representation or warranty of either Borrower contained in this
Agreement, the financial statements referred to in subsection 4.3, the other
Loan Documents or any other document, certificate or written statement
furnished to Lender by or on behalf of any such Person for use in connection
with the Loan Documents 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 in light of the circumstances in
which the same were made. The Projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by such Persons to be reasonable at the time made, it being recognized
by Lender 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 may differ from the projected results. There is no material fact
known to either Borrower that has had or will have a Material Adverse Effect
and that has not been disclosed herein or in such other documents, certificates
and statements furnished to Lender for use in connection with the transactions
contemplated hereby.
4.25 Use of Proceeds and Margin Security
Borrowers shall use the proceeds of all Loans for proper business
purposes consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by Borrowers or any of
their 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 or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act.
4.26 Insurance
Schedule 4.26 sets forth, as of the date hereof, a complete and
accurate description of all policies of insurance that will be in effect as of
the Closing Date for Borrowers and their Subsidiaries. Borrowers and their
Subsidiaries are adequately insured under such policies, no notice of
cancellation has been received with respect to such policies and Borrowers and
each of their Subsidiaries is in compliance with all conditions contained in
such policies.
4.27 Bank and Trust Accounts
Schedule 4.27 sets forth, as of the date hereof, the account numbers
and locations of all bank accounts of each Borrower and each of its
Subsidiaries, including accounts in which Trust Fund assets are maintained.
Neither Borrowers nor any of their Subsidiaries shall appoint any new trustee
for any Trust Fund or shall establish any new trust account for any Trust Fund
without the prior written consent of Lender, provided that such consent shall
not be required if such new account is established with a federally insured
financial institution which is licensed to hold trust funds and which has been
approved by the governmental
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entity in charge of overseeing trust funds in the state where the trust funds
are located and if Borrowers deliver notice thereof to Lender within ten (10)
days of establishing such account.
4.28 Compliance with Laws
Each Borrower and each of its Subsidiaries: (i) is in compliance with
all laws, ordinances, rules, regulations, orders, policies, guidelines and
other requirements of all domestic and foreign governments and all
instrumentalities and agencies thereof, having jurisdiction over the conduct of
its businesses or the ownership of its properties, including, without
limitation, relating to any use, release, storage, transport or disposal of
Hazardous Material, except where noncompliance would not subject either
Borrower, any of its Subsidiaries or any of the officers of either Borrower or
Subsidiary to criminal liability or, singly or in the aggregate, have a
Material Adverse Effect, and no such noncompliance has been alleged, (ii) has
filed in a timely manner all reports, documents and other materials required to
be filed by them with any governmental bureau, agency or instrumentality (and
the information contained in each of such filings is true, correct and complete
in all respects), except where failure to make such filings would not have a
Material Adverse Effect and (iii) has retained all records and documents
required to be retained by them pursuant to any law, ordinance, rule,
regulation, order, policy, guideline or other requirement of any governmental
authority, except where failure to retain such records would not subject either
Borrower, any of its Subsidiaries or any of the officers of either Borrower or
Subsidiary to criminal liability or, singly or in the aggregate, have a
Material Adverse Effect.
4.29 Investments
Except as described on Schedule 4.29, neither Borrower nor any of its
Subsidiaries has any investment in any Person other than investments permitted
under subsection 9.3 and is not engaged in any joint venture or partnership
with any other Person.
4.30 Real Property
Schedule 4.30 sets forth a complete and accurate list of all real
property owned or leased by each Borrower, specifying the owner of all owned
property and the lessee and lessor of all leased property, and a description of
all leases of leased real property. None of the real property that is subject
to any of the Mortgages is property that is dedicated for use as a cemetery.
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SECTION 5
SECURITY INTERESTS
5.1 Grant of Security Interests
In order to secure the payment and performance of the Obligations,
each Borrower hereby grants to Lender a continuing security interest in and to
all of its right, title and interest in the following property, whether now
owned or existing or hereafter acquired or arising and regardless of where
located:
(A) Accounts;
(B) Inventory;
(C) General Intangibles;
(D) Documents;
(E) Instruments;
(F) Equipment;
(G) Fixtures;
(H) All deposit accounts maintained with any bank or
financial institution;
(I) The Depository Account, all cash deposited therein
from time to time and other monies and property in
the possession or under the control of Lender;
(J) All books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and
related data processing software that at any time
evidence or contain information relating to any of
the property described in clauses (A) through (I)
above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and
(K) Proceeds of all or any of the property described in
clauses (A) through (J) above.
Notwithstanding the foregoing, the Collateral does not include, and Borrowers
do not grant a security interest to Lender in, any property of Borrowers in
which Cemetery Laws prohibit Lender from obtaining a security interest or other
Lien. Notwithstanding the foregoing, any Collateral that consists of real
property or any interest therein shall secure only the Borrowers' obligations
under the Term Loan and interest, fees and other charges thereon.
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5.2 Borrowers Remain Liable
Anything herein to the contrary notwithstanding: (a) each Borrower
shall remain liable under its contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed; (b) the exercise by Lender of any of the rights hereunder shall not
release either Borrower from any of its duties or obligations under the
contracts and agreements included in the Collateral; and (c) Lender shall not
have any obligation or liability under the contracts and agreements included in
the Collateral by reason of this Agreement, nor shall Lender be obligated to
perform any of the obligations or duties of either Borrower thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.
5.3 Further Assurances
(A) Other Documents and Actions. Borrowers shall, from time to
time, at their expense, promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or desirable or
that Lender may request in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Lender to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Borrowers shall: (a) execute
and file such financing or continuation statements or amendments thereto and
such other instruments or notices as may be necessary or desirable or as Lender
may request in order to perfect and preserve the Security Interests; (b) at any
reasonable time, upon demand by Lender, exhibit the Collateral to allow
inspection of the Collateral by Lender or persons designated by Lender and to
examine and make copies of the records of Borrowers related thereto and to
discuss the Collateral and the records of Borrowers with respect thereto with
and to be advised as to the same by Borrowers' officers and employees and in
the case of Accounts, Documents, General Intangibles and Instruments, with any
Person obligated thereon; and (c) upon Lender's request, appear in and defend
any action or proceeding that may affect either Borrower's title to or Lender's
security interest in the Collateral.
(B) Lender Authorized. Borrowers hereby authorize Lender to file
one or more financing or continuation statements and amendments thereto
relating to all or any part of the Collateral without the signature of
Borrowers.
SECTION 6
COLLATERAL COVENANTS
Borrowers jointly and severally covenant and agree that, so long as
any of the Commitments hereunder shall be in effect and until payment in full
of all Obligations, unless Lender shall otherwise give its prior written
consent, Borrowers shall perform or cause to be performed, and shall cause each
of their Subsidiaries to perform, all covenants in this Section 6 applicable to
such Persons.
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6.1 Bank Accounts; Collection of Accounts and Payments
(A) After the occurrence of an Event of Default, immediately upon
demand by Lender (provided that such Event of Default shall not have been cured
or waived prior to such demand), Lender and Borrowers shall enter into a bank
agency agreement ("Bank Agency Agreement") approved in form and substance by
Lender with each financial institution acceptable to Lender with which either
Borrower maintains from time to time any deposit accounts (general or special).
Pursuant to the Bank Agency Agreements, each Borrower shall grant to the Lender
a continuing lien upon, and security interest in, all such accounts and all
funds at any time paid, deposited, credited or held in such accounts (whether
for collection, provisionally or otherwise) or otherwise in the possession of
such financial institutions, and each such financial institution shall act as
Lender's agent in connection therewith.
(B) After the occurrence of an Event of Default, immediately upon
demand by Lender (provided that such Event of Default shall not have been cured
or waived prior to such demand), Borrowers shall establish a lock box (a "Lock
Box") with Lender (or assign its existing Lock Box to Lender) or blocked
accounts (collectively, "Blocked Accounts") in Borrowers' name with such banks
as are acceptable to Lender ("Collecting Banks"), subject to irrevocable
instructions approved in form and substance by Lender. The obligors on all
Accounts of Borrowers shall directly remit all payments on Accounts to such
Lock Box or Blocked Account and, if remitted to a Blocked Account, Borrowers
shall immediately deposit all cash payments made for Inventory or other cash
payments constituting proceeds of Collateral in the identical form in which
such payment was made, whether by cash or check. In addition, Lender may
establish one or more depository accounts at each Collecting Bank or at a
centrally located bank (collectively, the "Depository Account"). All amounts
held or deposited in the Blocked Accounts held by such Collecting Bank shall be
transferred to the Depository Account. All payments received by Lender,
whether by cash, check, wire transfer or any other instrument, made to such
Lock Box or Blocked Accounts or otherwise received by Lender and whether on the
Accounts or as proceeds of other Collateral or otherwise will be the sole and
exclusive property of Lender. Borrowers, and any of their Affiliates,
employees, agents or other Persons acting for or in concert with Borrowers,
shall, acting as trustee for Lender, receive, as the sole and exclusive
property of Lender, any monies, checks, notes, drafts or any other payments
relating to and/or proceeds of Accounts or other Collateral that come into the
possession or under the control of Borrowers or any Affiliates, employees,
agents or other Persons acting for or in concert with Borrowers, and
immediately upon receipt thereof, Borrowers or such Persons shall deposit the
same or cause the same to be deposited, in kind, in a Lock Box or Blocked
Account of Borrowers. Notwithstanding the foregoing, any amounts contained in
Lender's Depository Account or the Blocked Accounts or otherwise received by
Lender in excess of the Obligations then due and payable shall be the property
of Borrowers and shall promptly be paid over to Borrowers. The rights of Lender
under this subsection in the proceeds of Borrowers' Accounts shall be subject
to any obligation imposed by Cemetery Laws with respect to deposit of such
proceeds into Trust Funds.
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6.2 Corporate or Name Change
Borrowers shall notify Lender promptly in writing at least 30 days
prior to (a) any change in a Borrower's name and (b) a Borrower's commencing
the use of any trade name, assumed name or fictitious name.
6.3 Business Locations
Borrowers shall keep the Collateral owned by Borrowers or their
Subsidiaries at the locations specified on Schedule 4.13. Borrowers shall give
Lender thirty (30) days prior written notice of any change in the chief place
of business of a Borrower or any of its Subsidiaries or of any new location of
business or any new location for any of the Collateral. With respect to any
new location (which in any event shall be within the continental United
States), Borrowers shall and shall cause each of its Subsidiaries to execute
such documents and take such actions as Lender deems necessary to perfect and
protect the Security Interests.
6.4 Instruments
At Lender's request, after the occurrence and during the continuance
of an Event of Default, subject to any limitations imposed by Cemetery Laws,
Borrowers shall deliver and pledge to Lender all Instruments duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Lender. Upon Lender's request, Borrowers shall
mark conspicuously all chattel paper with a legend, in form and substance
reasonably satisfactory to Lender, indicating that such chattel paper is
subject to the Security Interests.
6.5 Account Covenants
Except as otherwise provided in this subsection 6.5, Borrowers shall
continue to collect, at their own expense, all amounts due or to become due
Borrowers under their Accounts. In connection with such collections, Borrowers
may take (and, at Lender's direction, shall take) such action as Borrowers or
Lender may deem necessary or advisable to enforce collection of such Accounts;
provided that Lender shall have the right at any time after the occurrence and
during the continuance of a Default or an Event of Default to: (A) notify the
customers or obligors under the Accounts of Borrowers of the assignment of such
Accounts to Lender and to direct such customers or obligors to make payment of
all amounts due or to become due directly to Lender; (B) enforce collection of
any such Accounts; and (C) adjust, settle or compromise the amount or payment
of such Accounts. After the occurrence and during the continuance of a Default
or an Event of Default, (i) all amounts and proceeds (including Instruments)
received by Borrowers with respect to any Accounts shall be received in trust
for the benefit of Lender, shall be segregated from other funds of Borrowers
and shall be forthwith paid over to Lender in the same form as so received
(with any necessary endorsement) to be held in the Depository Account pursuant
to subsection 6.1(B) and (ii) Borrowers shall not adjust, settle or compromise
the amount
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or payment of any Account, or release wholly or partly any customer or obligor
thereof, or allow any credit or discount thereon without the prior consent of
Lender. The rights of Lender under this subsection in the proceeds of
Borrowers' Accounts shall be subject to any obligation imposed by Cemetery Laws
with respect to deposit of such proceeds into Trust Funds.
6.6 Equipment Covenants
Each Borrower shall cause its Equipment to be maintained and preserved
in the same condition, repair and working order as when new, ordinary wear and
tear excepted, and shall promptly make or cause to be made all repairs,
replacements, and other improvements in connection therewith that are necessary
or desirable to such end. Each Borrower shall promptly inform Lender of any
material additions to or deletions from its Equipment and shall not permit any
items of its Equipment to become fixtures to real estate other than such
Borrower's Mortgaged Property.
6.7 Insurance
(A) Borrowers shall maintain insurance with respect to the
Collateral in accordance with the terms hereof. Borrowers shall maintain or
cause to be maintained, with financially sound and reputable insurers, public
liability and property damage insurance with respect to their business and
properties and the business and properties of their Subsidiaries against loss
or damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in an amount
acceptable to Lender. Borrowers shall maintain at least six (6) months of
business interruption insurance in an amount not less than $1,000,000.
Borrowers shall cause Lender to be named as loss payee (in the case of casualty
insurance) and additional insured (in all other cases) on all insurance
policies pursuant to appropriate endorsements in form and substance
satisfactory to Lender and further cause any insurers under such policies to
acknowledge that such policies shall not be amended, cancelled or terminated
without at least thirty (30) days prior written notice to Lender. Borrowers
shall be named the beneficiary of each keyman life insurance policy maintained
by Borrowers on the life of any employee of Borrowers.
(B) Borrowers hereby direct all insurers under such policies of
insurance with respect to its assets to pay all proceeds of such insurance
policies to Lender provided that so long as no Default shall have occurred and
be continuing, all proceeds of such insurance in amounts less than $100,000 per
occurrence shall be delivered to Borrowers. With respect to occurrences giving
rise to insurance proceeds in excess of $100,000 but less than $250,000, Lender
shall release such proceeds to Borrowers when and as necessary to pay for the
repair, replacement or reconstruction of the assets subject to such casualty,
provided that:
(1) at the time of any requested release of funds no
Default or Event of Default shall have occurred and be continuing;
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(2) the repair, replacement or reconstruction of such
assets shall be reasonably anticipated to be completed prior to the Termination
Date; and
(3) each release of funds shall be conditioned upon
receipt by Lender of architect's certificates, completion certificates, waivers
of mechanic's liens, or such other documentation as Lender may reasonably
request.
With respect to occurrences giving rise to insurance proceeds in
excess of $250,000, all proceeds may, at the direction of Lender, either be
applied by Lender to the prepayment of the Obligations or may be released to
Borrowers when and as necessary to pay for the repair, replacement or
reconstruction of the assets subject to such casualty as provided for in the
preceding paragraph.
6.8 Collateral Description
Borrowers shall furnish to Lender, from time to time, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Lender may reasonably request, all
in reasonable detail.
6.9 Use of Collateral
Borrowers shall not use or permit any Collateral to be used unlawfully
or in violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering any of the
Collateral.
6.10 Records of Collateral
Borrowers shall keep full and accurate books and records relating to
the Collateral and shall stamp or otherwise mark such books and records in such
manner as Lender may reasonably request indicating that the Collateral is
subject to the Security Interests.
6.11 Other Information
Borrowers shall, promptly upon request, provide to Lender all
information and evidence it may reasonably request concerning the Collateral,
and in particular the Accounts, to enable Lender to enforce the provisions of
this Agreement.
6.12 Lender Appointed Attorney-in-Fact
Each Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, with full authority in the place and stead of such Borrower
and in the name of such Borrower, Lender or otherwise, from time to time after
the occurrence and during the continuation of an Event of Default in Lender's
discretion to take any action and to execute any instrument that Lender may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
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(A) subject to subsection 6.7, to obtain and adjust insurance
required to be paid to Lender;
(B) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for monies due and to become due under or in
respect of any of the Collateral;
(C) subject to subsections 6.1 and 6.5, to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper;
(D) to file any claims or take any action or institute any
proceedings that Lender may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Lender with respect
to any of the Collateral;
(E) to pay or discharge taxes or Liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Lender in its sole
discretion, and such payments made by Lender to become joint and several
Obligations of Borrowers to Lender, due and payable immediately without demand
and secured by the Security Interests; and
(F) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Lender were the absolute owner thereof for all purposes, and to do,
at Lender's option and Borrowers' expense, at any time or from time to time,
all acts and things that Lender reasonably deems necessary to protect, preserve
or realize upon the Collateral.
Neither Lender nor any person designated by Lender shall be liable for any acts
or omissions or for any error of judgment or mistake of fact or law other than
as a result of Lender's or such person's gross negligence or wilful misconduct.
This power, being coupled with an interest, is irrevocable so long as this
Agreement shall remain in force and thereafter, until payment in full of all
Obligations and termination of the Commitment.
SECTION 7
AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations,
unless Lender shall otherwise give its prior written consent, Borrowers shall
perform, and shall cause each of their Subsidiaries to perform, all covenants
in this Section 7 applicable to such Persons.
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7.1 Financial Statements and Other Reports
Each Borrower shall 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 applied on a basis consistent with that applied in the
preparation of the financial statements delivered pursuant to subsection
7.1(B). Borrowers shall deliver to Lender the financial statements and other
reports described below.
(A) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month (or within forty-five (45)
days after the end of a month that is the last month of a fiscal quarter of
Borrowers), MHI shall deliver to Lender (1) its consolidated, with
eliminations, and consolidating balance sheet as at the end of such month and
(a) the related consolidated and consolidating statement of income for such
month and for the period from the beginning of the then current fiscal year to
the end of such month and (b) in the case of a month that is the last month of
a fiscal quarter of Borrowers, statements of cash flows and stockholders'
equity for such quarter and for the period from the beginning of the then
current fiscal year to the end of such quarter (all such consolidating
financial statements to be on a division by division and Subsidiary by
Subsidiary basis), in each case together with comparative financial statements
with respect to (i) the same period during the immediately preceding Fiscal
Year, and (ii) the Projections for such period, (2) a schedule of the
outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and
the principal amount and amount of accrued and unpaid interest with respect to
each such debt issue or loan and (3) an Availability Certificate as of such
month-end.
(B) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, MHI shall deliver to
Lender: (1) its consolidated balance sheet as at the end of such year and the
related consolidated statements of income, stockholders' equity and cash flow
for such fiscal year, together with comparative financial statements with
respect to (a) the same period in the immediately preceding Fiscal Year and (b)
the Projections for such period; (2) a schedule of the outstanding Indebtedness
for borrowed money of Borrowers and their Subsidiaries describing in reasonable
detail each such debt issue or loan outstanding and the principal amount and
amount of accrued and unpaid interest with respect to each such debt issue or
loan; (3) a report with respect to the financial statements from a firm of
independent certified public accountants of recognized national standing
selected by Borrowers, which report shall be unqualified as to going concern
and scope of audit and shall state (a) that such consolidated financial
statements present fairly the consolidated financial position of MHI and its
Subsidiaries in accordance with GAAP as at the dates indicated and the results
of their operations and cash flow for the periods indicated in conformity with
GAAP, (b) the extent to which, if at all, the methods of accounting used in the
preparation of such financial statements are not consistent with prior practice
and (c) that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with generally
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accepted auditing standards; and (4) copies of the consolidating financial
statements of MHI and its Subsidiaries (on a division by division and
Subsidiary by Subsidiary basis), including (a) consolidating balance sheets of
MHI and its Subsidiaries as at the end of such Fiscal Year showing intercompany
eliminations, (b) related consolidating statements of income of MHI and its
Subsidiaries showing intercompany eliminations and (c) related statements of
cash flow.
(C) Officer Certificate. Together with each delivery of financial
statements pursuant to clauses (A) and (B) above, Borrowers shall deliver to
Lender a Compliance Certificate of MHI's chief executive officer or chief
financial officer stating that: (1) such statements fairly present the
financial condition of MHI and its Subsidiaries in accordance with GAAP
(applied on a basis consistent with that applied in the preparation of the
financial statements delivered pursuant to subsection 7.1(B)) as of the dates
indicated; (2) (a) he has reviewed the terms of this Agreement and the Notes
and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrowers and their
Subsidiaries during the accounting period covered by such financial statements
and (b) such review has not disclosed the existence during or at the end of
such accounting period, and that he does not have knowledge of the existence as
at the date thereof, of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrowers
have taken, are taking and propose to take with respect thereto; and (3)
Borrowers are in compliance with the covenants contained in Section 6, Section
7 and Section 9, and Borrowers are in compliance with the covenants contained
in Section 8, demonstrating the same in reasonable detail, provided that
demonstration of compliance with the covenants set forth in Section 8 shall be
made only in connection with the delivery of the annual financial statements
pursuant to clause (B) above and in connection with the delivery of the monthly
financial statements pursuant to clause (A) above for a month that is the last
month of a fiscal quarter of Borrowers.
(D) Accountants' Certification. Together with each delivery of
consolidated financial statements pursuant to subsection 7.1(B), Borrowers
shall deliver to Lender a report from its independent certified public
accountants on compliance with the terms of this Agreement. Such report shall
be prepared in accordance with generally accepted auditing standards and shall
state that the independent auditor has audited Borrowers' financial statements
in accordance with generally accepted auditing standards. The report shall
include a reference to the specific applicable covenants of this Agreement
(including, without limitation, the covenants set forth in Section 8) and
provide negative assurance relative to compliance with the applicable covenants
of this Agreement (including, without limitation, the covenants set forth in
Section 8) insofar as they relate to accounting matters and shall specify that
the negative assurance is being given in connection with the audit of the
financial statements. If any condition or event that constitutes a Default or
an Event of Default has come to the attention of the independent auditor the
report shall specify the nature and period of existence of such event.
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(E) Accountants' Reports. Promptly upon receipt thereof,
Borrowers shall deliver copies of all significant reports submitted to
Borrowers by independent public accountants in connection with each annual,
interim or special audit of the financial statements of Borrowers made by such
accountants, including, without limitation, the comment letter submitted by
such accountants to management in connection with their annual audit.
(F) Management Report. Together with each delivery of financial
statements pursuant to clause (B) of this subsection 7.1 and together with each
delivery of financial statements pursuant to clause (A) of this subsection 7.1
for the last month of a fiscal quarter of Borrowers, Borrowers shall deliver to
Lender a management report: (1) describing the operations and financial
condition of Borrowers and their Subsidiaries for the quarter then ended and
the portion of the current fiscal year then elapsed (or for the fiscal year
then ended in the case of year-end financials); (2) setting forth in
comparative form the corresponding figures for the corresponding periods of the
previous Fiscal Year and the corresponding figures from the most recent
Projections for the current fiscal year delivered to Lender pursuant to
subsection 7.1(J); and (3) discussing the reasons for any significant
variations. The information above shall be presented in reasonable detail and
shall be certified by the chief financial officer of MHI to the effect that
such information fairly presents the results of operations and financial
condition of Borrowers and their Subsidiaries as at the dates and for the
periods indicated.
(G) Trustee Transmittal Letter. Borrowers shall deliver to Lender
a copy of each Transmittal Letter that is delivered to the trustee of any Trust
Fund promptly after such Transmittal Letter is delivered to such trustee. At
Lender's request, each such Transmittal Letter shall be accompanied by a
detailed report setting forth the payments received by Borrowers from each
pre-need contract of Borrowers and the amount required by Borrowers to be paid
to such Trust Fund.
(H) Funds Audit Reports. Promptly upon Borrowers' receipt
thereof, a copy of each report of any audit of the Trust Funds by either a
state or federal governmental agency or by Borrowers' independent accountants.
(I) Appraisals. From time to time, upon the request of Lender,
Borrowers shall obtain and deliver to Lender appraisal reports in form and
substance and from appraisers reasonably satisfactory to Lender, stating the
then current fair market and orderly liquidation values of (1) all or any
portion of the Equipment and real estate owned by each Borrower or any of its
Subsidiaries and (2) the then current business value of Borrowers and its
Subsidiaries. Notwithstanding the foregoing, Lender shall not request an
appraisal of any item of real estate more often than one time every three
years, except that Lender may reasonably request such appraisals at any time
after the occurrence and during the continuation of an Event of Default. All
appraisals shall be at the expense of Borrowers.
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(J) Projections. As soon as available and in any event no later
than the last day of each Fiscal Year, Borrowers shall deliver to Lender
Projections of Borrowers and their Subsidiaries for the forthcoming three (3)
Fiscal Years, year by year, and for the forthcoming Fiscal Year, quarter by
quarter.
(K) SEC Filings and Press Releases. Promptly upon their becoming
available, MHI shall deliver to Lender copies of: (1) all financial statements,
reports, notices and proxy statements sent or made available by MHI or any of
its Subsidiaries to its security holders; (2) all regular and periodic reports
and all registration statements and prospectuses, if any, filed by MHI or any
of its Subsidiaries with any securities exchange, the National Association of
Securities Dealers or with the Securities and Exchange Commission or any other
governmental or private regulatory authority; and (3) all press releases and
other statements made available by MHI or any of its Subsidiaries to the public
concerning developments in the business of any such Person.
(L) Indebtedness and Capital Stock Notices. Borrowers shall
promptly deliver to Lender copies of all material notices given or received by
Borrowers with respect to any Indebtedness or MHI Capital Stock and shall
notify Lender within two (2) days of Borrowers' obtaining knowledge of any
potential or actual event of default with respect to Indebtedness or of any
event that with the giving of notice or passage of time or both would be a
default or event of default with respect to Indebtedness.
(M) Events of Default, etc. Promptly upon any officer of either
Borrower obtaining knowledge of any of the following events or conditions,
Borrowers shall deliver to Lender a certificate of MHI's chief executive
officer or chief financial officer specifying the nature and period of
existence of such condition or event and what action Borrowers have taken, are
taking and propose to take with respect thereto: (1) any condition or event
that constitutes an Event of Default or Default; (2) any notice that any Person
has given to either Borrower or any of its Subsidiaries, or any other action
taken, with respect to a claimed default or event or condition of the type
referred to in subsection 10.1(B); or (3) any Material Adverse Effect.
(N) Litigation. Promptly upon any officer of either Borrower
obtaining knowledge of (1) the institution of any material claim, demand, suit,
proceeding, petition, governmental investigation or arbitration against or
affecting either Borrower or any property of either Borrower not previously
disclosed by Borrowers to Lender, or (2) any material development in any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation, letter of violation, arbitration, judgment, award, order,
decree, consent, conciliation agreement or settlement agreement at any time
pending against or affecting either Borrower or any property of either
Borrower, Borrowers shall promptly give notice thereof to Lender and provide
such other information as may be reasonably available to them to enable Lender
and its counsel to evaluate such matter.
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(O) Employee Benefit Plans. With reasonable promptness, and in
any event within thirty (30) days, Borrowers will give notice of and/or deliver
to Lender copies of: (1) the establishment of any new Employee Benefit Plan,
the commencement of contributions to any plan to which Borrowers or any of
their Subsidiaries was not previously contributing or any increase in the
benefits of any existing Employee Benefit Plan; (2) each funding waiver request
filed with respect to any Employee Benefit Plan and all communications received
or sent by Borrowers or any of their Subsidiaries with respect to such request;
and (3) the failure of Borrowers or any of their Subsidiaries to make a
required installment or payment under section 302 of ERISA or section 412 of
the IRC by the due date.
(P) Termination Events. Promptly and in any event within ten (10)
days of becoming aware of the occurrence of or forthcoming occurrence of any
(1) Termination Event or (2) "prohibited transaction," as such term is defined
in section 406 of ERISA or section 4975 of the IRC, in connection with any
Pension Plan or any trust created thereunder, Borrowers will deliver to Lender
a notice specifying the nature thereof, what action Borrowers have taken, are
taking or propose 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.
(Q) ERISA Notices. With reasonable promptness but in any event
within ten (10) days after the receipt thereof, Borrowers will deliver to
Lender copies of: (1) any favorable or unfavorable determination letter from
the Internal Revenue Service regarding the qualification of an Employee Benefit
Plan under section 401(a) of the IRC and (2) all notices received by a Borrower
or any of its Subsidiaries of the PBGC's intent to terminate any Employee
Benefit Plan or to have a trustee appointed to administer any Employee Benefit
Plan.
(R) Insurance. Within the sixty (60) day period prior to the end
of each Fiscal Year, Borrowers shall deliver to Lender a report in form and
substance reasonably satisfactory to Lender outlining all material insurance
coverage maintained as of the date of such report by each Borrower and each of
its Subsidiaries and all material insurance coverage planned to be maintained
by such Persons in the subsequent Fiscal Year.
(S) Trust Fund's Noncompliance with Laws. Promptly upon
Borrowers' or any of their Subsidiaries' obtaining knowledge thereof, Borrowers
shall deliver to Lender notice of any material noncompliance by any Trust Fund
with any law, ordinance, rule, regulation, order, policy, guideline and other
legal requirements applicable to such Trust Fund, including /a description of
such noncompliance and the steps, if any, that Borrowers have taken, are taking
or propose to take in respect of such noncompliance.
(T) Supplemental Schedules. Borrowers shall supplement in writing
and deliver to Lender revisions of the Schedules annexed to this Agreement to
the extent necessary to disclose new or changed facts or circumstances after
the Closing Date; provided that subsequent disclosures shall not constitute a
cure or waiver of any Default or Event of Default resulting from any material
matters disclosed unless Lender shall have failed to
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object to such disclosure within thirty (30) days after its receipt thereof,
and in the case that Lender shall have failed to so object, such revision shall
be deemed to be an amendment to the Schedules attached to this Agreement as of
the date of such delivery to Lender.
(U) Other Information. With reasonable promptness, Borrowers
shall deliver such other information and data with respect to Borrowers or any
of their Subsidiaries as from time to time may be reasonably requested by
Lender.
7.2 Access to Accountants
Borrowers authorize Lender to discuss the financial condition of
Borrowers and of their Subsidiaries with such independent public accountants
upon reasonable notice to Borrowers of its intention to do so. Borrowers shall
be given the reasonable opportunity to participate in any such discussion.
Borrowers shall deliver a letter to such accountants authorizing them to comply
with the provisions of this subsection 7.2.
7.3 Corporate Existence, etc.
Except as otherwise permitted by subsection 9.6, each Borrower shall
and shall cause each of its Subsidiaries to at all times preserve and keep in
full force and effect its corporate existence and all rights and franchises
material to its business.
7.4 Payment of Taxes and Claims; Tax Consolidation
Borrowers shall and shall cause each of their Subsidiaries to pay (A)
all taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon and (B) all claims
(including, without limitation, 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 before any penalty or fine
is incurred with respect thereto; provided that no such tax, charge or claim
need be paid if a Borrower or Subsidiary is contesting same in good faith by
appropriate proceedings promptly instituted and diligently conducted and if a
Borrower or Subsidiary, as appropriate, has established such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP.
Borrowers shall not and shall not permit any of their Subsidiaries to
file or consent to the filing of any consolidated income tax return with any
Person (other than with Borrowers and their Consolidated Subsidiaries).
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7.5 Maintenance of Properties
Each Borrower shall maintain or cause to be maintained in good repair,
working order and condition all material properties used in the business of
such Borrower or its Subsidiaries and shall make or cause to be made all
appropriate repairs, renewals and replacements thereof.
7.6 Inspection; Lender Meeting
Each Borrower shall permit any authorized representatives designated
by Lender to visit and inspect any of the properties of such Borrower or of any
of its Subsidiaries, including its and their financial and accounting records,
and to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and business with its and their officers and independent
public accountants, at such reasonable times during normal business hours.
Without in any way limiting the foregoing, each Borrower shall participate in a
meeting of Lender once during each Fiscal Year to be held at Borrower's
corporate offices at such time as may be agreed to by Borrower and Lender.
7.7 Compliance with ERISA
Each Borrower and each of its Subsidiaries shall establish, maintain
and operate all Employee Benefit Plans to comply in all material respects with
the terms of each Employee Benefit Pan and the provisions of ERISA, the IRC and
all other applicable laws, and the regulations and interpretations thereof.
7.8 Environmental Compliance
(A) Environmental Laws. Borrowers shall and shall cause each of
their Subsidiaries at all times to comply with all applicable Environmental
Laws, except for instances of noncompliance that, singly or in the aggregate,
would not have a Material Adverse Effect.
(B) Indemnification. Borrowers shall and do jointly and severally
indemnify, pay and hold Lender harmless from and against any and all losses,
costs (including, without limitation, cleanup costs, court costs, and
attorneys' fees), liabilities, injuries, expenses, claims and damages
whatsoever incurred or suffered by or asserted against Lender by reason of any
violation of any applicable Environmental Law for which either Borrower or any
of its Subsidiaries is liable or which is related to any real property owned,
leased or operated by either Borrower or any of its Subsidiaries, or by reason
of the imposition of any governmental lien for the recovery of environmental
cleanup or response costs expended by reason of any such violation, or by
reason of any breach of any representation, warranty or affirmative or negative
covenant, including, without limitation, by reason of any matter disclosed in
Schedule 4.20; and the provisions of and undertakings and indemnification set
out in this sentence shall survive the termination of this Agreement and the
payment and satisfaction of the obligations, and shall continue to be the
liability, obligation and indemnification of each Borrower binding upon each
Borrower.
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(C) Remedial Action. Each Borrower shall, and shall cause its
Subsidiaries to, promptly take any and all necessary remedial actions in
response to the presence, storage, use, disposal, transportation or discharge
of any Hazardous Materials on, under or about any real property owned, leased
or operated by such Borrower or Subsidiary. In the event either Borrower or
any of its Subsidiaries undertakes any remedial action with respect to any
Hazardous Material on, under or about any real property owned, leased or
operated by such Borrower or Subsidiary, Borrowers shall conduct and complete
such remedial action in compliance with all applicable Environmental Laws, and
in accordance with the policies, orders and directives of all federal, state
and local governmental authorities except when the liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Material
is being contested in good faith by Borrowers and appropriate reserves therefor
have been established in accordance with GAAP.
(D) Further Assurance. If Lender at any time has a reasonable
basis to believe that there may be a material violation of any Environmental
Law by a Borrower or any of its Subsidiaries or related to any real property
owned, leased or operated by a Borrower or any of its Subsidiaries or real
property adjacent to such real property, then Borrowers agree, upon request
from Lender, to provide Lender, at Borrowers' expense, with such reports,
certificates, engineering studies or other written material or data as Lender
may require so as to satisfy Lender that such Borrower or Subsidiary is in
compliance with all applicable Environmental Laws.
7.9 Environmental Disclosure
(A) Borrowers shall promptly advise Lender in writing and in
reasonable detail of: (1) any discharge by Borrowers or any of their
Subsidiaries of any Hazardous Material required to be reported to any federal,
state, local or other governmental or regulatory agency under all applicable
Environmental Laws; (2) any and all written communications sent or received by
Borrowers or any of their Subsidiaries with respect to any Environmental Claims
or any discharge of Hazardous Material required to be reported to any federal,
state, local or other governmental or regulatory agency; (3) any remedial
action taken by Borrowers, any of their Subsidiaries or any other Person in
response to any Hazardous Material on, under or about any real property owned,
leased or operated by Borrowers or any of their Subsidiaries, the existence of
which could result in an Environmental Claim that could have a Material Adverse
Effect; (4) the discovery by Borrowers or any of their Subsidiaries of any
occurrence or condition on any real property adjoining or in the vicinity of
any real property owned, leased or operated by Borrowers or any of their
Subsidiaries that could cause such real property or any part thereof to be
classified as "border-zone property" or to be otherwise subject to any
restrictions on the ownership, occupancy, transferability or use thereof under
any Environmental Laws; and (5) any request for information from any
governmental agency that indicates such agency is investigating whether
Borrowers or any of their Subsidiaries may be potentially responsible for a
release, disposal or discharge of Hazardous Materials.
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(B) Borrowers shall, and shall cause each of their Subsidiaries
to, promptly notify Lender of (1) any proposed acquisition of stock, assets, or
property by Borrowers or any of their Subsidiaries that could reasonably be
expected to expose Borrowers or any of their Subsidiaries to, or result in,
Environmental Claims that could have a Material Adverse Effect and (2) any
proposed action to be taken by Borrowers or any of their Subsidiaries to
commence any operations that could reasonably be expected to subject Borrowers
or any of their Subsidiaries to additional laws, rules or regulations,
including laws, rules and regulations requiring additional or amended
environmental permits or licenses. Borrowers shall, and shall cause each of
their Subsidiaries to, at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this subsection 7.9.
7.10 Compliance with Laws, etc.
Borrowers shall comply with and shall cause each of their Subsidiaries
to comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority as now in effect and that may be imposed
in the future in all jurisdictions in which Borrowers or any of their
Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
7.11 Mortgages; Title Insurance; Surveys
(A) Title Insurance. At the time of delivery of any Mortgage with
respect to Additional Mortgaged Property, Borrowers shall deliver or cause to
be delivered to Lender a Mortgage Policy assuring Lender that such Mortgage
creates a valid and enforceable first priority mortgage liens on such
Additional Mortgaged Property, free and clear of all defects and encumbrances
except Permitted Encumbrances. All Mortgage Policies shall be in form and
substance reasonably satisfactory to Lender and shall include an endorsement
insuring against the effect of future advances under this Agreement, for
mechanics' liens and for any other matter that Lender may reasonably request,
and shall provide for affirmative insurance and such reinsurance as Lender may
reasonably request. In the case of each leasehold constituting Additional
Mortgaged Property, Lender shall have received such estoppel letters, consents
and waivers from the landlords and non-disturbance agreements from any holders
of mortgages or deeds of trust on such real estate as may have been requested
by Lender, which documents shall be in form and substance satisfactory to
Lender.
(B) Additional Mortgaged Property. Lender may from time to time
designate real property or leasehold interests of either Borrower or any
Subsidiary of either Borrower after the date hereof as "Additional Mortgaged
Property," in which case Borrowers shall as promptly as possible (and in any
event within sixty (60) days after such designation) deliver to Lender a fully
executed Mortgage, in form and substance satisfactory to Lender together with
title insurance policies and surveys as required by this subsection 7.11(B);
provided, however, that Additional Mortgaged Property shall not include any
real property or leasehold interest of Borrowers in which Lender is prohibited
under Cemetery Laws from
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obtaining a Lien. Borrowers agree that, following the taking of the actions
with respect to any Additional Mortgaged Property required by the immediately
preceding sentence, Lender shall have a valid and enforceable first priority
mortgage on the respective Additional Mortgaged Property, free and clear of all
defects and encumbrances except for Permitted Encumbrances.
(C) Surveys. At the time of delivery of any Mortgage with respect
to Additional Mortgaged Property, Borrowers shall deliver or cause to be
delivered to Lender current surveys, certified by a licensed surveyor, for such
Additional Mortgaged Property. All such surveys shall be sufficient to allow
the issuer of the Mortgage Policy therefor to issue an ALTA lender's policy
without exception for matters that would be disclosed by an accurate survey.
(D) Expenses. All actions to be taken pursuant to this subsection
7.11 shall be at the sole expense of Borrowers.
7.12 Further Assurances
(A) Borrowers shall from time to time execute such financing
statements, documents, security agreements and reports as Lender at any time
may reasonably request to evidence, perfect or otherwise implement the security
for repayment of the Obligations provided for in the Loan Documents.
(B) At Lender's request from time to time, Borrowers shall cause
each Subsidiary created or acquired by either Borrower after the Closing Date
promptly to guaranty the Obligations and to grant to Lender a security interest
in the real, personal and mixed property of such Subsidiary to secure the
Obligations. The documentation for such guaranty or security shall be
substantially similar to the Loan Documents with such modifications reasonably
requested by Lender.
7.13 Interest Rate Protection
Upon Lender's request, Borrowers shall enter into an Interest Rate
Agreement reasonably satisfactory to Lender with respect to not less than
$10,000,000 of the principal amount of the Term Loan.
7.14 Management
Borrowers shall at all times employ appropriately qualified and
competent senior management.
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7.15 Acquisition Information
(A) Excess Acquisitions. In connection with each proposed Excess
Acquisition, Borrower shall deliver to Lender the following:
(1) not less than 15 Business Days prior to the
Acquisition, such information regarding the Target as Lender shall
reasonably request, including, without limitation, information
evidencing the satisfaction of the General Criteria and a complete due
diligence package (including, without limitation, the documents,
agreements and instruments identified on Exhibit H);
(2) as and when available, copies of all Acquisition
Documents to be executed or delivered in connection with such
Acquisition in preliminary and final form; and
(3) from time to time as requested by Lender, such
documents and instruments as Lender shall reasonably request to grant
to Lender a first priority Lien on all assets and stock (in the case
of an Acquisition of stock) of the Target, subject only to Permitted
Liens and such other Liens to which Lender shall consent in writing.
(B) Non-Excess Acquisitions. In connection with each Acquisition
that is not an Excess Acquisition, Borrower shall deliver to Lender the
following:
(1) prior to 15 Business Days following the date of such
Acquisition, the documents, agreements and instruments identified in
items 2, 4, 5, 7, 8(a-d) and 9 on Exhibit H and such other information
as Lender shall reasonably request regarding the Target's financial
performance, business operations and assets;
(2) as and when available, copies of all final
Acquisition Documents executed or delivered in connection with such
Acquisition; and
(3) from time to time as requested by Lender, such
documents and instruments as Lender shall reasonably request to grant
to Lender a first priority Lien on all assets and stock (in the case
of an Acquisition of stock) of the Target, subject only to Permitted
Liens and such other Liens to which Lender shall consent in writing.
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SECTION 8
FINANCIAL COVENANTS
Borrowers covenant and agree that so long as any of the Commitments
remain in effect and until payment in full of all Obligations, unless Lender
shall otherwise give its prior written consent, Borrowers shall comply with and
shall cause each of its Subsidiaries to comply with all covenants in this
Section 8 applicable to such Persons.
8.1 Capital Expenditure Limits
The aggregate amount of all Capital Expenditures of Borrowers and
their Subsidiaries shall not exceed $1,000,000 during any Fiscal Year.
8.2 Lease Limitations
Borrowers' and their Subsidiaries' expenditures, on a consolidated
basis, whether for rental payments, principal payments, interest payments,
service charges or otherwise, under all capitalized leases, operating leases,
lease-purchase agreements, conditional sales contracts, purchase money security
arrangements and other similar agreements shall not exceed $400,000 during any
Fiscal Year.
8.3 Interest Expense Coverage
At each fiscal quarter-end, Borrowers' Interest Expense Coverage, on a
consolidated basis, for the Trailing Twelve-Month Period, shall be not less
than 2.75 at any fiscal quarter-end.
8.4 Fixed Charge Coverage
At each fiscal quarter-end, Borrowers' Fixed Charge Coverage, on a
consolidated basis, for the Trailing Twelve-Month Period, shall not be less
than the following amounts for each fiscal quarter-end occurring during the
periods indicated below:
Period Amount
------ ------
From the Closing Date to and
including October 31, 1995 1.25
From and after November 1, 1995 1.50
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8.5 Total Debt to Pro Forma EBIDAT
At each fiscal quarter-end, the ratio of Borrowers' consolidated Total
Indebtedness as of such quarter-end to consolidated Pro Forma EBIDAT for the
Trailing Twelve-Month Period, on a consolidated basis, shall not be greater
than 4.0 to 1.
SECTION 9
NEGATIVE COVENANTS
Borrowers covenant and agree that so long as any of the Commitments
remain in effect and until payment in full of all Obligations, unless Lender
shall otherwise give its prior written consent, Borrowers shall comply with and
shall cause each of their Subsidiaries to comply with all covenants in this
Section 9 applicable to such Persons.
9.1 Indebtedness
Borrowers shall not and shall not permit any of their Subsidiaries
directly or indirectly to create, incur, assume, guaranty, or otherwise become
or remain directly or indirectly liable with respect to any Indebtedness
except:
(A) The Obligations;
(B) Contingent Obligations permitted hereunder and any
Indebtedness arising as a result of such Contingent Obligations;
(C) Indebtedness with respect to Capital Leases permitted
hereunder;
(D) Permitted Purchase Money Indebtedness;
(E) Indebtedness outstanding at the Closing Date and shown on
Schedule 4.4; and
(F) Unsecured, Subordinated Indebtedness to Sun Bank under a line
of credit of up to $1,000,000.
9.2 Liens and Related Matters
(A) Prohibition of Liens. Borrowers shall not and shall not
permit any of their Subsidiaries directly or indirectly to create, or otherwise
cause, incur, assume, suffer or permit to exist any Lien on or with respect to
any property or asset (including any document or instrument with respect to
goods or accounts receivable) of Borrowers or any of their Subsidiaries,
whether now owned or hereafter acquired, or any income or profits therefrom,
except Permitted Encumbrances.
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(B) No Negative Pledges. Borrowers shall not and shall not permit
any of their Subsidiaries to enter into or assume any agreement (other than the
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired, unless such
agreement specifically permits the Security Interests.
(C) No Restrictions on Subsidiary Distributions. Except as
provided herein, Borrowers shall not and shall not permit any of their
Subsidiaries to directly or indirectly create, or otherwise cause, incur,
assume, suffer or permit to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Person to:
(1) pay dividends or make any other distribution on any of such Person's
capital stock; (2) subject to subordination provisions, pay any indebtedness
owed to any such Person; (3) make loans or advances to any such Person; or (4)
transfer any of its property or assets to any such Person other than pursuant
to asset disposition agreements subsequently or previously approved by Lender
that prohibit the disposition of such assets to any other Person.
9.3 Investments; Joint Ventures
Borrowers shall not and shall not permit any of their Subsidiaries
directly or indirectly to make or own any Investment in any Person including
any Joint Venture, except:
(A) Borrowers and their Subsidiaries may make and own Investments
in Cash Equivalents;
(B) Borrowers and their Subsidiaries may make intercompany loans
and investments to the extent permitted hereunder;
(C) Borrowers and their Subsidiaries may make loans and advances
to employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $50,000 in the aggregate for
Borrowers and all of their Subsidiaries at any time outstanding; and
(D) Investments set forth on Schedule 4.29.
9.4 Contingent Obligations
Borrowers shall not and shall not permit any of their Subsidiaries to
directly or indirectly create or become or be liable with respect to any
Contingent Obligation except:
(A) Contingent Obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of business;
(B) Contingent Obligations under Interest Rate Agreements approved
by Lender in its sole discretion with respect to the Loans;
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(C) Existing Contingent Obligations described in Schedule 4.4;
(D) Contingent Obligations under indemnity agreements to title
insurers to cause such title insurers to issue to Lender mortgagee title
insurance policies, as provided herein;
(E) Contingent Obligations with respect to customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Dispositions;
(F) Contingent Obligations incurred in the ordinary course of
business with respect to surety and appeal bonds, performance and
return-of-money bonds and other similar obligations not exceeding at any time
outstanding $50,000 in aggregate liability; and
(G) Contingent Obligations with respect to Indebtedness permitted
hereunder.
9.5 Restricted Junior Payments
Borrowers shall not and shall not permit any of their Subsidiaries to
directly or indirectly declare, order, pay, make or set apart any sum for any
Restricted Junior Payment except that, if no Default or Event of Default has
occurred, or would occur as a result of such Restricted Junior Payment:
(A) Borrowers may make payments with respect to Indebtedness
permitted hereunder that constitutes Subordinated Indebtedness as required in
accordance with the terms thereof, but only, in each case, to the extent
required by, and subject to the subordination provisions contained in the
indenture or other agreement pursuant to which such Indebtedness was issued or
otherwise as approved by Lender;
(B) Borrowers' Subsidiaries may make dividends and distributions
to Borrowers to the extent necessary to permit Borrowers to pay the Obligations
and to make any Restricted Junior Payments permitted under clause (A) above and
to permit Borrowers to pay expenses incurred in the ordinary course of business
or in accordance with the provisions of this Agreement; and
(C) and if Borrower's New Worth, after giving effect to such
Restricted Junior Payment, will be not less than $40,624,000, Borrower may
declare or pay cash dividends on any shares of any class of stock of Borrower
now or hereafter outstanding and may purchase shares of any such class of stock
of Borrower, provided that such Restricted Junior Payment, when aggregated with
all other dividends declared or paid on shares of any class of stock of
Borrower and purchases of any class of stock of Borrower, does not exceed
$500,000 for any Loan Year.
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9.6 Restriction on Fundamental Changes
Borrowers shall not and shall not permit any of their Subsidiaries to:
(A) enter into any transaction of merger or consolidation other than in
connection with an Acquisition that is permitted hereunder; (B) liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution); (C)
convey, sell, lease, sublease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any substantial part of its
business or assets, or the capital stock of any of its Subsidiaries, whether
now owned or hereafter acquired; or (D) acquire by purchase or otherwise all or
any substantial part of the business or assets of, or stock or other evidence
of beneficial ownership of, any Person, except that Borrowers may make Capital
Expenditures permitted hereunder, Investments permitted hereunder, intercompany
loans permitted hereunder and Acquisitions that are permitted hereunder.
9.7 Disposal of Assets
Borrowers shall not and shall not permit any of their Subsidiaries to
sell, lease, transfer or otherwise dispose of any of their respective property,
business or assets, except for (A) bona fide sales of Inventory to customers
for fair value in the ordinary course of business; or (B) Asset Dispositions if
all of the following conditions are met: (1) the market value of assets sold or
otherwise disposed of in any single transaction or series of related
transactions does not exceed $100,000 and the aggregate market value of assets
sold or otherwise disposed of in any Fiscal Year does not exceed $200,000; (2)
the consideration received is at least equal to the fair market value of such
assets; (3) the sole consideration received is cash; (4) the Net Proceeds of
such Asset Disposition are applied as required by this Agreement; (5) after
giving effect to the sale or other disposition of the assets included within
the Asset Disposition and the repayment of Indebtedness with the proceeds
thereof (and in connection with an Asset Disposition of Equipment followed by
the contemporaneous purchase of Equipment of equivalent or greater value, after
giving effect to such purchase of Equipment), Borrowers are in compliance on a
pro forma basis with the covenants set forth in this Agreement recomputed for
the most recently ended month for which information is available and in
compliance with all other terms and conditions contained in this Agreement; and
(6) no Default or Event of Default shall then exist or would result from such
sale or other disposition (and, if applicable, any repurchase of replacement
Equipment). In the event of any Asset Disposition made within the parameters
of clause (B) above, if (I) such Asset Disposition is effected without the
contemporaneous purchase of replacement Equipment of equivalent or greater
value, Borrowers shall deliver all of the Net Proceeds to Lender for
application against the Loan in accordance with this Agreement, or (II) such
Asset Disposition is followed by the contemporaneous purchase of replacement
Equipment of equivalent or greater value, Borrowers shall have delivered to
Lender written evidence of the use of the Net Proceeds for such purpose.
Except as permitted by this Agreement, all replacement Equipment purchased by
Borrowers shall be free and clear of all Liens, except for the Security
Interests.
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9.8 Sales and Lease-Backs
Borrowers shall not and shall not permit any of their Subsidiaries to
directly or indirectly become or remain liable as lessee or as guarantor or
other surety with respect to any lease of any property whether real or personal
or mixed and whether now owned or hereafter acquired that a Borrower or any of
its Subsidiaries has sold or transferred or intends to sell or transfer to any
other Person.
9.9 Transactions with Shareholders and Affiliates
Borrowers shall not and shall not permit any of their Subsidiaries
directly or indirectly to enter into or permit to exist any material
transaction (including, without limitation, the material purchase, sale, lease
or exchange of any property or the rendering of any service) with any
Affiliate, or with any director, officer or employee, except for (a) payments
permitted under subsection 9.5 or 9.10 and (b) transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of
Borrowers and their Subsidiaries and upon fair and reasonable terms that are
fully disclosed to Lender and are no less favorable to Borrowers or their
Subsidiaries than would be obtained in a comparable arm's length transaction
with a Person that is not an Affiliate of Borrowers.
9.10 Compensation and Fees
Borrowers shall not and shall not permit any of their Subsidiaries to
pay compensation to any executive officer of Borrowers or any Affiliate of any
such executive officer, regardless of whether such compensation consists of
salary, bonus, management, consulting or other fees, capital distributions, or
other benefits or otherwise, unless such compensation has been approved by an
independent committee of MHI's board of directors and such committee has
determined that the amount of such compensation is fair and reasonable.
9.11 Disposal of Stock
Borrowers shall not and shall not permit any of their Subsidiaries
directly or indirectly to sell, assign, pledge or otherwise encumber or dispose
of any shares of capital stock or other equity securities of a Borrower or its
Subsidiary, including warrants, rights or options to acquire shares or other
equity securities of a Borrower or its Subsidiary, provided that MHI may issue
shares of capital stock or other equity securities the net proceeds of which
are used for Acquisitions that are permitted hereunder.
9.12 Environmental Liabilities
Borrowers shall not and shall not permit any of their Subsidiaries to:
(A) violate any applicable Environmental Law in any manner that could have a
Material Adverse Effect; (B) dispose of any Hazardous Materials into or onto or
(except in compliance with applicable Environmental Laws) from, any real
property owned, leased or operated by a
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Borrower or any of its Subsidiaries; or (C) permit any Lien imposed pursuant to
any statute, regulation or order relating to Hazardous Materials or the
disposal thereof to be imposed or to remain on any real property owned, leased
or operated by a Borrower or any of its Subsidiaries, other than a Lien for
amounts that are not then due and payable, and to permit any such Lien to
remain on such property for a period in excess of sixty (60) days after
Borrowers obtain knowledge thereof.
9.13 Conduct of Business
From and after the Closing Date, Borrowers shall not and shall not
permit any of their Subsidiaries to engage in any business other than the
businesses of the type described on Schedule 4.1(D). MHI shall not engage in
any business other than the ownership of FSAG's capital stock and the
performance of administrative duties for FSAG, and MHI shall not own any
material operating assets other than FSAG's capital stock.
9.14 Changes Relating to Subordinated Indebtedness
Borrowers shall not and shall not permit any of their Subsidiaries to
change or amend the terms of any Subordinated Indebtedness if the effect of
such amendment is to: (A) increase the interest rate on such Indebtedness; (B)
change the dates upon which payments of principal or interest are due on such
Indebtedness; (C) change any event of default or add any covenant with respect
to such Indebtedness; (D) change the redemption or prepayment provisions of
such Indebtedness; (E) change the subordination provisions thereof (or the
subordination terms of any guaranty thereof); or (F) change or amend any other
term if such change or amendment would materially increase the obligations of
the obligor or confer additional material rights on the holder of such
Indebtedness in a manner adverse to a Borrower, any of its Subsidiaries or
Lender.
9.15 Fiscal Year; Charter and ByLaws
Borrowers shall not and shall not permit any of their Subsidiaries to
change its Fiscal Year or permit FSAG to amend its Certificate of Incorporation
or its Bylaws in a manner that would adversely affect Lender.
9.16 No New Subsidiaries
Borrowers shall not and shall not permit any of their Subsidiaries to
create any Subsidiary not listed on Schedule 4.1(E) unless, if Lender shall so
request, Borrowers cause such Subsidiary to guarantee the Obligations and all
of the outstanding capital stock of such Subsidiary that is owned by either
Borrower or a Subsidiary of either Borrower is pledged to Lender as collateral
for the Obligations. Neither Borrower shall transfer any assets to any of its
Subsidiaries, except that MHI may transfer assets to FSAG and MHI may transfer
assets (including cash) to MHI Financial, Inc. having an aggregate value not in
excess of $10,000 in any Fiscal Year of Borrowers.
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9.17 Compliance with ERISA
Borrowers shall not:
(A) permit the occurrence of any Termination Event that would
result in a liability on the part of Borrowers or any of their Subsidiaries in
excess of $10,000;
(B) permit the present value of all benefit liabilities under any
Pension Plan to exceed the current value of the assets of such Pension Plan
allocable to such benefit liabilities by more than $10,000;
(C) permit any accumulated funding deficiency in excess of $10,000
(as defined in section 302 of ERISA and section 412 of the IRC) with respect to
any Pension Plan, whether or not waived;
(D) engage, or permit any of their Subsidiaries to engage, in any
prohibited transaction under section 406 of ERISA or section 4975 of the IRC
for which a civil penalty pursuant to section 502(i) of ERISA or a tax pursuant
to section 4975 of the IRC in excess of $10,000 is imposed;
(E) permit the establishment or amendment of any Employee Benefit
Plan that could result in any material liability to Borrowers or any of their
Subsidiaries; or
(F) establish or participate in any Multi-employer Plan.
9.18 Surety Bonds and Letters of Credit
Borrowers shall not post any surety bond, letter of credit or other
credit enhancement instrument that is permitted by applicable law in lieu of
making necessary deposits to the Trust Funds.
9.19 Acquisitions
Borrowers shall not make an Acquisition or enter into any agreement or
binding commitment to make an Acquisition if any of the following conditions is
met with respect to such Acquisition:
(A) the Acquisition qualifies as an Excess Acquisition;
(B) the Target is not in the same line or a related line
of business as Borrowers; or
(C) a Default or Event of Default shall be in existence
at the time of such Acquisition or would be created by such
Acquisition.
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It is understood and agreed that Lender's approval of Excess
Acquisitions shall be in its sole and absolute discretion and shall be based
upon Lender's evaluation and approval of the business and financial condition
of the Target and review and approval of the Acquisition Documents in
connection with the proposed Acquisition. The General Criteria set forth
certain criteria which Lender will consider in evaluating each prospective
Excess Acquisition. However, each Borrower acknowledges that Lender may reject
an Excess Acquisition notwithstanding the satisfaction of the General Criteria.
Lender shall use its best efforts to notify Borrowers of its approval or
disapproval of any Acquisition requiring its consent within 7 days following
Borrowers' delivery to it of all of the information required by subsection
7.15(A) with respect to such Acquisition.
SECTION 10
DEFAULT, RIGHTS AND REMEDIES
10.1 Event of Default
"Event of Default" shall mean the occurrence or existence of any one
or more of the following:
(A) Payment. Failure of Borrowers to pay (i) any installment of
principal of any Loan when due or (ii) within five (5) days after the due date,
any interest on any Loan or any other fees payable under subsection 2.3 or any
other amount or Obligation due under this Agreement; or
(B) Default in Other Agreements. (1) Failure of a Borrower or any
of its Subsidiaries to pay when due or within any applicable grace period any
principal or interest on Indebtedness (other than the Loans) or any Contingent
Obligations; or (2) breach or default of Borrower or any of its Subsidiaries
with respect to any Indebtedness (other than the Loans) or any Contingent
Obligations, if the effect of such failure to pay, default or breach is to
cause or to permit the holder or holders thereof to cause such Indebtedness
and/or Contingent Obligations having an individual or aggregate principal
amount in excess of $10,000 or having an aggregate principal amount in excess
of $50,000 to become or be declared due prior to their stated maturity, whether
or not such failure to pay, default or breach is waived by such holder or
holders; or
(C) Breach of Certain Provisions. Failure of Borrowers (i) to
perform or comply with any term or condition contained in subsections 6.1, 6.2,
6.3, 6.4, 6.5 or 6.12, Section 8, Section 9 (other than subsections 9.3, 9.10,
9.12 and 9.17) or subsection 7.3 or (ii) within twenty (20) days after receipt
by Borrowers of notice from Lender of such failure, to perform or comply with
any term or condition contained in subsections 6.6, 6.7, 6.8, 6.9, 6.10, 6.11,
7.1, 7.2, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13 or 7.14 or (iii)
to perform or comply with any term or condition contained in subsections 9.3,
9.10, 9.12 or 9.17 and to
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cure such failure to comply within twenty (20) days after Borrowers' obtaining
knowledge of such failure to comply; or
(D) Breach of Warranty. Any representation, warranty,
certification or other statement made or deemed made by any party (other than
Lender) in any Loan Document or in any statement or certificate at any time
given by such Person in writing pursuant hereto or in connection with any Loan
Document is false in any material respect on the date made or deemed made; or
(E) Other Defaults Under Loan Documents. Borrowers or any other
party (other than Lender) defaults in the performance of or compliance with any
term contained in this Agreement or the other Loan Documents and such default
is not remedied or waived within twenty (20) days after receipt by Borrowers of
notice from Lender of such default (other than occurrences described in other
provisions of this subsection 10.1 for which a different grace or cure period
is specified or that constitute immediate Events of Default); or
(F) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A
court enters a decree or order for relief with respect to a Borrower or any of
its Subsidiaries in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed or any other similar relief is
granted under any applicable federal or state law; or (2) the continuance of
any of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against a Borrower or any of
its Subsidiaries under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over a Borrower or any of its Subsidiaries,
or over all or a substantial part of its property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the consent
of a Borrower or any of its Subsidiaries for all or a substantial part of the
property of such Borrower or Subsidiary; or
(G) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An
order for relief is entered with respect to a Borrower or any of its
Subsidiaries, or a Borrower or any of its Subsidiaries commences a voluntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents 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 consents to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) a Borrower or any of its Subsidiaries
makes any assignment for the benefit of creditors; or (3) the Board of
Directors of a Borrower or any of its Subsidiaries adopts any resolution or
otherwise authorizes action to approve any of the actions referred to in this
subsection 10.1(G); or
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(H) Liens. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of a Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances), and such lien,
levy or assessment is not stayed, vacated, paid or discharged within ten (10)
days; or
(I) Judgments and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving (1) an amount in any
individual case in excess of $10,000 or (2) an amount individually or in the
aggregate at any time in excess of $50,000 (in either case not adequately
covered by insurance as to which the insurance company has acknowledged
coverage) is entered or filed against a Borrower or any of its Subsidiaries or
any of their respective assets and remains undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
(J) Dissolution. Any order, judgment or decree is entered against
a Borrower or any of its Subsidiaries decreeing the dissolution or split up of
such Borrower or Subsidiary and such order remains undischarged or unstayed for
a period in excess of twenty (20) days; or
(K) Solvency. A Borrower ceases to be solvent (as represented in
subsection 4.23) or admits in writing its present or prospective inability to
pay its debts as they become due; or
(L) Injunction. Borrowers or any of their Subsidiaries is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
(M) Invalidity of Loan Documents. Any of the Loan Documents for
any reason, other than a partial or full release in accordance with the terms
thereof and other than as a result of Lender's negligence, ceases to be in full
force and effect or is declared to be null and void, or a Borrower denies that
it has any further liability under any Loan Documents to which it is party, or
gives notice to such effect; or
(N) Damage, Strike, Casualty. Any material damage to, or loss,
theft or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty that causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of either Borrower or any of its Subsidiaries if any such event or
circumstances would have a Material Adverse Effect; or
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(O) Licenses and Permits. The loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter acquired by
either Borrower or any of its Subsidiaries if such loss, suspension, revocation
or failure to renew could have a Material Adverse Effect; or
(P) Failure of Security. Lender does not have or ceases to have a
valid and perfected first priority security interest in the Collateral (subject
to Permitted Encumbrances) for any reason other than the failure of Lender to
take any action within its control; or
(Q) Assets Seized. Any part of the Collateral or the assets of
either Borrower or any of its Subsidiaries with a value in excess of $10,000 in
the aggregate are attached, seized, subjected to a writ or distress warrant, or
levied upon, or come within the possession or control of any creditor and on or
before the thirtieth (30th) day thereafter such Collateral or assets are not
returned to such Borrower or Subsidiary, as applicable, or such writ, distress
warrant or levy is not dismissed, stayed or lifted; or
(R) RICO. Any criminal action, suit or proceeding is initiated
against either Borrower, any of its Subsidiaries or any officers of either
Borrower or any of its Subsidiaries under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding would result in the
confiscation or forfeiture of any material portion of the assets of such
Borrower or Subsidiary or any of the stock or other collateral pledged pursuant
to the Pledge Agreement; or
(S) Criminal Action Against Officers. Any criminal action,
proceeding, indictment, or arrest shall be brought or made against any officer
of either Borrower in connection with actions of such officer in the scope of
his employment.
10.2 Suspension of Commitments
Upon the occurrence of any Default or Event of Default, notwithstanding any
grace period or right to cure, Lender, without notice or demand, may
immediately cease making additional Loans, and the Commitments shall be
suspended; provided that, in the case of a Default, if the subject condition or
event is waived, cured or removed within any applicable grace or cure period,
the Commitments shall be reinstated.
10.3 Acceleration
Upon the occurrence of any Event of Default described in the foregoing
subsections 10.1(F) or 10.1(G), the unpaid principal amount of and accrued
interest and fees (including, without limitation, prepayment fees in an amount
determined in accordance with this Agreement) on the Term Loan and the
Revolving Loan and all other Obligations shall automatically become immediately
due and payable, together with accrued interest thereon, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
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expressly waived by Borrowers, and the Commitments shall thereupon terminate.
Upon the occurrence and during the continuance of any other Event of Default,
Lender may, by written notice to Borrowers, declare all or any portion of the
Loans and all or some of the other Obligations (including, without limitation,
prepayment fees in an amount determined in accordance with subsection 2.3) to
be, and the same shall forthwith become, immediately due and payable together
with accrued interest thereon, without presentment, demand, protest or other
requirements of any kind, all of which are expressly waived by Borrowers, and
the Commitments shall thereupon terminate.
10.4 Disposition of Collateral
(A) Upon the occurrence and during the continuation of an Event of
Default, Lender may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC (whether or
not the UCC applies to the affected Collateral) and also may: (a) require
Borrowers to, and Borrowers hereby agrees that they shall, at their expense and
upon request of Lender forthwith, assemble all or part of the Collateral as
directed by Lender and make it available to Lender at a place to be designated
by Lender that is reasonably convenient to both parties; (b) withdraw all cash
in the Depository Account and apply such monies in payment of the Obligations
in the manner provided herein; (c) without notice or demand or legal process,
enter upon any premises of Borrowers and take possession of the Collateral; and
(d) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, at such time or times, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as
Lender may deem commercially reasonable. Borrowers agree that, to the extent
notice of sale shall be required by law, at least ten (10) days notice to
Borrowers of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any
sale of the Collateral, if permitted by law, Lender may bid (which bid may be,
in whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account of Lender.
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned. To the extent permitted by law, Borrowers hereby
specifically waive all rights of redemption, stay or appraisal that it has or
may have under any law now existing or hereafter enacted.
(B) Upon the occurrence and during the continuation of an Event of
Default, Lender shall have the right to enter upon the premises of Borrowers
where the Collateral is located (or is believed to be located) without any
obligation to pay rent to Borrowers, or any other place or places where the
Collateral is believed to be located and kept, to render the Collateral useable
or saleable, to remove the Collateral therefrom to the premises of Lender or
any agent of Lender for such time as Lender may desire in order to effectively
collect or liquidate the Collateral, and/or to require Borrowers to assemble
the Collateral
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and make it available to Lender at a place or places to be designated by
Lender. Upon the occurrence of an Event of Default hereunder, Lender shall
have the right to take possession of Borrowers' original books and records, to
obtain access to Borrowers' data processing equipment, computer hardware and
software relating to the Collateral and to use all of the foregoing and the
information contained therein in any manner Lender deems appropriate; and
Lender shall have the right to notify postal authorities to change the address
for delivery of Borrowers' mail to an address designated by Lender and to
receive, open and dispose of all mail addressed to Borrowers.
10.5 Assignment of Intellectual Property
Borrowers hereby assign, transfer and convey to Lender, effective upon
the occurrence of any Event of Default hereunder, all Intellectual Property
owned or used by Borrowers together with any goodwill associated therewith, all
to the extent necessary to enable Lender to realize on the Collateral and any
successor or assign to enjoy the benefits of the Collateral. This right and
assignment shall inure to the benefit of all successors, assigns and
transferees of Lender and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed
in lieu of foreclosure or otherwise. Such right and assignment is granted free
of charge, without requirement that any monetary payment whatsoever be made to
Borrowers by Lender.
10.6 Assigned Agreements
If an Event of Default has occurred and is continuing, Borrowers
hereby irrevocably authorizes and empowers Lender to assert, either directly or
on behalf of Borrowers any claims Borrowers may have, from time to time,
against any other party to the Assigned Agreements or to otherwise exercise any
right or remedy of Borrowers under the Assigned Agreements (including, without
limitation, the right to enforce directly against any party to an Assigned
Agreement all of Borrowers' rights thereunder, to make all demands and give all
notices and to make all requests required or permitted to be made by Borrowers
under the Assigned Agreements).
10.7 Limitation on Duty of Lender with Respect to Collateral
Beyond the safe custody thereof, Lender shall have no duty with
respect to any Collateral in its possession or control (or in the possession or
control of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property. Lender shall not be liable or responsible for any loss or damage to
any of the Collateral, or for any diminution in the value thereof, by reason of
the act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by Lender in good faith.
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10.8 Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Depository Account shall be applied: first,
to all fees, costs and expenses incurred by Lender with respect to this
Agreement, the other Loan Documents or the Collateral, including, without
limitation, those described in subsections 10.9 and 12.1; second, to all fees
due and owing to Lender; third, to accrued and unpaid interest on the
Obligations (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts); fourth, to the principal
amounts of the obligations outstanding; and fifth, to any other indebtedness or
obligations of Borrowers owing to Lender.
10.9 Termination of Security Interests; Release of Collateral
Upon payment in full of all Obligations and the termination of all
Commitments, the Security Interests shall terminate. Upon such termination of
the Security Interests or release of any Collateral, Lender shall, at the
expense of Borrowers, execute and deliver to Borrowers such documents as
Borrowers shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 11
ASSIGNMENT AND PARTICIPATION
11.1 Assignments and Participations in Loans and Notes
(A) Assignment by Lender. Lender may, without the consent of
Borrowers, assign all or a portion of its interests, rights and obligations
under this Agreement (including, without limitation, all or a portion of the
Loans at the time owing to it and the Notes held by it) to one or more other
Persons or qualified investors; provided, however, that such assignment shall
not, without the consent of Borrowers, require Borrowers to file a registration
statement with the Securities and Exchange Commission or apply to or qualify
the Loans or the Notes under the blue sky laws of any state. Upon any such
assignment, from and after the effective date thereof, (x) the assignee shall
be a party hereto and, to the extent provided in such assignment, have the
rights and obligations of a Lender hereby, and (y) the assigning Lender shall,
to the extent provided in such assignment, be released from its obligations
under this Agreement with respect to its Commitment.
(B) Issuance of New Notes. Within fifteen (15) days after receipt
of notice of any assignment, Borrowers shall execute and deliver to Lender or
its designee in exchange for the surrendered Note or Notes a new Note or Notes
to the order of such assignee in amounts equal to the Commitment assumed by
such assignee and a new Note or Notes to the order of the assigning Lender in
an amount equal to the Commitments retained by it
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hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes,
shall be dated the effective date of such assignment (provided that in no event
shall Borrowers be required to pay to the assignee under such Note or Notes any
amounts that Borrowers already have paid to the assignor prior to Borrowers
execution of such Note or Notes) and shall otherwise be in substantially the
form of the assigned Notes delivered to the assignor Lender. Each surrendered
Note or Notes shall be cancelled and returned to Borrowers.
(C) Participations. Lender may, without the consent of Borrowers,
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments hereunder and the Loans owing
to it and the Notes held by it); provided, however, that (1) each such
participation shall be in an amount not less than $1,000,000, (2) Lender's and
Borrowers' obligations under this Agreement (including, without limitation, the
Commitment) shall remain unchanged, (3) Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (4) Lender
shall remain the holder of the Notes held by it for all purposes of this
Agreement, (5) Borrowers shall continue to deal solely and directly with Lender
in connection with Lender's rights and obligations under this Agreement,
provided, that Lender may agree with any participant that Lender shall not,
without such participant's consent, agree to or approve any waivers or
amendments that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the commitments of such
participant, reduce the amount of any fees to which such participant is
entitled, extend any scheduled payment date for principal or release Collateral
securing the Loans (other than Collateral disposed of pursuant to subsection
10.4 hereof or otherwise in accordance with the terms of this Agreement or the
Security Documents), and (6) any such disposition shall not, without the
consent of Borrowers, require Borrowers to file a registration statement with
the Securities and Exchange Commission to apply to qualify the Loans or the
Notes under the blue sky law of any state. Lender shall endeavor to deliver
written notice to Borrowers of any such participation prior to the effective
date thereof, provided that the failure to deliver such notice or to deliver
such notice prior to such effective date shall not affect the validity of such
participation, but any such participant shall have not right to exercise any
set-off provided for under subsection 11.3 or otherwise pursuant to the Loan
Documents prior to the date that Lender delivers written notice to Borrower of
such participation.
All amounts payable by Borrowers hereunder shall be determined as if
Lender had not sold such participation and the holder of any such participation
shall not be entitled to require Lender to take or omit to take any action
hereunder except action directly affecting (1) the extension of the final
maturity of any scheduled principal amount of or interest on a Loan or any fees
related thereto allocated to such participation, or (2) a reduction of the
principal amount of or the rate of interest payable on the Loans or any fees
related thereto allocated to such participation, or (3) a release of any
Collateral (other than in accordance with the terms of the Security Documents).
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(D) Disclosure of Information. Lender may, in connection with any
assignment, proposed assignment, participation or proposed participation
pursuant to this subsection 11.1, disclose to the assignee, participant,
proposed assignee or proposed participant, any information relating to
Borrowers and their Subsidiaries furnished to Lender by or on behalf of
Borrowers or their Subsidiaries; provided that, prior to any such disclosure,
each such assignee, proposed assignee, participant or proposed participant
shall agree with Borrowers or Lender (which in the case of an agreement with
only Lender, Borrowers shall be recognized as a third party beneficiary
thereof) to preserve the confidentiality of any confidential information
relating to Borrowers received from Lender.
11.2 Appointment of Agent
If, as a result of any assignment of Lender's interests, rights or
obligations under this Agreement, there shall be more than one Lender, such
Lenders shall have the right to designate a Lender to act as agent for all
Lenders (the "Agent"). In performing its functions and duties under this
Agreement, Agent shall act solely as an agent of Lenders, and Agent (in its
capacity as such) does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrower. 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, Agent in its individual
capacity as a Lender hereunder. 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. Agent may
resign at any time by giving thirty (30) days prior written notice thereof to
each Lender and Borrowers. Upon any such resignation, the Lenders shall have
the right to appoint a successor Agent. Upon acceptance of appointment, the
successor Agent shall succeed to and become vested with all rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. The provisions
of this subsection 11.2 are solely for the benefit of any such Agent and
Lenders, and Borrowers shall not have any rights as a third party beneficiary
of any of the provisions hereof.
11.3 Set-Off and Sharing of Payments
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, Lender and each holder of any Note is hereby authorized by
Borrowers at any time or from time to time, without notice to Borrowers or to
any other Person, any such notice being hereby expressly waived, to set-off and
to appropriate and to apply any and all balances held by it at any of its
offices for the account of either Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to such Borrower or
Subsidiary) and any other property at any time held or owing by that Lender or
that holder to or for the credit or for the account of either Borrower or any
of its Subsidiaries against and on account of any of the Obligations that are
not paid when due. Borrowers agree, on behalf of themselves and their
Subsidiaries, to the fullest extent permitted by law, that (A) any Lender or
holder may exercise its right to set-off with respect to amounts in excess of
its pro rata share of the
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Obligations and may sell participations in such excess to other Lenders and
holders and (B) any Lender or holder so purchasing a participation in the Loans
made or other Obligations held by other Lenders or holders may exercise all
rights of set-off, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of Loans and other Obligations in the amount of such participation.
SECTION 12
MISCELLANEOUS
12.1 Expenses and Attorneys' Fees
Whether or not the transactions contemplated hereby shall be
consummated, Borrowers agree to promptly pay all reasonable fees, costs and
expenses incurred by Lender in connection with any matters contemplated by or
arising out of this Agreement or the other Loan Documents including, without
limitation, the following, and all such reasonable fees, costs and expenses
shall be part of the Obligations, payable on demand and secured by the
Collateral: (A) reasonable fees, costs and expenses (including reasonable
attorneys' fees, allocated costs of internal counsel and fees of environmental
consultants, industry consultants, accountants and other professionals retained
by Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements
evidenced by the Loan Documents; (B) reasonable fees, costs and expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
incurred in connection with the negotiation, preparation, execution and
administration of the Loan Documents, the Loans and any amendments,
modifications and waivers relating thereto; (C) reasonable fees, costs and
expenses of environmental consultants, industry consultants, accountants and
other professionals retained by Lender in connection with the administration of
the Loan Documents and the Loans if such retention is either required by
applicable law or if such retention is after the occurrence and during the
continuation of an Event of Default; (D) reasonable fees, costs and expenses
incurred in creating, perfecting and maintaining perfection of Liens in favor
of Lender pursuant to any Loan Document, including lien search fees, filing and
recording fees, taxes and expenses, title insurance policy fees, fees and
expenses of attorneys for providing such opinions as Lender may reasonably
request and fees and expenses of attorneys to Lender; (E) reasonable fees,
costs and expenses (including reasonable attorneys' fees and allocated costs of
internal counsel) incurred in connection with the review, documentation,
negotiation, closing and administration of any subordination agreements; (F)
reasonable fees, costs and expenses incurred in connection with forwarding to
Borrowers the proceeds of Loans including Lender's standard wire transfer fee;
(G) reasonable fees, costs, expenses and bank charges, including bank charges
for returned checks, incurred by Lender in establishing, maintaining and
handling lock box accounts, blocked accounts or other accounts for collection
of the Collateral; (H) reasonable fees, costs, expenses (including reasonable
attorneys' fees and allocated costs of internal counsel) and costs of
settlement incurred in collecting upon or
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enforcing rights against the Collateral; (I) reasonable fees, costs and
expenses of inspecting the Collateral; (J) reasonable fees, costs and expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
incurred in any action to enforce this Agreement or the other Loan Documents or
to collect any payments due from Borrowers under this Agreement, the Notes or
any other Loan Document or incurred in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement, whether
in the nature of a "workout" or in connection with any insolvency or bankruptcy
proceedings or otherwise; (K) reasonable fees, costs and expenses (including
reasonable attorneys' fees and allocated costs of internal counsel) incurred
after the occurrence and during the continuation of an Event of Default for
protecting, insuring, storing, warehousing, appraising, handling, maintaining,
shipping and disposing of the Collateral; and (L) any and all excise, property,
sales and use taxes imposed by any state, federal, local or other governmental
authority on any of the Collateral for which Lender may be liable.
Borrowers hereby authorize and direct Lender, at Lender's option, to
debit Borrowers' Loan Account (by increasing the principal balance of the
Revolving Loan) in the amount of any such fees and expenses owed by Borrowers
when due.
12.2 Indemnity
In addition to the payment of expenses pursuant to this Agreement,
whether or not the transactions contemplated hereby shall be consummated,
Borrowers agree to and do jointly and severally indemnify, pay and hold Lender
and any holder of any of the Notes, and the officers, directors, employees,
agents, affiliates and attorneys of Lender and such holders (collectively
called the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents, Lender's agreement to make the Loans hereunder, the use
or intended use of the proceeds of any of the Loans or the exercise of any
right or remedy hereunder or under any other Loan Document (the "Indemnified
Liabilities"); provided that Borrowers shall not have any obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrowers
shall contribute the maximum portion that they are permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
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12.3 Amendments and Waivers
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Borrowers
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and Borrowers. Each amendment, modification, termination
or waiver shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Borrowers in any
case shall entitle Borrowers 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 12.3 shall be
binding upon each holder of the Notes at the time outstanding, each future
holder of the Notes, and, if signed by Borrowers, on Borrower.
12.4 Retention of Documents
Lender may, in accordance with Lender's customary practices, destroy
or otherwise dispose of all documents, schedules, invoices or other papers,
delivered by Borrowers to Lender unless Borrowers request in writing that same
be returned. Upon Borrowers' request and at Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.
12.5 Notices
Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing addressed
to the respective party as set forth below and may be personally served,
telecopied, telexed or sent by overnight courier service or United States mail
and shall be deemed to have been given: (A) if delivered in person, when
delivered; (B) if delivered by telecopy or telex, on the date of transmission
if transmitted on a Business Day before 3:00 p.m. (Chicago, Illinois time) or,
if not, on the next succeeding Business Day; (C) if delivered by overnight
courier, two (2) days after delivery to such courier properly addressed; or (D)
if by U.S. Mail, four (4) Business Days after depositing in the United States
mail, with postage prepaid and properly addressed. Any notice or other
communication that is delivered by or on behalf of Lender to either Borrower
shall be deemed to have been delivered to the other Borrower. Any notice or
other communication (including a Notice of Borrowing) that Lender receives from
either Borrower shall deemed to be a joint notice or other communication from
both Borrowers.
Notices shall be addressed as follows:
(a) If to Borrowers: MHI GROUP, INC.
3100 Capital Circle, N.E.
Tallahassee, Florida 32308
Attention: David J. McLaurin
Telecopy: (904) 385-0338
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With copies to: Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, New York 10022
Attention: Bruce R. Kraus
Telecopy: (212) 752-2991
and
Douglass, Powell & Rudolph
211 East Call Street
Tallahassee, Florida 32302
Attention: John A. Rudolph, Jr.
Telecopy: (904) 224-3644
(b) If to Lender: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Portfolio Manager
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
With a copy to: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Legal Department
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this subsection. A notice not given as provided above shall,
if it is in writing, be deemed given if and when actually received by the party
to whom given.
12.6 Survival of Warranties and Certain Agreements
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of the Notes. Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreements of
each Borrowers set forth in subsections 2.7, 2.8, 4.19, 4.20, 7.8, 12.1 and
12.2 and the agreements of Lender set forth in subsection 11.3 shall survive
the payment of the Loans and the termination of this Agreement. Subject to the
provisions of subsection 12.8, all other agreements between Borrowers and
Lender set forth
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in this Agreement shall terminate upon payment of the Loans and the termination
of this Agreement.
12.7 Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Lender or any holder of any Note in
the exercise of any power, right or privilege hereunder or under the Notes
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 right, power or privilege. All rights and remedies
existing under this Agreement and the Notes are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
12.8 Marshaling; Payments Set Aside
Lender shall be under no obligation to marshall any assets in favor of
Borrowers or any other Person or against or in payment of any or all of the
Obligations. To the extent that Borrowers make a payment or payments to Lender
or Lender enforces its security interests or exercises its rights of set-off,
and such payment or payments or the proceeds of such enforcement or set-off 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, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligations or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set- off had not occurred.
12.9 Independence of Covenants, Representations and Warranties
All covenants hereunder shall be given in any jurisdiction 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 be
otherwise within the limitations of, another covenant warranty shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
12.10 Severability
The invalidity, illegality or unenforceability in any jurisdiction of
any provision in or obligation under this Agreement, the Notes or other Loan
Documents shall not affect or impair the validity, legality or enforceability
of the remaining provisions or obligations under this Agreement, the Notes or
other Loan Documents or of such provision or obligation in any other
jurisdiction.
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12.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights
In the event of a partial assignment of Lender's rights and
obligations hereunder, the obligation of each Lender hereunder shall be several
and not joint, and no Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. Nothing contained in any Loan
Document and no action taken by Lender pursuant hereto or thereto shall be
deemed to constitute Lenders to be 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.
12.12 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.
12.13 Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
12.14 Successors and Assigns; Subsequent Holders of Notes
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns except that
Borrowers may not assign their rights or obligations hereunder without the
written consent of Lender. Lender's rights of assignment are subject to
subsection 11.1.
12.15 No Fiduciary Relationship
No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty by Lender to Borrower.
12.16 Consent to Jurisdiction and Service of Process
BORROWERS HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY
AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE
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LITIGATED IN SUCH COURTS. BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION
WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH NOTE, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION. BORROWERS DESIGNATE AND APPOINTS CT CORPORATION SYSTEM AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWERS THAT IRREVOCABLY AGREE
IN WRITING TO SO SERVE AS THEIR AGENT TO RECEIVE ON THEIR BEHALF SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWERS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
BORROWERS AT THEIR ADDRESS PROVIDED IN SUBSECTION 12.5 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BORROWERS
REFUSES TO ACCEPT SERVICE, BORROWERS HEREBY AGREE THAT SERVICE UPON THEM BY ANY
OTHER MEANS AUTHORIZED BY APPLICABLE LAW OR COURT RULE SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING
PROCEEDINGS AGAINST BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION.
12.17 Waiver of Jury Trial
BORROWERS AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO
THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. BORROWERS AND LENDER ALSO WAIVE ANY
BOND OR SURETY OR SECURITY UPON SUCH BOND THAT MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF LENDER. 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, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. BORROWERS AND LENDER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE
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WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWERS AND LENDER FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH 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, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.18 Confidentiality
Lender shall use its best efforts to keep any nonpublic information
regarding Borrowers delivered or made available to it pursuant to this
Agreement that Borrowers have identified as confidential information
confidential from anyone other than persons employed or retained by Lender who
are or are expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided that, nothing herein shall prevent Lender
from disclosing such information to (i) any bona fide assignee, transferee or
participant that has agreed to comply with this subsection in connection with
the contemplated assignment or transfer of any Loans or participation therein,
(ii) as required or requested by any governmental agency or representative
thereof or pursuant to legal process or (iii) as required in connection with
the exercise of any remedy under the Loan Documents.
12.19 Counterparts; Effectiveness
This Agreement and any amendments, waivers, consents, or supplements
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 of which counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
12.20 Entire Agreement
This Agreement, including all exhibits and other documents attached
hereto or incorporated by reference herein, constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all other
understandings, oral or written, with respect to the subject matter hereof.
85
<PAGE> 95
12.21 Obligations of Borrowers
All of the Obligations and all other obligations, agreements,
representations and warranties of Borrowers (or either of them) hereunder and
under each other Loan Document shall be the joint and several obligations,
agreements, representations and warranties of Borrowers.
[signatures appear on following page]
86
<PAGE> 96
Witness the due execution and delivery hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
HELLER FINANCIAL, INC. MHI GROUP, INC.
By: Steven Land By:
--------------------------------- --------------------------------
Title: Assistant Vice President Title: President / CEO
------------------------------ -----------------------------
Attest:
By:
--------------------------------
Title: Vice President / CFO
-----------------------------
[SEAL]
FUNERAL SERVICES ACQUISITION GROUP,
By:
--------------------------------
Title: President / CEO
-----------------------------
Attest:
By:
--------------------------------
Title: Vice President
-----------------------------
[SEAL]
87
<PAGE> 97
AMENDED AND RESTATED REVOLVING LOAN NOTE
$22,375,000 February 2, 1995
FOR VALUE RECEIVED, undersigned, MHI GROUP, INC., a Florida
corporation ("MHI"), and FUNERAL SERVICES ACQUISITION GROUP, INC., a Florida
corporation ("FSAG"; MHI and FSAG are collectively referred to as the
"Borrowers"), hereby, jointly and severally, unconditionally promise to pay to
the order of HELLER FINANCIAL, INC., a Delaware corporation (the "Lender"), at
the Lender's office located at 500 West Monroe Street, Chicago, Illinois 60661,
or at such other place as the holder of this Note may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of TWENTY-TWO MILLION THREE
HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($22,375,000), or, if less, the aggregate
unpaid principal amount of the Revolving Loan made to the Borrowers by the
Lender under the Amended Credit Agreement (as hereinafter defined), at such
times as are specified in and in accordance with the provisions of the Amended
Credit Agreement.
This Note is the Revolving Note referred to in subsection 2.1(E) of the
Amended and Restated Credit and Security Agreement of even date herewith,
between the Borrowers and the Lender (as heretofore and hereafter amended,
supplemented or restated from time to time, the "Amended Credit Agreement";
capitalized terms used herein and not otherwise specifically defined herein
shall have the meanings assigned to them in the Amended Credit Agreement) and
is issued to evidence the Revolving Loan made to the Borrowers pursuant to the
provisions of the Amended Credit Agreement, to which reference is hereby made
for a statement of the terms, conditions and covenants under which the
Revolving Loan evidenced hereby was made and is to be repaid, including, but
not limited to, those related to acceleration of the indebtedness represented
hereby upon the occurrence of an Event of Default or upon the termination of
the Commitment. Payment of this Note is secured, inter alia, by the
Collateral.
This Note is delivered in replacement of that certain Revolving Loan
Note dated October 9, 1992 (the "Existing Note"), executed by the Borrowers in
favor of the Lender, to evidence the amendments to (but not a novation or
refinancing of) the obligations evidenced thereby effected pursuant to the
Amended Credit Agreement. Upon the due execution and delivery of this Note to
the Lender, the Existing Note shall be deemed cancelled.
<PAGE> 98
The Borrowers promise to pay interest on the outstanding principal
balance of this Note at the rate(s) and on the payment dates set forth in the
Amended Credit Agreement. Interest shall be computed as provided in the
Amended Credit Agreement.
In no contingency or event whatsoever shall interest charged
hereunder, however such interest may be characterized or computed, exceed the
highest rate permissible under any applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lender has received interest
hereunder in excess of the highest rate applicable hereto, the provisions of
the Amended Credit Agreement with respect to Excess Interest shall apply.
The Borrowers hereby waive demand, presentment, protest, notice of
demand, dishonor, presentment, protest and of nonpayment.
If this Note is collected by or through an attorney-at-law, all
reasonable costs of collection, including reasonable attorneys' fees, shall be
payable by the undersigned.
THIS NOTE SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS. Whenever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note. Whenever in this Note reference is made to the Lender or the
Borrowers, such reference shall be deemed to include, as applicable, a
reference to their respective successors and assigns. The provisions of this
Note shall be binding upon and shall inure to the benefit of such successors
and assigns. The Borrowers' successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for either of the
Borrowers.
[Signatures appear on following page]
<PAGE> 99
WITNESS the hand and seal of the undersigned, as of the date first
above written.
MHI GROUP, INC.
By:
-----------------------------------------------
Title: President / CEO
--------------------------------------------
Attest: Jane Harris
-------------------------------------------
Title: Vice President
--------------------------------------------
[CORPORATE SEAL]
FUNERAL SERVICES ACQUISITION GROUP, INC.
By:
-----------------------------------------------
Title: President / CEO
--------------------------------------------
Attest: Jane Harris
-------------------------------------------
Title: Vice President
--------------------------------------------
[CORPORATE SEAL]
<PAGE> 100
AMENDED AND RESTATED TERM NOTE
$12,625,000 February 2, 1995
FOR VALUE RECEIVED, the undersigned, MHI GROUP, INC., a Florida
corporation ("MHI"), and FUNERAL SERVICES ACQUISITION GROUP, INC., a Florida
corporation ("FSAG"; MHI and FSAG are collectively referred to as the
"Borrowers"), hereby, jointly and severally, unconditionally promise to pay to
the order of HELLER FINANCIAL, INC., a Delaware corporation (the "Lender"), at
the Lender's office located at 500 West Monroe Street, Chicago, Illinois 60661,
or at such other place as the holder of this Note may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of TWELVE MILLION SIX HUNDRED
TWENTY-FIVE THOUSAND DOLLARS ($12,625,000).
This Note is the Term Note referred to in subsection 2.1(E) of the
Amended and Restated Credit and Security Agreement of even date herewith,
between the Borrowers and the Lender (as heretofore and hereafter amended,
supplemented or restated from time to time, the "Amended Credit Agreement";
capitalized terms used herein and not otherwise specifically defined herein
shall have the meanings assigned to them in the Amended Credit Agreement) and
is issued to evidence the Term Loan made to the Borrowers pursuant to the
provisions of the Amended Credit Agreement, to which reference is hereby made
for a statement of the terms, conditions and covenants under which the Term
Loan was made and is to be repaid, including, but not limited to, those related
to acceleration of the indebtedness represented hereby upon the occurrence of
an Event of Default or upon the termination of the Commitment. Payment of this
Note is secured, inter alia, by the Collateral.
This Note is delivered in replacement of that certain Term Note dated
October 9, 1992 (the "Existing Note"), executed by the Borrowers in favor of
the Lender, to evidence the amendments to (but not a novation or refinancing
of) the obligations evidenced thereby effected pursuant to the Amended Credit
Agreement. Upon the due execution and delivery of this Note to the Lender, the
Existing Note shall be deemed cancelled.
The entire principal amount of this Note shall be due and payable in
full in one payment on the Expiry Date.
<PAGE> 101
The Borrowers promise to pay interest on the outstanding principal
balance of this Note at the rate(s) and on the payment dates set forth in the
Amended Credit Agreement. Interest shall be computed as provided in the
Amended Credit Agreement.
In no contingency or event whatsoever shall interest charged
hereunder, however such interest may be characterized or computed, exceed the
highest rate permissible under any applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lender has received interest
hereunder in excess of the highest rate applicable hereto, the provisions of
the Amended Credit Agreement with respect to Excess Interest shall apply.
The Borrowers hereby waive demand, presentment, protest, notice of
demand, dishonor, presentment, protest and of nonpayment.
If this Note is collected by or through an attorney-at-law, all
reasonable costs of collection, including reasonable attorneys' fees, shall be
payable by the undersigned.
THIS NOTE SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS. Whenever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note. Whenever in this Note reference is made to the Lender or the
Borrowers, such reference shall be deemed to include, as applicable, a
reference to their respective successors and assigns. The provisions of this
Note shall be binding upon and shall inure to the benefit of such successors
and assigns. The Borrowers' successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for either of the
Borrowers.
[Signatures appear on following page]
<PAGE> 102
WITNESS the hand and seal of the undersigned, as of the date first
above written.
MHI GROUP, INC.
By:
Title: President / CEO
-------------------------------------
Attest: Jane Harris
------------------------------------
Title: Vice President
-------------------------------------
[CORPORATE SEAL]
FUNERAL SERVICES ACQUISITION GROUP, INC.
By:
----------------------------------------
Title: President / CEO
-------------------------------------
Attest: Jane Harris
------------------------------------
Title: Vice President
-------------------------------------
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 11.1
MHI GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(000'S OMITTED, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
----------- -----------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income $ 654 $ 924 $ 2,562 $ 2,977
---------- ---------- ---------- ----------
Average common shares
outstanding 6,271,126 4,861,474 6,233,797 4,141,938
Net shares to be issued upon
exercise of dilutive stock options
after applying treasury stock
method 736,020 604,619 650,212 592,027
---------- ---------- ---------- ----------
Adjusted shares outstanding,
primary basis 7,007,146 5,466,093 6,884,009 4,733,965
Contingent issuances of common
stock for unsettled bankruptcy
claims
- 14,905 - 15,790
---------- ---------- ---------- ----------
Adjusted shares outstanding,
fully diluted basis 7,007,146 5,480,998 6,884,009 4,749,755
========== ========== ========== ==========
Earnings per common and
common equivalent share-
primary and fully diluted:
Net income $ .09 $ .16 $ .37 $ .63
========== ========== ========== ==========
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCEHDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER PERIOD ENDED JANUARY 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1994
<PERIOD-START> MAY-01-1994
<PERIOD-END> JAN-31-1995
<CASH> 4,349
<SECURITIES> 0
<RECEIVABLES> 9,488
<ALLOWANCES> 1,002
<INVENTORY> 2,477
<CURRENT-ASSETS> 17,653
<PP&E> 13,955
<DEPRECIATION> 2,490
<TOTAL-ASSETS> 105,709
<CURRENT-LIABILITIES> 4,329
<BONDS> 11,125
<COMMON> 2,531
0
39
<OTHER-SE> 39,171
<TOTAL-LIABILITY-AND-EQUITY> 105,709
<SALES> 14,984
<TOTAL-REVENUES> 18,179
<CGS> 3,760
<TOTAL-COSTS> 13,570
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 1,088
<INCOME-PRETAX> 3,521
<INCOME-TAX> 959
<INCOME-CONTINUING> 2,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,562
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
